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South African data prices not dropping fast enough

Compared to other countries, South Africa’s data prices are higher, even where there is a common network provider.

South Africa’s mobile network operators are not only charging more for data relative to the other countries in which they operate, but the gap between those prices keeps widening as data costs fall faster in other countries.

The two largest operators Vodacom and MTN are the biggest culprits of overpricing, charging “considerably higher” prices than they do in other parts of the globe.

Using data from the Independent Communications Authority of South Africa in a provisional report on the prices of data in the country, the Competition Commission showed that while 1GB of Vodacom data costs R168.56 in South Africa, the same bundle was close to 90% less in Egypt at R16.28 and in Nigeria at R40.26. Closer to home, Vodacom charges R109.49 for 1GB in Lesotho.

Similarly, MTN’s prepaid 1GB data bundle is priced at R173.60 in South Africa however the same bundle was R2.03 in Iran or R45.76 in Nigeria. In Zambia, 1GB of MTN data will set you back R49.53.

Two years after the commission established the data market inquiry to probe costs of data, its findings released on Wednesday give credence to the public outcry that mobile operators are charging exorbitant prices.

Data prices are anti-poor 

The most “disturbing” finding in the report is that low-income consumers may be “exploited to a far greater degree” than their wealthier counterparts.

These customers opt to buy smaller data bundles as they are more affordable however the commission’s assessment of headline retail prices showed that in the end, they paid “inexplicably more on a per MB/GB basis”.

“The retail pricing structure of mobile data is anti-poor,” Tembinkosi Bonakele, commissioner at the Competition Commission told the media.

For instance, compared to the costs of buying 1GB, a consumer buying 100MB will pay almost double on a per bundle basis for the same data period. Vodacom currently sells 1GB of data valid for 30 days at R149 while 100MB is R29. If the same consumer continues to buy the 100MB bundle until they hit the 1GB mark, they will have spent R290 in total.

On top of paying more for lower bundles, lower-income consumers were also far more likely to be subject to punitive out-of-bundle rates which account for up to half of the money they spend on data, unlike consumers who buy larger bundles and are less likely to run out of data.

Chief economist at the commission James Hodge said network providers were invited to comment on this discrepancy during the first leg of the hearings and argued that the gap between the smaller and larger bundle rates reduced when considering hourly bundles, promotional data or free data offered to consumers.

“I suppose, from the commission’s perspective, to be told that someone who wants to use 100MB over a month must rather use it in the next hour in order to get a cheap price isn’t a way of compensating,” said Hodge. “Invariably, that data will expire and the effective price will be much higher.”

What was of further concern is that poor consumers were exploited for being poor. Hodge explained how network providers were more willing to drop prices for wealthier consumers because they were more likely to use the data liberally and spend more meaning revenue does not deteriorate to the same extent.

Hodge said headline prices for data had also remained relatively unchanged over the past few years with network providers opting to provide users with data specials, which gives the impression of cheaper rates. The lack of transparency around costs makes it difficult for consumers to compare prices across networks and inhibits price competition in the industry.

Vodacom and MTN say data is falling

Both Vodacom and MTN noted the commission’s report, and said they would be studying it further in order to make submissions and comments by June 14 for the final report.

In the interim, the network providers stressed the efforts they have made to lower costs.  Vodacom’s spokesperson noted that it had recently announced a drop to its out-of-bundle prices by up to 70%.

MTN spokesperson Jacqui O’Sullivan added that the commission was largely reliant on outdated information from 2017, which does not consider the changes that have happened in the mobile pricing sector over the past 18 months.  

“One such significant change was MTN’s decision in February of this year to cut its out-of-bundle data rate by up to 75% for pre-paid customers,” said O’Sullivan.

However, at the press briefing, Hodge said while network operators claim that data prices are falling in South Africa, “the gap is widening over time”.

Immediate cost relief 

Some of the recommendations to provide immediate relief on data prices include mobile operators committing to reducing their headline tariff levels and locking them to the average price that a user would pay for data plus free bonus and promotional data.

“That leaves the operator’s revenue neutral because it does not dig into their revenue because that’s what they are effectively charging but it does mean that all consumers can benefit from that,” said Hodge. The greater price transparency would also promote price-based competition.

The commission also wants network providers to reduce the price of bundles lower than 1GB to an “objectively justifiable and socially defensible range of the 1GB price”. The provisional level is a cap of 25% higher on a per MB basis. This will provide real price relief particularly to lower-income consumers who mostly use small data bundles.

The commission acknowledged the need to urgently assign spectrum and other essential facilities, which will reduce infrastructure costs for network providers.  

Minister of Economic Development Ebrahim Patel said data was essential to building a skilled and competitive economy especially in the context of the “fourth industrial revolution”, which has changed the face of core services in society such as healthcare, education and skills development.

“This is about more than simply a problem of high data prices,” said Patel. “It’s the entire economy that is affected by this”.

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Good, Good , good. The only reason for inflated prices could be to pay off the undersea cables.

Next stop is to investigate inflated car prices in SA

Undersea cable is not the reason because Lesotho’s prices is way below offerings in SA. Something more sinister is at play

Apparently both Vodacom and MTN charge us 3-4 times what they charge their customers in Nigeria!

MTN and Vodacom is not the type of privatisation we want, they are monopolies.

how much is a liter of petrol in nigeria compare to sa

Two thoughts: It’s not the poor who is exploited, it is rather the people who doesn’t use a lot of data that is exploited. Bringing the poor into it, is just politicking. Also, I have no proof, but I bet that part of the high cost charged, is the cost of BEE that permeates through everything in SA.

I received the same sms from MTN about them slashing data bundle rates by 75% as from 1 Feb.
However, I was quoted R160 for 1gb data just a few minutes ago.
How is that a 75% slashing from the previous R173/1gb?

We recently travelled to Egypt and Vietnam; data in both these countries are easy to come by (tourist sim) and also super cheap (even in Rands) – just mind boggling!

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