Special Report – High Data Costs
One of the many truths slammed home by the COVID -19 pandemic has been how essential Internet and mobile connectivity is. This is from circulating news updates about health information on the virus to enabling us to work from home, keep in touch with loved ones and friends, and stay entertained and upbeat in the face of isolation. With working from home set to be the new norm for many, and social distancing expected to remain until at least 2022 – in order to stop the spread and prevent health systems being overwhelmed – connectivity is more crucial than ever. The United Nations has even declared access to the Internet a basic human right (though it’s at the discretion of an individual country to put it into law). And in South Africa, connectivity is widely recognised as a key accelerator of efforts to release us from the cycle of inequality and poverty, through access to education and jobs. Yet, our country has notoriously had the most expensive Internet access in the world.
UNBUNDLING FIBRE COSTS
Today, there are more than 4,5 billion Internet users (almost 60% of the people on the planet). In December, picodi.com analysed the pricings of 233 of the biggest fibre Internet providers in 62 countries, focusing on those with unlimited residential plans. According to speedtest.net, most countries (55 out of 62) offer the speed of 100 Mbps (megabytes per second), providing for smooth browsing on more than one device at once, and watching streaming services in the highest 4K resolution.
By far the steepest prices recorded were in South Africa – $87 a month (about R1 250 in December). Next highest were in Iceland and Norway (about R990 a month). Lowest prices were in Russia (R150) and the Ukraine (R86). Of the 62 countries, only residents in 25 paid more than R300 a month for unlimited fibre connection.
Alan Knott-Craig, founder of an NGO that advocates for free Wi-Fi for all low-income communities in Africa, has estimated that of a total of 13,4 million households in SA, at most 1,2 million have fixed broadband. And, all are in the “leafy suburbs and CBDs of metros”, as he wrote in the Daily Maverick last year. That, he says, leaves 12,2 million households without fixed broadband, the residents forced to rely on mobile data. And, no South Africans need telling how high the costs of this have been.
DOWNLOADING DATA PRICES
In a Data Market Inquiry report released in
December, the Competition Commission slated data prices, particularly of Vodacom and MTN – the biggest players – with 70% of the market. It described the structure of their tariffs for monthly data bundles as “anti-poor”, with the cost per megabyte for smaller volume bundles – all that many people can afford – higher than the cost per megabyte for higher volume bundles. In its provisional report in April last year, the Commission had noted, “Relative to a 1GB bundle, a consumer buying a 100MB bundle will pay roughly twice the price on a per bundle basis for the same data period of validity”. It also noted that data prices here were higher than in other countries in BRICS (Brazil, Russia, India, China, South Africa) and the SADC (the Southern African Development Community).
In December, it said that all networks should offer prepaid subscribers a “lifeline package” of free daily data so that every citizen had continuous access to data, whatever their income level. It added that the two networks needed to reach an agreement with it on “substantial and immediate reductions on tariff levels” in the next few months – and that preliminary evidence suggested scope for prices to drop 30% to 50%.
WHY THE STEEP INTERNET COSTS? Asked last year what determined the prices in the countries where it operated, Vodacom said the costs of delivering services varied considerably, depending on the country. Some costs were set by governments, such as taxes, spectrum licence fees, import duties and rental fees for undersea cables. Others related to the size of a country, its population density and the availability of fixed-line connectivity. The company gave the example of a country with a big population where operators could use economies of scale, compared with a less urbanised one needing investment in rural infrastructure at great cost.
MTN said comparisons should be made with “appropriate peers” – countries such as Algeria, Egypt, Turkey, Mexico, Colombia, Peru and Venezuela. These shared similar topography, proportion of the population being urban, GDP per head, mobile penetration, number of base stations per square kilometre and portion of prepaid versus contract customers (an indicator of income). It added that comparison should focus not just on price, but on affordability and service quality such as download speeds and coverage. “As long as the debate is focused on price alone, generally, South African mobile operators are not the cheapest, but are also not the most expensive overall,” said MTN corporate affairs executive Jacqui O’Sullivan.
Other reasons offered include the high input
costs (for labour, property, energy and company tax), theft of batteries and vandalism at base stations, expensive and time-consuming applications to municipalities, the cost of rolling out and upgrading a network as well as the landscape. “If South Africa was flat and had a large population density in all areas, it would, of course, have been less expensive to service than the reality,” telecommunications companies noted last year in a Fin24 report.
SO, WHAT IS BEING DONE?
After the Competition Commission report, Vodacom was the first to react. On 10 March, two weeks before the lockdown, it announced that it had agreed to a multi-year substantial reduction of monthly data bundles across the board. Competition Commissioner, Tembinkosi Bonakele, said South Africans were paying more for data than their African counterparts, but that from 1 April, Vodacom prices would drop by over 30% across all channels.
“For example, the key 1GB monthly data bundle will drop from R149 per month to no more than R99,” – a 34% decrease.
In addition, Vodacom announced that it would subsidise Internet access to certain websites, enabling consumers to browse sites related to health, wellness, education, jobs and Wikipedia. There would be free access to other essential information, such as local and international
headlines, trends and the weather. Further discounted bundle offers would be made available for prepaid customers in areas where most people were living below the food poverty line. And, zero-rated offerings to all schools, universities and TVET Colleges would be expanded.
Trade and Industry minister Ebrahim Patel said he hoped that this would be a “catalyst in the industry for change – the competitors will have to respond”. And, they did.
On 15 April, MTN went live with revised pricing, slashing the cost of its prepaid data bundles by up to 50%. The 1GB 30-day bundle price was cut from R149 to R99 – 34%. MTN also offered its customers a “daily lifeline” of free 20MB data through its messaging platform, Ayoba, and zero-rating public benefit websites. Larger bundles were improved in volume and pricing.
“MTN already offers zero-rated access to 500 websites, including for public schools and universities, public health, vocational colleges, educational colleges, educational resources and employment sites,” said Mthokozisi Ndlovu, communications and public relations manager.
The good news didn’t stop. In April, Telkom reached an agreement with the Competition Commission to drop the prices it charges Internet service providers such as Afrihost, Axxess and MWEB to use its network. At publication time, media analyst and communications technology commentator Arthur Goldstuck was predicting that consumers could anticipate savings on their monthly ADSL and fibre bills of between R100 and R200.
South Africa’s Internet connectivity appears to be on track, at last. Could it be that, like the clear views opening of the Himalayas for the first time in 30 years, there’s a glimmer of silver lining in the COVID -19 pandemic in SA? Something to help us cope better with the enormous challenges of the pandemic, and what promises to be its even more challenging aftermath – and riding on the Fourth Industrial Revolution advancements available through the Internet? Could it be that we will, eventually, build a better, more equal and educated nation that is able to claim its place in the new post-coronavirus world?