How to stop the R2/MB extortion - TechCentral

How to stop the R2/MB extortion

hilton-tarrant-180Much like interconnect rates which for years remained stubbornly and unreasonably high, punitive out-of-bundle mobile data rates are a relic of a bygone era.

Sure, operators might have been justified in charging R2/MB in the early days of GPRS, the Wap-based mobile Web and very limited data coverage. But no amount of arguing that out-of-bundle rates serve as an incentive for subscribers to buy bundles so that networks can “plan capacity better” stands up to scrutiny.

Consumers suffer — with situations like R800 YouTube videos commonplace — but network operators suffer, too, as their customers simply resent them for this profiteering (despite how lucrative it is). That operators scramble in the background every time there’s coverage of out-of-bundle rates in the media speaks volumes.

In May, in its AGM business update to the market (and before the fine settlement with authorities was announced), MTN pointed to “organic” revenue in Nigeria being down 6% year on year in the first four months of 2016. Regulatory services were suspended in October and only lifted at the end of March, meaning the operator could not launch new products or services, or indeed change any price plans or tariffs from July 2015). MTN noted the rather obvious impact this would have on operating performance. But, the second reason given is far more interesting.

MTN pointed to “regulatory restrictions that obliged operators to seek permission from customers to charge out-of-bundle rates upon the depletion of data bundles”.

In one of its quarterly Compliance Monitoring and Enforcement Reports, the Nigeria Communications Commission (NCC) directed all operators to comply with the following with effect from August 24 2015:

That where a subscriber’s data bundle account is fully depleted before the due date, service providers should notify the subscriber via SMS, giving information regarding the tariff/ billing rate for automatic migration; and

That all service providers should henceforth stop auto‐migration of subscriber’s data service to the pay‐as‐you‐go (PAYG) account upon depletion of the data bundle account, except with the express consent and authorisation of the subscriber via SMS.

The NCC is analysing submissions from operators which it sought in December to establish compliance. The data it requested from operators is stunningly exhaustive:

  • Figure of active data service subscribers for the months of: September, October, November 2015;
  • Lists of subscribers whose data got exhausted in each of these months;
  • Lists of subscribers who opted for PAYG in each of these months;
  • Lists of subscribers who opted for bundle purchase; including evidence of their authorisation;
  • Lists of subscribers who neither selected the PAYG nor identified a bundle plan purchase (no action);
  • All data provided must come with an audit trail.

Nigeria’s regulator, then, has provided a simple and obvious solution to the lack of transparency (and profiteering) on out-of-bundle data rates. And it’s determined to ensure compliance.

Simply make sure the customer is aware they’ve depleted their bundle and provide a clear (transparent) breakdown of tariffs once they shift to out of bundle. Crucially, require the customer to consent to the out-of-bundle rates. No consent, no data service. The tens of millions of data users will make informed choices soon enough. (If they want to pay R2/MB, that’s fine — they’ll be doing so willingly!)

smartphone-user-640

This is not a technically difficult solution to implement. In fact, operators already have similar mechanisms to deal with migration of customers between different prepaid price plans.

Operators will bleat about not being able to plan capacity for their networks, but a regulation requiring opt-in will stimulate not restrict data bundle sales and usage. The only thing that will be affected negatively is the billions that operators make from those R2/MB charges. Some (much?) of this will be replaced by increased data bundle revenue.

Tellingly, nowhere in MTN Nigeria’s investor day presentation published in mid-June does the company describe the out-of-bundle directive/regulations as a threat to its future business prospects. Once again, the directive is highlighted as a reason for past underperformance (only). But it states that “good growth in data revenue is expected”, now that the biggest hurdle of it being able to launch new services and change tariffs has been lifted.

The core reason why this regulatory approach is so appealing is that it doesn’t force the regulation of tariffs. That’s a separate, well-defined process that already (mostly) works. Instead, it simply requires transparency and opt-in.

It’s useless blaming only the operators for excessive charges like this. Operators will do whatever is possible both legally and from a regulatory point of view in the pursuit of maximising profits. They’re companies with shareholders (and stakeholders). Here, the blame lies squarely with communications regulator Icasa. South Africa needs a strong communications regulator, not hopeless market inquiries that are decades late, nor heavy-handed, onerous regulation. There’s a difference and Nigeria has shown the way in regulations that are smart, above all else.

  • Hilton Tarrant works at immedia
  • This column was first published on Moneyweb and is used here with permission

7 Comments

  1. CharlieTango on

    While it may be up to the regulator to act on this, one would hope that the leadership of the likes of MTN, Vodacom, Telkom and Cell C would have the moral integrity to not rip off their customers.

  2. GreenOrangeKat on

    It is unfortunate that their morality gives way to their profit motive. No argument will defeat our view of their archaic, unscrupulous customer-fleecing practices.

  3. tongue in cheek on

    nice answer psychedelic cat, or possibly they are monotheistic:they had no morals just profit motive

  4. No chance of that.

    Have had MTN flatly refuse to explain ‘ghost’ data charges on my monthly bill

    Just a wall of silence

  5. William Stucke on

    An excellent and simple solution, Hilton. They are already doing it with roaming (Thanks, William), and they have no excuse not to do this with out of bundle data, except that they have been allowed to get away with it in the past.