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‘Data prices must fall!’ – Competition Commission

Commission gives Vodacom and MTN two months to oblige – or face prosecution.

Vodacom and MTN have been given an ultimatum by the Competition Commission to reduce prepaid monthly mobile data bundle prices within two months – possibly by between 30% and 50% – or face prosecution in terms of the Competition Act.

These reductions will be in addition to the most recent price reductions by Vodacom and MTN.

This was one of the major recommendations contained in the final report of the data services market inquiry released by the commission on Monday.

It was also recommended that Telkom Openserve reach an agreement with the commission within two months on substantial reductions in the price of IP Connect (the wholesale ‘internet protocol’ product through which third-party internet service providers connect to Telkom’s network) to remove excessive pricing concerns.

Tembinkosi Bonakele, commissioner of the Competition Commission, said on Monday the report found that the market for data services in South Africa is highly concentrated with a duopoly of the two leading operators, Vodacom and MTN.

Bonakele said data prices are excessive, which may violate the provisions of the Competition Act.

“We believe strongly as a commission this requires strong and decisive interventions.

“We have noted that there have been recent price reductions but we do recommend in the report that Vodacom and MTN must independently reach an agreement with the commission on substantial and immediate reductions in pricing, especially of pricing of prepaid bundles, which we have found to be more expensive than the so-called contracts and reflect a bias against the poor.

‘Excessive pricing’

“We think there is scope to reduce these prices in the region of 30% to 50%. We have decided that we will give the industry two months to act on these recommendations, failing which we will consider a prosecution for excessive pricing,” he said.

Bonakele said the commission is saying to the industry “it’s up to you”.

“If we are able to reach an agreement for you to address our concerns, that’s fine. If not, I think we have reached a stage as a regulator where we say that this must be an issue that is considered for referral to the Competition Tribunal.

“We will see now what is the response to the recommendations,” he said.

“We cannot continue debating. We have done enough of that and think the industry must now come on board.”

Deputy commissioner Hardin Ratshisusu said in terms of the Competition Act, the commission has the option to refer the matter to the tribunal, start a new case, or enter into a settlement agreement with the affected firms.

“We do urgently implore them to engage with the commission constructively. If they engage constructively with the commission, we are confident that we will reach an amicable solution which will benefit consumers and will take our economy forward.

“Indeed there will be hefty penalties at the end of the day for those that do not wish to cooperate with the commission,” he said.

Bonakele said a second major issue that led to the inability of other operators to effectively compete is the issue of infrastructure sharing, which is largely a regulatory issue.

Essential infrastructure

He said the commission believes that infrastructure, especially essential infrastructure, should be subject to regulation.

The report has recommended legislative changes that should set pricing standards for different types of facilities to facilitate cost-based access to infrastructure facilities.

Minister of Trade and Industry Ebrahim Patel said it is clear there is a competition problem in the data services market because prices are higher than they should be, higher than in many other markets elsewhere in the world, and profitability levels are high.

Patel said this reflected potentially anti-competitive outcomes that may be the subject of an investigation into excessive pricing.

He added that the inquiry also found that the structure of-, and practices in, the market result in discrimination against lower-paid consumers, that roaming markets are not working or not working as well as they should, and that something should be done about it.

“These are quite significant recommendations that seek to address the issue of retail prices and seek to remove the differential in the pricing charge to lower-income consumers and high-income users of data services,” he said.

The report made a number of recommendations to enhance price-based competition, including that Vodacom and MTN reach an agreement with the commission within six months to ensure that their national roaming agreements with other networks are priced, at a minimum, at wholesale rates that reflect a reasonable discount on their own effective retail rates.

It also recommended the development of alternative infrastructure to provide data services in lower-income areas and small secondary cities and towns, and that government at all levels must actively promote the development of free public Wi-Fi in low-income areas, including government buildings, commuter points such as train stations and taxi ranks, and public spaces such as parks, shopping areas and government service offices, as well as the creation and entry of community networks.

The report recommended that a single government department or agency be designated as responsible for driving these initiatives across the different departments and levels of government.

Other recommendations contained in the inquiry report include that all mobile operators must reach an agreement with the commission within three months:

  • To offer all prepaid subscribers a lifeline package of daily free data to ensure all citizens have data access on a continued basis.
  • On a consistent industry-wide approach to the zero-rating of content from public benefit organisations and educational institutions.
  • To inform each subscriber monthly of the effective price for all data consumed.

MTN said it had noted the release of the report on data pricing and would study the full report once it was received from the commission.

Vodacom said it would engage the commission on the report.

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I’m all for cheaper & better but at what cost, in the long run?
It’s hard to take this commission or any such conglomerate tied to gov’t seriously on matters like this. When you consider the way they go on about doing business, the monopolies they control, the state of our economy and their waste in the face of a poverty stricken nation.
Maybe this commission should be more concerned with releasing spectrum, before taking these matters to court. That way their prospects of success would be greater and taxpayers money won’t go to yet more waste.

I am waiting anxiously for the Competition Commission to tackle two of the biggest monopolies in South Africa : Eskom and Transnet. The suspense is killing me.

and the Banks…don’t forget the Banks.

And SAA

Vodacom and MTN have deep pockets – Plug it into the legal channel and it will take years for the data prices to fall.
If this regulator (read government) really want competition then why not just buy cell C cheaply and lower the data prices to where you want it – This will really benefit the poor !!!!
Of course you can then appoint a Board of all your friends, employ your family as contractors and get government bailouts just like SAA.

The government has a monopoly in the supply of spectrum. They restrict the supply, while there is high demand. It is this action by the government that supports the high cost of data. It is the same issue as in the electricity sector. Government has a monopoly on electricity generation, therefore, electricity is unaffordable, and even unavailable sometimes.

They should provide spectrum and the free market will serve the consumer by bringing competition to drive down prices. Government choose to implement the old, failed strategies of market intervention that will simply decimate the supply of products and services over the long term. The market has a built-in mechanism that guarantees the best service at the best price. This mechanism is called competition. ANC policies create a barrier to entry for competitors who want to supply data.

Instead of demanding cheap data from private service providers, we should rather demand spectrum from the government. We need more competition while the socialist government policies prevent the competition from serving the consumers. It is clear that the high cost of data, like the high cost of electricity, can only be blamed on the ANC. The ANC is hoarding spectrum for cadres, while the cadres are incapable.

“It is clear that the high cost of data, like the high cost of electricity, can only be blamed on the ANC.”

The ANC is indeed a vast mine of dizzying incompetence, but the profits generated by Vodacom and MTN make it difficult to accept your statement at face value.

That is my point – they only have pricing power because they have little competition, thanks to the ANC.
MTN’s value has declined by 80% since 2017 while the VOD share price is 40% lower than in 2017. Is this what it looks like when companies have excessive pricing power? I don’t know, I would say the share price reflects the unique situation in Africa and South Africa specifically. The government confiscates your cash flow when they run out(MTN Nigeria), then politicians regulate your prices to increase their personal cash flow, and citizens steal the batteries from your towers to generate cashflow for themselves.

Who are they stealing from? The PIC owns a large chunk of the shares in these companies. This implies that government employees, of which many are shareholders, are using their pensions to bribe themselves to vote for the ANC. They have already spent 40% to 80% of their ownership in these companies in this manner. These people are either extremely benevolent or extremely stupid. I’d like to believe that it is the former.

I call on vodacom and MTN to object this and fight them tooth and nail

He he he, Hayibo, Suka Wena… If “government and regulators have failed to release the spectrum that the mobile industry has so critically required” you take money from the consumer, why dont you take the government to court? oh goodness Jehovah, what has the South African consumer done so bad that he be raped day-in-day-out… I think we are beginning to enjoy it and business will continue to abuse us.

Prediction : the top end packages will become more expensive in order to cross-subsidize the low end packages.

No different than how business electricity tariffs subsidize low income electricity tariffs.

Soon they will try to do an NHI on mobile communication services. They will figure that private individuals spend x billion on airtime and that this money should be diverted into a communication fund to make sure everyone has fair access to the internet.

As always there is a Socialist slant. Makes one wonder why it took 2 years to come to this conclusion. One can see a mile away the outcome probably comes straight from cabinet.

The effect of this would be the inverse and opposite of what they thought they would achieve. Just more destruction of SA-INC.

If I am not mistaken the PIC holds over 25% of MTN.

Hahaaa. Can only laugh at this lot.

This is the danger when you are the provider of what is considered a “right”. I am sure the other markets where Vodacom and MTN operate will be watching with interest. These companies need to move away from being a simple pipe to offering value added services.

Vodacom shareholders must be peeved off since they have paid handsomely for the license to operate via the latest BEE deal. The hits keep on coming.

I honestly cannot see them building 5G networks in South Africa. The capital requirements and regulatory risks are huge.

The unintended consequences of the CompComm’s actions are the opposite: it stifles healthy competition in the long-term!

The CompComm has a regressive socialist stance.

How about govt reducing red tape (make that income tax as well) for an easier regulatory environment. SA is simply over-regulated (..well, it helps with keeping useless jobs)

This corrupt ANC government does not have a clue how to run govern a country properly. A failure in each and very department!

My commission decrees that the taxi industry start showing their customers some respect and stop slaughtering them like sheep on a daily basis. Yeah right!

We heard the same defensive tactics when the two were charging more than R3 per minute for voice in the early late 90s and early 2000s. Then they were pressurized to drop voice to less than R2 and again they were forced to drop to less R1. Same for data they reduced their prices and data profits continue to grow

We have to be consistent and break the collusion between labour unions and the ANC. Labour unions enjoy exorbitant privileges that protects and enriches their members to the detriment of the unemployed. The cost of labour has to fall to benefit the consumers. The tripartite alliance has a false monopoly on the supply of labour. They are responsible for mass-unemployment.

For your line of reasoning to be coherent, fair and consistent, you will have to agree with this statement.

I believe the headline should read “Data fees must fall”

I would prefer that data itself doesn’t fall.

I support this fully, mostly because of the cynical way in which Vodacom and MTN evaded ICASA’s rules on data expiry. The practical outcome of their implementation was that data still expires and it has had zero impact on total data cost for a given usage.

Spectrum is a national asset which does not belong to the providers. It is licensed to them for our benefit, not for them to screw us blind when data prices elsewhere in Africa are modest by comparison.

Data prices have already fallen quite dramatically in the past 2 years, or well at least if you have been shopping around, like any consumer should.

If you need data for household consumption MTN Fixed LTE now costs around R6.6 per GB (30GB for R200) or R5 per GB if you go into the upper echelons of packages.

And for data on the move you can’t go wrong with just a Rain sim, especially if you have a dual sim phone, it is however much more expensive at R50 per GB (and ironically Rain roams on Vodacom’s network)

There is a very simple way to tax the national asset called spectrum : a % based on the kW of transmission equipment.

You own 5GW of equipment you pay 5000 what the guy with 1MW pays and he pays 1000 times what the local 1kW network pays.

I am tired of paying 100 times more for mobile broadband than for fiber. MOST of that revenue sits untaxed in offshore transfers. Mauritius post box companies probably earn 5 times more from SA mobile than SA does.

Do not be fooled by Vodacom headline earnings

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