Why the poor pay R1 for data and the rich 5c

This week the Independent Communications Authority of South Africa released a report with a dull title but a dramatic message.

The regulator’s Bi-annual Report on the Analysis of Tariff Notifications Submitted to Icasa for the Period 01 January 2016 to 30 June 2017, lays bare the price structure of South African communications, and highlights the astonishing discrepancy between data costs for the rich and those for the poor.

Lurking amid 70 pages of tables and analysis is a chart that starkly contrasts the out-of-bundle fee that lowincome users pay, with the big bundles that well-off users buy.

The cost per megabyte, if you are using airtime — or being charged out-of-bundle — is given as R2 for Vodacom, R1.10 for Cell C, 99c for MTN and 29c for Telkom. Yes, the much-maligned Telkom is the only operator that has anything close to an affordable data rate for the poor.

In comparison, those who buy big data bundles of 20GB pay around 5c a megabyte (Vodacom), about 5.5c (Cell C), 6c (MTN) or 4.5c (Telkom).

It appears the operators had anticipated this report. Last month, Cell C said it would drop its out-of-bundle rate to 15c. Just last week, Vodacom announced it would slash this rate — although the slash was more of a shave, as it came down to the same 99c rate as MTN.

This puts the two biggest operators on a par in both price and as being the most expensive.

So how have the big two been able to claim massive reductions in the cost of data in recent years?

The answer lies in the big bundles. A 20GB data package on Vodacom costs R999. On MTN it is R1 250, Cell C falls halfway between the two, while Telkom again leads the price race at R899.

These figures encapsulate the digital divide in South Africa: it is not about who has access; it’s about the poor paying R1 for a service that costs the rich 5c.

And how can it be that a one-time monopoly like Telkom, which was once a byword for exploitation, has provided the moral leadership here?

For one thing, it has allowed itself to be guided by customers instead of by accountants, says Attila Vitai, Telkom’s CEO of consumer, mobile and small business.

“Youngsters were telling me they never use voice telephony on mobile,” he told Business Times.

“They use WhatsApp, Skype, instant messaging, all of the communications that use data. It’s a rarity for them to use traditional circuit-switched voice calls. Internally, we said: ‘How do we take advantage of this?’

“That prompted us to come up with the FreeMe packages, which are the best deal in town.

“Vodacom and MTN always experienced a big advantage over the smaller players because of the network effect of their 30 million or so subscribers, who could get special tariffs for making on-network calls. Data eliminates that advantage. Yes, we lost the voice market years ago, but now data is our game and we push it very hard.”

The next step, Vitai believes, is to provide cheap, uncapped mobile data.

“We can transform the economy with low-cost access to education, entertainment and communications,” he says. “For that, affordable uncapped is a non-negotiable.”

Yes, Telkom lost the voice market years ago, but now data is our game