Data costs stranglehold internet access for the poor

New regulations aimed at protecting mobile data consumers have been delayed due to a legal challenge from South Africa’s big mobile

New regulations aimed at protecting mobile data consumers have been delayed due to a legal challenge from South Africa’s big mobile operators. But some commentators argue that even the disputed regulations don’t go far enough in reducing data costs.

The regulations, which were meant to take effect in June 2018, would have forced mobile operators to roll over unused data rather than make consumers forfeit their unused data.

Prices in South Africa remain unaffordable to the majority.

But some stakeholders, such as Research ICT Africa, argue that the proposed regulations do not properly address the “significant problem of high data prices” and that “prices in South Africa remain unaffordable to the majority”.

According to a policy paper published by Research ICT Africa in June 2018, data prices from South Africa’s top operators remained stagnant for the last two years. However, as the paper suggests, in spite of prices remaining static, South Africans are still struggling to go, and stay, online.

News reports also suggest that meetings between the Independent Communications Authority of South Africa (Icasa) and mobile operators regarding an out-of-court settlement have resulted in a deadlock, with the matter now almost certain to head to court.

Mobile network operators in South Africa are facing increased scrutiny amid persistent calls from consumers for reduced data prices and a pending market inquiry by the Competition Commission.

Critics have suggested that so-called out-of-bundle data rates and small data packages, which offer scant value for money, are the two key elements of the current data pricing regime that affect the poor disproportionately.

In South Africa, high-and middle-income subscribers who can afford multiple-year contracts with large data packages get the best value, while low-income subscribers, who have no option but to use prepaid or “pay-as-you-go” plans, buy small data packages that are, in relative terms, exponentially much more expensive.

Naturally, low-income users with limited data spend per month are affected to a much greater extent by shock out-of-bundle bills. For example, a user who can only afford to purchase a daily 20MB bundle could end up paying double by using just 4MB out of bundle.

In October last year, Vodacom cut its out-of-bundle rate by 50%, reducing it to 99c per megabyte. Cell C and MTN have imposed similar rates since 2014 and 2015, respectively. Up until Vodacom made this cut, prepaid users on its network were paying a staggering 1 300% more for out-of-bundle data than contract subscribers. But even with this reduced rate, Vodacom prepaid users are still paying 600% more.

Mobile network operators have refused to share information on what percentage of their prepaid data revenue is billed at out-of-bundle rates, citing confidentiality for reasons of market competitiveness. However, Vodacom’s preliminary results for the year ended 31 March 2017 contained some interesting figures.

The mobile provider detailed its prepaid and contract revenue by showing amounts for in-bundle and out-bundle services. Its prepaid revenue for both voice and data totalled R21.9 million, with 75% of this revenue generated from out-of-bundle services and the remaining 25% from in-bundle services. By contrast, only 27% of Vodacom’s contract revenue, amounting to R23.8 million for the period, was out of bundle, with 73% in bundle.

When New Frame initially contacted Vodacom to enquire as to what percentage of its prepaid data was out of bundle, the mobile operator agreed to assist. But a week later, we were told that such “competitive information” could not be disclosed.

Vodacom was able to confirm that out-of-bundle charges currently constitute 12% of overall data revenue for both prepaid and contract. Lexi Ball, Vodacom’s senior media relations specialist, said: “Vodacom previously disclosed this information as part of its financial results, reflecting contract revenue splits between in-bundle and out-of-bundle rates, and prepaid revenue split between in-bundle and out-of-bundle rates. To align with industry reporting standards, we will no longer disclose this information.”

When contacted, none of the other mobile network operators were prepared to disclose what percentage of their prepaid data revenue was billed at out-of-bundle rates.

Cell C’s communications executive, Karin Fourie, said she could not provide the information, while MTN corporate affairs executive Jacqui O’Sullivan said the information is not made available publicly because it is “competitive information”.

During an address to Parliament in February this year, Economic Development Minister Ebrahim Patel promised that the market inquiry by the Competition Commission into the high cost of data, which was launched in August last year, will result in reduced costs.

The inquiry was initiated because the commission believes there are features in this market that prevent, distort or restrict competition within the sector. One of the main objectives of the inquiry is to identify areas of market power where consumers might be exploited or excluded by firms.

Recent comparative studies conducted by the Icasa, the body mandated to regulate mobile network operators, show that Vodacom customers in other African countries buy data at significantly cheaper rates than South Africans.

For example, in South Africa, 1GB of data on Vodacom costs $11.06 (R135.16), however, Nigerians pay just 25% of that cost (R33.79). In Lesotho, citizens can buy 1GB of data on Vodacom for 68% of what it costs in South Africa (R91.91).

Icasa CEO Willington Ngwepe, who was appointed in October last year, says that data prices in South Africa fell by 45% between 2010 and 2015. However, according to him, data prices have seen only a “marginal reduction” since 2016. He added that out-of-bundle data costs increase the cost of data significantly.

The less connected

Indra de Lanerolle, the head of Wits University’s Network Society Internet Research Programme, questioned why we have out-of-bundle rates at all, and added that data prices have only fallen “if you are able to buy big bundles of 5GB or more. At the other end of the market, those prices have not fallen”.

According to him, the poor are “very restricted to buying data in small bundles”.

In November last year, De Lanerolle, along with colleagues Marion Walton and Alette Schoon, published a research report titled Izolo: Mobile Diaries of the Less Connected.

The study’s sample group was selected from three provinces, two urban townships and one rural area. All participants earned less than R1 000 a month, with some below R300 a month.

The report highlights that the internet of higher-income earners is a very different reality to the internet of the poor, where having no airtime is the “default condition”.

Out of the 80-plus participants in the diary research, more than half had no airtime on their phones at the time of their interviews. This gives credence to the statistic that of the 29 million smartphones in South Africa, only 25% have internet access.

The report states the “fragility” of the participants’ connections, as the “frugality” of their mobile practices results in most of them never exploring the internet for information or news. Instead, their online activities are restricted to social media networks such as Facebook and WhatsApp, whose mobile phone applications do not use data as per deals with local mobile network operators.

This frugality is evident in the story of Thandiwe, a hairdresser who can only afford to purchase R12 worth of data a month. She told the researchers: “I only turn on my data when I want to check messages, or if maybe I want to send someone a message, or maybe I’m checking someone’s whereabouts.”

She also told them she would love to use the internet for her work. “If I were to get more data I would Google and check more hairstyles … maybe a person would come and say, ‘I want to do something’… like try something new … then I know that I have my own different styles that I get from the Web.”

The report argues that the common conception of the internet as an “always-on Web”, does not describe the daily practices of the less-connected consumers who featured in the study.

“The diaries suggest that for the less connected who use mobile internet, they have not moved beyond access, but rather that access remains contingent and involves repeatedly having to establish and negotiate that access,” reads the report.

Mobile network operators have been vocal for years about their need for spectrum in order for them to roll out better services. But De Lanerolle says that “we can’t wait for spectrum, we need to look at what can be done today”.

According to him, South Africa could be as many as seven years away from switching off its analog television signals, only then will spectrum be freed up for the ICT sector.

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