2020 poised to be the year #DataWillFall

2020 is poised to be the year in which SA could finally see the cost of communicating become more affordable, with mobile data costs expected to be significantly slashed.

Since 2016, South Africans have been complaining about the high price of data, with frustrations resulting in the social media campaign #DataMustFall, drawing the attention of politicians, the public and regulators, who have been putting pressure on operators to make mobile Internet access more affordable.

On average, South Africans pay around $7.19 (R106) for 1GB of data, which is six times more expensive than what mobile users pay in other emerging economies, according to the State of Mobile Web 2019 report released by Opera.

The working class, youth, students and women of SA are considered to be among those most marginalised by the widening digital divide.

The role of the Competition Commission in mandating price reductions, the enforcement of the Independent Communications Authority of SA’s (ICASA’s) data regulations, combined with successful spectrum allocation are the three main factors expected to contribute to significantly lower data prices before the end of 2020, say analysts.

In its Data Services Market Inquiry preliminary report, released in December 2019, the Competition Commission threw a curve ball to SA’s leading telcos, MTN and Vodacom, recommending they reduce their mobile data prices.

Next week, the Competition Commission and ICASA are expected to make parliamentary presentations on their success in pressurising telcos to step up efforts to reduce data costs, with analysts saying they are optimistic about the outcome of the highly anticipated reports in paving the way for the reduction of data tariffs.

“The Internet Service Providers' Association (ISPA) is hopeful and we are expecting positive outcomes from the Competition Commission’s Data Services Market Inquiry to be announced on 2 March 2020,” says an ISPA spokesperson.

“Further amendments to the end-user and subscriber service charter regulations introduced in March 2019, which require data rollover and end exploitative out-of-bundle billing, have already reduced mobile data costs for South Africans, and we are hoping for further reductions in tariffs, particularly for smaller prepaid bundles which are likely to be tied to a successful spectrum auction.”

With mobile phone penetration well over the 100% mark in SA, and the number of smartphones sitting at around 22 million, the association believes lower mobile data prices will have a hugely positive effect on SA’s Internet penetration.

“Affordable Internet access simply means everyone can potentially participate in the digital economy and more can be done with less. Internet access is an input cost, like labour in the industrial age, and it makes sense to strive towards ensuring universal affordable Internet access to spur economic growth, job creation and entrepreneurship,” adds ISPA.

In July 2017, the #DataMustFall furore led to ICASA announcing its intention to conduct an inquiry to determine the priority markets in the electronic communications sector, followed by the publication of the discussion document last year.

The Competition Commission joined the list of local authorities probing the high price of data services in SA, initiating its own inquiry in August 2017.

In April 2019, ICASA’s new data regulations came into effect, aimed at putting an end to automatic out-of-bundle billing and allowing users to rollover unused data, helping consumers keep more money in their pockets.

Arthur Goldstuck, MD of World Wide Worx, told ITWeb the Competition Commission getting in on the act is the most useful contribution to lowering data prices we have seen so far.

“We should see prices for ad hoc or out of bundle data fall significantly in the second half of this year. However, due to representations made by the operators, and the delay in implementing the new rules, we can expect to see something like the glide path that was used to phase in reductions in the inter-connect fee a few years ago. This means we will see out of bundle data prices begin to fall this year, but it may take longer to see the full impact of new regulations,” explains Goldstuck.

The new out-of-bundle regulations have had a significant impact, not so much on the cost of data, but on its cost-effectiveness, with data customers now being treated “a little more fairly, and not being penalised as heavily as before,” for not immediately using data for which they had paid, he adds.

Mobile operators have been waiting for years for allocation of spectrum in order to provide faster and more widespread high-speed data services.

They have for years claimed they will only be able to effect substantial reductions in data prices when they receive more high-demand spectrum, and in its preliminary report, the Competition Commission has given notice that it will hold them to this.

“The issuing of high-demand spectrum to existing telcos will bring down their cost of providing data, which will also contribute to their willingness to bring down data prices. In addition, the commitment of the president to making communication more affordable makes lower data prices a national imperative, and that will provide the foundation for prices coming down this year,” Goldstuck points out.

In his budget speech yesterday, finance minister Tito Mboweni said ICASA will be appropriately capacitated for the impending licensing of high-demand spectrum.

In his State of the Nation Address, president Cyril Ramaphosa stated ICASA is looking to conclude the spectrum licensing auction before the end of 2020, echoing sentiments expressed by ICASA’s CEO at the end of last year, saying the telecoms regulator plans to expedite the spectrum licensing process, with the intention to grant licences sometime this year.

In the absence of high-demand spectrum being issued to telcos, lowering data prices will place greater strain on them, according to Goldstuck.

“For more than a decade, the country has been held back through failure to license spectrum, and operators have only been able to rollout 4G/LTE thanks to ‘re-farming’ spectrum intended for 3G. That is not only expensive, but also inefficient. It is obvious from a point of view of both economic impact and economies of scale that the existing operators need to be prioritised for spectrum allocation, but in a way that opens their infrastructure to others. Instead, they are deprioritised, while still having to open their infrastructure to others.”

If spectrum is not issued in a more practical manner, the current scenario will result in substantially higher cost for the telcos, which would give them a strong argument to resist price cuts, concludes Goldstuck.