Policy bungling keeps data costs high - TechCentral

Policy bungling keeps data costs high

marian-shinn-180The effects of perpetual policy bungling, which has become the hallmark of the ANC government’s communications ministries, will be laid bare during a two-day public hearing into the cost of communications held in parliament this week.

During the past two years, I have repeatedly asked for the topic to be included in the programme of the portfolio committee on telecommunications & postal services, and it is with some relief that I recently managed to persuade the chairwoman, Mmamoloko Kubayi, to hold it before this term expires.

The lack of availability of spectrum for wireless broadband services is the major cause of high prices. The unavailability of spectrum has created an artificial scarcity that has stifled competition needed to drive down prices.

The unavailability of spectrum has two main causes:

  • The failure of the programme to migrate from analogue to digital broadcasting, thus freeing up the airwaves to create more space for wireless broadband services.
  • The failure of policy on how to allocate the high-demand spectrum, which is stalled in a spectrum stand-off between the minister of telecoms & postal services and the Independent Communications Authority of South Africa. The high court will deal with this on 27 and 28 September.

Making more spectrum available to a diversity of network providers will have a major impact on growth and diversity of the ICT sector and the enterprise and social development services it facilitates, leading to economic growth, inclusion of marginalised communities and increased revenue for the fiscus to provide e-government services.

Increased competition, coupled with effective and independent regulation, will drive down communication costs.

The current United Nations definition of “affordable broadband” is that a 500MB allocation of prepaid mobile data should cost no more than 5% of average monthly income. The Alliance for Affordable Internet stated in its 2015-2016 Affordability Report that in South Africa an Internet connection costs the majority of South Africans anywhere between 6-19% of their monthly income.

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The lack of availability of spectrum for wireless broadband services is the major cause of high prices, says the writer

The alliance is one of 12 presenters appearing before the committee this week, along with the mobile service providers, civic groupings and the Internet Service Providers’ Association.

For this week’s hearings to impact on the cost of communication, it is vital for government to face up to the detrimental effect years of policy bungling have had on stifling citizens’ ability to exploit communications technology. It must back down from its ideological standpoints and give citizens what they want — affordable and plentiful spectrum.

  • Marian Shinn is a Democratic Alliance MP and the party’s spokeswoman on telecommunications

9 Comments

  1. While the shortage of spectrum is an issue for the networks, I think that Shinn is being somewhat liberal with the truth when she cites it as the main reason for the high cost of data.

    Yes, spectrum is scarce, and in certain places this creates congestion and makes network planning more difficult for telcos. But, and this is a very big but, this should not have such a direct cost on the price of data. If you have spectral congestion, it means that you are able to sell less data in certain places at certain times of the day, not that it should necessarily cost more.

    The costs of supplying data are not so elastic that having access to more spectrum will drive prices down from the R150 level per GB to the international average which seems to be around R35. And the reason for that, is that data prices are not set on a “cost plus” basis, but rather on a “what will the market bear” basis. When I hear MTN argue that they are unable to supply data at lower rates because of the costs involved, I’m suspicious. If that was the case, there would be no way for Afrihost (a smaller company with much lower negotiation strength) to offer a service over the MTN network at less than half the cost. After all, the high costs that MTN are complaining about are for their radio network and spectrum costs, the identical network and spectrum that Afrihost are leasing from them.

    Please note that the shambles of allocating the high-demand spectrum is an issue, but I’m not convinced that following the DA/ICASA model of auctioning off this spectrum to the highest bidder is necessarily the best solution. The two networks likely to be winners in that scenario haven’t shown themselves to be friends of the consumer in the past twenty years or so.

    As they say, a stopped clock is right twice a day, and I think that the DTPS may actually be right in their opposition to the auction. We should be careful of knee-jerk reactions from politicians who are more concerned about opposition than what is best for South Africa. Shinn is very shrill, but is on the wrong side of both this and the DTT encryption issue in my opinion.

  2. This sounds like one of those veiled defenses of the exploitation of South African consumers by the mobile operators. Various studies have consistently been pointing out that South African mobile operators are charging consumers far higher than they do in other jurisdictions in which they operate. Clearly this has very little to do with the scarcity of the spectrum the DA uses to defend this exploitation. Rather than facing to the market structure and ineffective regulation the DA continues on its opportunism blaming policy and spectrum obviously because of the ongoing court case. It is interesting that the DA in this article talks of competition as a lever to drive down prices. The very DA was only a matter of weeks ago issuing statements supporting the wholesale sell off of the spectrum to the highest bidders that would entrench the exploitative duopoly of Vodacom and MTN. The same sell-off auction plans would potentially license only 4 operators and not introduce any new players or create competition. In addition, the R3bn price tag placed on the spectrum will obviously be passed on to consumers, thus increasing the cost of communication services. If there is someone who is muddled in this discussion it is obviously the DA.

  3. Well put !

    Yup, one only has to look at the obscene profits of the duopoly, and know that it has nothing to do with ‘spectrum allocation’

    In effect, an anti trust should be brought against this duopoly, they need to be broken up into smaller entities, and many new companies brought to the market, all on a level playing field.

    But of course, dont expect this anytime soon.

    After all, this is ‘old boys club’ SA we talking about.

  4. Yup

    In a nutshell, if ‘spectrum allocation’ was hurting the duopoly so much, HOW COME THEY STILL GENERATE OBSCENE PROFITS, year in and year out ??

    No you 2 big telecoms bullies, we not shedding any tears for you.

  5. Well put- Somehow in this country, corporates have this license to fleece the public, AND get away with it

  6. tongue in cheek on

    I agree, the telco’s have artificially (best business practice, my ass)priced bandwidth too high, for the big corporate bonuses and shareholder complacency

  7. tongue in cheek on

    an anti trust should be brought against this duopoly- right on brother, we have enough corruption in government, it’s time our beady eye be turned on greedy corporates, they are equally responsible for lack of servicing the poor in this country

  8. tongue in cheek on

    well, the govt lives off “donations” from tax payers, so guess who are the corrupter’s of these govt officials, follow the money

  9. Short memories! In 2001 Telkom was going to deregulate to make things cheaper? 2010 World Cup! Would make data and internet accessible for all. 2016 the same question with no answers! Same government thats sinking the country into debt and leaving the future citizens with nothing.