There is little argument that when communications regulator Icasa cut mobile call termination rates — the per-minute charges operators levy on each other to carry calls between their networks — there was a significant flow-through of benefits to end users.
Smaller operators Cell C and Telkom could take advantage of the lower charges to compete more effectively on price with their bigger rivals, Vodacom and MTN. A price war ensued, and today South Africans are paying much less, on average, for voice telephony than they did just five years ago.
Although Icasa made a mess of crafting the regulations — resulting in a successful but ultimately futile court challenge from the big incumbents — the 90%-plus reduction in the wholesale rates over the past half a decade or so has led to lower retail prices. It could be argued that termination rates should never have been allowed to be as high as they were — R1.25/minute at their peak — but forcing them down was the right thing to do.
There is now mounting pressure on the regulator to do something similar when it comes to data — to deal with (perceived) high prices and aggressive data expiry policies by the operators. In the first of a series of planned interventions, Icasa last week published draft regulations dealing with data expiry. The move has been widely welcomed by consumers, but the intervention warrants caution and careful interrogation because there’s a danger that it could lead to unintended consequences, including higher prices.
To recap, the draft regulations propose various tiers of data expiry based on the size of data bundle purchased. They also attempt to put a stop to the exploitation by the operators of out-of-bundle pricing, which in some instances is still punitively high: as much as R1/MB or even R2/MB — and few would argue that those prices amount to gouging. Where there has been consumer criticism of Icasa’s draft regulations, it’s been that it hasn’t gone far enough.
Many consumers argue, probably incorrectly, that data shouldn’t ever expire. But to optimise and plan their networks, and for simple practicality, data should have a sell-by date. The question is, what should that expiry period be? And should that timeframe be determined by the regulator, or should the market be allowed to decide what’s right? If it’s determined that there’s insufficient competition, then that should be addressed through policy — by licensing new competitors or even creating an environment where the operators are required to open their data networks on a wholesale basis, much like Telkom’s Openserve does now with third-party Internet service providers. It’s worked wonders for the fixed-line market, where ISPs have come up with innovative packages and forced down prices (where they have been able to).
That said, focusing the regulatory spotlight on data expiry and out-of-bundle pricing — forcing the operators to justify their practices — is not a bad thing. Whatever they might argue, the big mobile networks have not done enough to address the prohibitive costs for the poor of connecting to the Internet.
And the poor end up paying more, per megabyte consumed, than the rich. The wealthy can afford uncapped fixed-line data; the poor are reliant on mobile and often can’t afford the larger data bundles that offer lower in-bundle rates. Hopefully, Icasa’s inquiry will make the CEOs of these companies think more creatively about how to address this issue. In a country where income disparities are so large, it is iniquitous that the poor are expected to pay so much more for data while the rich have uncapped broadband.
This is one area where Icasa’s draft regulations fall flat: they penalise the poor. Whereas the regulator proposes that those buying 20GB or more of data (those who can afford it) will be able to keep that data for at least 24 months, those buying between 1MB and 50MB (mostly the poor) can expect that data to expire after just 10 days.
The other big problem is Icasa is proposing regulations that could end up distorting the market. If the operators can’t expire data for, say, 12 months (as is the proposal for those buying between 10GB and 20GB of data), what does that do to retail prices? The fact is, the longer it takes for data to expire, the more the cost there is associated with providing that data.
Operators need to plan for future demand, and by expiring data after a certain period, they can (in theory) keep prices down. Some have even begun offering (relatively) low-cost data bundles that expire in a day or even after just a few hours: this simply wouldn’t be possible under Icasa’s plan. What does that mean for product innovation?
There are no easy answers to these issues. But Icasa, under pressure from consumers and politicians, must resist taking a populist course. It must tread carefully in crafting regulations, lest they unintended consequences.
It’s almost always best to leave the market, where it’s sufficiently competitive, to determine the right products and prices, especially in the retail space. If competition hasn’t led to the right outcomes, then it’s best to address this through policy interventions rather than telling operators how to design their products or, worse, what prices they can charge (which, worryingly, may be next on Icasa’s menu of planned interventions).
That being said, it’s clear the operators themselves haven’t done enough to address the affordability gap. They have a serious PR problem, which is only going to get worse if they come out all guns blazing at Icasa. If they don’t come to the party with better deals, and find ways of making it more affordable for the poor to be included in the digital economy, they run the risk of regulatory oversight that could make their lives very difficult indeed. — (c) 2017 NewsCentral Media
- Duncan McLeod is editor of TechCentral