Pass cost savings on to mobile clients

SEVERAL major South African mobile phone network operators recently announced healthy results, which came hot on the heels of unexpected tariff increases imposed on consumers mid-contract. The reasons given for these increases ranged from rising technology prices to load shedding, from inflationary pressures to the roll-out of new services. Although there may be elements of truth to each, not all of them stand up to scrutiny, and the consumer is getting short shrift as a result.

One of the reasons given for tariff hikes was that networks needed to install generating capacity and battery power to cope with load shedding. No data centre worth its bits and bytes would not have set up emergency electricity generation capacity after that dark period in SA’s history in 2008 — so why are the networks only now passing the costs of doing so on to consumers?

I believe the networks aren’t being honest when they claim they have no choice but to change existing contracts to cover the costs of services that are already (or should already be) in place, in an environment in which technology is helping to reduce their operating costs and where these decreased costs should be passed on to customers. A perfect example is the investment in Voice over LTE (VoLTE), a technology that makes networks’ handling of calls more efficient and cheaper.

The networks have also not factored in the changing communications environment, however, and how developing technology has changed the way they use their infrastructure.

Combined with the fact that contract rates have remained relatively flat, it seemed straightforward to assume that costs were going up and revenues were remaining static. Added to this were claims that investment in new technology such as VoLTE demanded capital expenditure that they were forced to pass on to consumers.

VoLTE is a technology very similar to Voice over Internet Protocol (VoIP) calling systems such as Skype. It enables wireless operators to use the data network to transmit voice services in the same way they transmit data — it’s in effect the most updated version of VoIP.

VoLTE uses new, more cost-effective technology that the networks have already invested in as part of their capital expenditure — capital expenditure that is a cost of doing business, and not a cost that should be passed on to customers. The costs to provide the same service will dramatically decrease when VoLTE is used, and will allow for more traffic to be carried.

The other side of the coin is that VoLTE is unlikely to become universally available in SA. It is a fundamental principle of physics (and life) that you don’t get anything for nothing. And what the networks haven’t made clear is that the increased data speeds made possible by VoLTE come at the cost of range as they use more power. To get the same level of coverage, they will have to choke speeds or install masts in orders of magnitude greater than they already have in place.

Put simply, the networks have already invested in infrastructure to be able to provide their customers with a service that costs them less to offer, which means they will make greater profits. They are not passing these cost savings on to their customers — rather, they are pleading poverty and implementing increased contract rates for a variety of seemingly suspect reasons.

It is time South Africans realised that they have a choice when it comes to calling friends, family, and business associates. Fixed-line and mobile phone operators are no longer the only channels to use to make calls — native dialler VoIP calls are possible.

There may well be hiccups as more people adopt the technology, but we’re so punch-drunk with dropped calls that some teething problems during migration will hardly be noticed. The alternative is to walk up to the nearest shareholder of a network and just hand over your cash directly. It’s your choice.

Lamberti is MD of AlwaysOn.