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Expiring data bundles: Bring on the regulations!

It is surely farcical that the ‘same’ 1GB of data costs anywhere from R12 to R579 …

Icasa’s move to regulate what it terms “out-of-bundle billing practices” and “expiry of data practices” is years overdue. The regulator wants to get rid of the typical 30-day expiry period for mobile data bundles, which has been a characteristic of the industry since 3G data products were launched.

Importantly, it does not want to get rid of expiry all together. It is accepted that at some point, bundles purchased ought to expire (as is the case globally). Rather, the regulator seeks to ensure that the expiry period is more generous, particularly on larger bundles.

In a Government Gazette notice, it proposes the following expiry periods for bundles:

  • 1MB to 50MB: 10 days
  • 50MB to 500MB: 30 days
  • 500MB to 1GB: 60 days
  • 1GB to 5GB: 90 days
  • 5GB to 10GB: 180 days
  • 10GB to 20GB: 12 months
  • >20GB: 24 months

Now, the size and pricing of bundles by all operators in the market is not random; it is (obviously) deliberate. There’s a reason why pricing of 1GB of prepaid/one-off data on three of the four networks, for example, is clustered around the R150 mark and lasts 30 days (on Telkom Mobile it is priced at R99 and valid until the end of the next calendar month (as much as 60 days).

Operators know what the typical ‘deferral’ rate is, i.e. how much data is likely to expire on each bundle, on average. They take this into account when pricing. Combine this with the other vector, time, and you can quickly understand why the ‘same’ 1GB of one-off data can cost R12 (if you use it between 11pm and 5am, when there is minimal usage on the network), R29 (if you use it on weekends only), R79 (if it expires in seven days), R99 (if it expires in 14 days), R149 (if it expires in 30 days) or R579 (if it expires after six months).

These are all real prices and illustrate ‘dynamic’ pricing in the extreme. But, it must be noted that this situation is not unique to South Africa. In most markets (from developed to developing), pricing strategies are similar.

Coupled with this are the actual sizes of bundles, and the price differences between them. You can buy 1GB, 2GB, 3GB or 5GB bundles, but not 4GB. And, the gap between 5GB and 10GB is enormous (and between 10GB and 20GB, even bigger)! Price psychology plays a huge role here. Look at the differences between these larger bundle prices:

  • 500MB: R99
  • 1GB: R149
  • 2GB: R249
  • 3GB: R299
  • 5GB: R399

Typical 500MB customers are ‘incentivised’ to rather buy 1GB (double the data, for ‘only’ R50 more). Similarly, typical 2GB users are ‘incentivised’ to rather buy 3GB. Over time, the typical customer will use more data (by design). And, if they deplete their allocation before the 30-day expiry, they’ll buy data bundles more frequently (say, every 25 days). That’s why operators can argue that the ‘average’ price per megabyte has fallen to the extent that it has: More customers are using more in-bundle data.

It’s important to understand how these numbers and expiry periods relate to the market. Using Vodacom data for Q1 2018, the average monthly usage by each of its 16.6 million smartphone subscribers is 734MB (up 15%). On the high-end – think iPhones and Galaxy S-type devices – this average is 2GB (up 36%).

The proposed regulations also require that notifications are sent at various points (50%, 70%, 90%, 100%) during the depletion of bundles. This is not a huge ask. Most networks have implemented aggressive notification strategies to counteract the negative market perceptions created by the #DataMustFall hearings. Separately, requiring customers to specifically opt-in to out-of-bundle charges upon depletion – which is proposed – is also not unique to this market. Nigeria sanctioned operators for not doing this back in 2015.

How are the operators likely to react?

For a start, they will surely lobby hard to get shorter expiry periods than those proposed by the regulator. I’m not certain we’ll get to the more optimistic 12-month and 24-month periods. It is likely that the operators will launch entirely new propositions at new price points (to comply with the regulations), but this pricing will be ‘stickier’ (a euphemism meaning higher, for longer).

Critical to these proposed regulations being successful is how they deal with so-called ‘promotional’ bundles as well as dynamic/targeted ones (those unique to the particular subscriber’s usage and purchase history). The latter is already a reality on the Vodacom network (its highly successful Just4You proposition). Data ‘bonuses’ (free data on top of standard bundles) is also not taken into consideration (yet?).

Along with this is the question of how regulations deal with bundled propositions, where voice minutes, SMSes and data access are bundled together in a single price (this is particularly prevalent in developed markets).

Tiering of pricing based on access speed could become a reality. This is already the case in many European markets, as well as emerging markets such as India. Data bundles on 2G or 3G networks are cheaper than those offering 4G access.

Let me be clear: operators will find ways to work – and price – around whatever regulations are implemented (especially in their current, overly simplistic construction). This is what operators do the world over.

That said, regulation can be highly effective, as has been seen with aggressive cuts to mobile termination rates, which have driven down the price of voice calls far quicker than the ‘market’ would’ve. A year ago, Icasa published a surprise (and since-withdrawn) Invitation To Apply for mobile spectrum. At the time, I argued that the proposal would yield a positive result for both sides of the market it intended to manage (which is rare). Government then lurched to the other extreme, with a proposal in its White Paper that all spectrum be assigned to a national wholesale operator. Thankfully, sanity has prevailed and we look set for a hybrid approach. Government gets its wholesale operator, while the likes of Vodacom, MTN, Cell C and Telkom get access to their own spectrum too, via an auction.

These data bundle and expiry regulations are long-overdue. Let’s get them implemented already!

Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.

He owns shares in Vodacom, first purchased in June 2013.

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It started with Mweb years ago—Remember when they use to charge you for the amount of data that you used?? THEN ONE DAY, they came out with unlimited data at 1/2 the price in response to market forces. This was price fixing and someone needs to investigate this!!

WRONG. The shift to uncapped ADSL is a direct result of Seacom going live. With Telkom’s hold on SAT3 prior to this, prices were high and capacity constrained (both artificially so).

‘Let me be clear’ – the practice of expiring data bundles is nothing short of theft. Period.

The regulator does not need to investigate just pass the law that sets the upper limit on data pricing.

They just need to learn from the EU experience.

Yep more laws is just what we need.

Imagine we will be like the USA with all it’s complicated laws and no crime at all.

I apologise for the unfortunate Shutterstock image that was published with the article. Hopefully, the new one is less provocative! – Ryk

Ryk, and in the process of replacing the caption image, my light-harted comment were also censored and remove.

Horsetrader is correct about the thieving.

Let’s put it another way: At the beginning of the month I buy a tank of petrol for my car, and then at the end of the month / next month I must give what’s left back???

After all I paid for that data, therefore it is mine, so I should be able to use it as I see fit?

Let’s put it in yet another way.

You have water rights from a flowing stream shared with 100 other people. You go on leave for the month and not use your 100 litre allocation. It just flows by your house, unused and not stored in a dam.

No next month, you are back and want to use 200 litres. And your downstream friends are annoyed as there is less water left than normal.

I am not saying data should expire in 30 days. But unlike your fuel, it cannot be stored if not used. You buy a secice more than a physical product. If you do not use it, it is not available later without affecting others.

So be careful what you wish for, longer expiry periods will either come at an increased cost, or decrease in your pension funds (as telecoms companies which your pension is invested in become less profitable)

Secice should be service

“It is surely farcical that the ‘same’ 1GB of data costs anywhere from R12 to R579 …”

It is farcical that anyone sticks with the expensive option.

Id there a regulation forcing anyone not to change to a cheaper option?

Agreed, if you stick with the expensive option you are nothing short of stupid (or just very naive, and maybe justifiably so – old people etc). However, different rates for different expiry dates is ridiculous. I would also argue that the regulation is not there to govern consumers, but rather to limit exploitation by service providers.

All those different expiry dates for different size bundles – wada, wada, wada
Just another way to bamboozle, control and rip clients off.
More work for accountants and administrators.
Just keep it simple.
A 2 litre bottle of milk at checkers costs R21.99.
If I buy 10 bottles, I pay R219.90.
Why should data be any different?
The data is paid for, in cash, up front. The operators have the revenue in their bank before the product is used.
They have therefore been paid in full for their “product” and, unlike milk, there should be no expiry date.
I’ts plain theft.

Data is not a product its a service. So you should say I pay before the service is used.

If you and I agree that you will work for me 30 hours a month. I pay you every month, but ask you to do nothing for me. Then in December, I say great, here is 360 hours of work I want you to do this month, get cracking.

Will that work?

I am also anoyed at the shortness of the expiration periods, but it is illogical to have no expiry period, services just do not work that way

So then the data providers are taking payment, up front, for something they might not be able to provide when the purchaser wants to use it.
In that case, the purchasers’ money should be refunded.

The reason why we have this system of data sales as a standard practice is because of long-standing collusion between the service providers.

Thanks for that info.

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