daniel chigunwe
Cellular providers have been reducing the price of mobile data, motivated by a bit of threat from the Competition Commission, which initiated an inquiry into the mobile industry in August 2017 — and concluded in its December 2019 report that providers must cut the price of data by as much as 50 percent by March 2020.
The commission then announced that it had reached an agreement with Vodacom that the price of monthly data bundles would be reduced across the board.
“Effective from April 1, 2020, the price will come down by over 30 percent across all channels,” said the CompCom.
“For example, the key 1GB monthly data bundle will drop from R149 per GB to no more than R99 (including Vat). This represents a 34 percent price decrease.
“Customers that buy the lowest volumes of data, which are typically the poorest customers, will see the greatest benefit of these price decreases.”
However, poor customers are still paying the highest prices for data.
Since those first steps, the price of data has been declining steadily.
For instance, MTN announced earlier this year that it had reduced its mobile data price from R99 to R85 for one gigabyte (GB) — available to prepaid users and valid for 30 days. Vodacom reduced its price to R85 for 1GB too, while C Cell cut its price to R65.
One can argue that these basic prices are meaningless given the vast number of different packages and (confusing) prices.
Small bytes bite hard
A look at cellular companies’ advertising booklets and websites shows, without a doubt, that people buying smaller data packages are paying way more than users that buy larger bundles.
One example: Somebody buying 10GB (prepaid) from Vodacom will pay R469, equal to R46,90 per GB — way less than the R85 quoted for 1GB. The poor guy who buys 20 megabytes (MB) for R29 ends up paying R145 for 1GB.
The same applies at other operators.
A wealthier prepaid MTN user who buys 100GB for R999 will be paying a scant R9,99 per GB — nearly 10 times less than the ‘R85 for 1GB’ deal.
Long-term prepaid data bundles are also way cheaper than buying small packages from time to time. Vodacom’s Pay Once Upfront deal offers 1GB per month for 12 months at R599. This translates to just less than R50 per GB, with each 1GB valid for a month, compared to R85 if purchased every month.
The upfront package of 10GB per month for 12 months at R2 499 is equal to a price of just more than R20 for 1GB — if you have the R2 500 to pay upfront.
Contract pricing is cheaper than prepaid prices. Cell C offers 50GB at R999 per month on a 24-month contract (also less than R20 per month for 1GB), while the smaller contracts offering 10GB would cost the user some R34 for 1GB.
Economies of scale
Economies of scale exist, and passing some of the benefits to bigger customers makes sense. Price differentiation is a reality, as is offering good deals to lock wealthy clients into longer-term contracts.
However, the vast differences in prices raise a few questions:
How much does it cost to “manufacture” mobile data?
Does it cost operators more to produce and sell 200MB than 1GB?
Does it cost a cellular company more, or is there a higher risk, when selling to cash customers buying prepaid bundles than to contract customers who wait for their account and settle their bills 30 days later?
Data must fall more fairly
Koketso Moeti, executive director of amandla.mobi, the civil rights organisation that started the Data Must Fall campaign in 2016, says data in SA continues to be very expensive.
“The Data Must Fall campaign is not over. As an organisation, we remain committed to access for low-income consumers and recognise we are not there yet.
“We are committed to this for the long haul and continue to work on the issue,” she says.
“The Data Services Market Inquiry (by the Competition Commission) did not solve all the problems in the telecoms sector, which it was never meant to do, but it was an important step in the right direction.
“It is a step that has provided some relief for millions of consumers. For example, the 1GB bundle decreasing from R149 to R85 enabled access for some who would’ve never previously afforded the bundle. This relief should not only be safeguarded, but also expanded,” she adds.
The organisation says that prices for lower-income people are way too high.
“The reality is that the majority of people, low-income consumers in particular, will continue to primarily rely on mobile data for access,” says Moeti.
“So for us, it is crucial that the overall inequities in the cost of data, like the price differentials between what lower-income and wealthier ones pay for data, along with the loopholes used by mobile network operators to pick-pocket consumers like out-of-bundle data rates, are addressed.
“There is still a lot of work to be done in this regard.”
Operators justifying price hikes
Moeti refers to a statement by Charles Molapisi, CEO of MTN SA, which reportedly assured MTN shareholders that the company would grow revenue by continuing to implement inflationary price hikes.
“The reason for this increase, he said, was load shedding,” she says.
“Yes, excessive load shedding is a crisis for many businesses — particularly small ones.
“But it cannot be ignored that this crisis has also had a negative impact on consumers, and especially low-income consumers. An unjustified price increase will add to the burden.
“Given how operators in the past have failed to provide sound justification for the existing price differentials between prices on bundles purchased by low-income consumers versus more well-off ones, this cannot be trusted.
“If MTN truly is doing the best it can, it’s important the company is transparent with regulators and consumers by quantifying the impact of load shedding on its operations,” she says.
“Big businesses in the country have a long history of using crises to profiteer, and mobile networks should not be allowed to do that.”
SA data prices among the highest globally
A study by the UK price comparison site Cable found that mobile data in sub-Saharan Africa is among the most expensive in the world.
The 2022 study shows that data in SA was more expensive than in Nigeria, Kenya, Egypt and Senegal. It was also more expensive than in Ireland, France and Italy.
SA’s data is even a few cents per GB ahead of Luxembourg, the country with the highest per capita income in the world.
The study compared the average price of 1GB data across countries in US dollars. It compared 57 different data plans offered by different cellular companies, concluding that the average for 1GB in SA was just below R35 last year — the cumulation of the vast price differences across packages.
Capitec Bank offers its customers a flat rate of R45 per GB when buying data, irrespective of whether it is 20MB or 10GB. The data does not expire, and in-bundle and out-of-bundle rates are the same.
Unfortunately, Capitec does not offer cellphones, and the Capitec offerings of airtime and data won’t work with cellphones that are locked into a specific network. — Moneyweb
Bongani Ndlovu