PATEL’S MISDIAGNOSIS

Sky-high mobile data costs are a problem. But the government’s threats to tackle the industry mask its own role in creating this lopsided scenario

t was the sort of good news announcement that you might have missed amid the headlines of Ace Magashule’s shenanigans and how we’re paying over the bar for speaking on our cellphones. But tucked away in the inside pages, there was Nedbank, telling everyone how it was quietly doing what no-one ever expected: scrapping its monthly fee on three of its bank accounts.

“We are hoping to make things easier for our clients,” said Nedbank’s Vanesha Palani. “Our commitment to financial inclusion remains absolute.”

Well, perhaps. You could ask why, if Nedbank is so motivated by “financial inclusion”, it didn’t do this a decade ago, after a Competition Commission banking inquiry bemoaned the social impact of high bank fees?

Rather, isn’t the truth that the prospect of losing clients to the three new banks — Tymebank, Discovery Bank and Bank Zero — is what sparked this newfound zeal for banking for all? Tymebank, for example, charges zero fees, and has signed up 250,000 customers in just a few months.

Ebrahim Patel, the minister of economic development, who had plenty to say last week at the unveiling of the Competition Commission's preliminary report on how much mobile companies charge for data, would do well to study why the banks cut their fees.

Instead, Patel spoke last week of “market failure” while muttering threats of government intervention to force operators to slash fees: “The government would not hesitate to use regulatory power to ensure that a more competitive pricing regime was put in place.”

Now, it’s clear from just about every survey that mobile costs are a problem. As last week’s Competition Commission report recounted: “SA ranks poorly when compared across a worldwide selection of countries and is considerably more expensive than the cheapest offers.”

While the commission used outdated prices, local website Mybroadband’s most recent figures show that for 1GB of data, the two largest operators, MTN and Vodacom, charge roughly double in SA what they charge in other

Icountries. For MTN, it was R112 per gigabyte in SA, for Vodacom, R116.

But the problem is Patel’s diagnosis. He seems to believe this lopsided scenario is a blunt form of greed, which can be cured with threats and invective. Specifically, what he doesn’t mention is the government’s own role in creating this warped competitive picture.

Take this nugget from the commission’s report: “The failure to release high-demand spectrum due to delays in digital migration has left operators with both insufficient spectrum and a lack of access to favourable lowfrequency bands, raising costs unnecessarily.”

The problem for operators like MTN and Vodacom is that without this higher-quality spectrum, they must build more base stations to ensure passable network quality, spending more on carrying traffic.

Only, the government has spent years sitting on this high-end spectrum, awarding it to no-one. So competition and prices suffered. But don’t expect the government to tell you that three weeks before an election.

On Monday, Vodacom released a rebuttal of the commission’s report. It said: “Unquestionably, the most significant obstacle to reducing input costs and, by extension, data prices is the fact that no new spectrum has been allocated in SA in the past 14 years. Lengthy delays in completing the digital migration and allocating 4G spectrum have curbed the pace at which data prices could have fallen.” It said that in Lesotho, which has already assigned 5G spectrum, data fees have plunged. Mybroadband’s analysis bears this out.

In SA, both Vodacom and MTN have just 38MHZ of spectrum — all in the low-quality bands. Yet MTN has nearly double that in Nigeria, 70MHZ, of which 10MHZ is high-quality spectrum needed for 4G networks. In Lesotho, Vodacom has 173MHZ of spectrum, more than fourfold what it has in SA. And of this 173MHZ, 20MHZ is the top-end spectrum.

This is one reason why, in SA, MTN and Vodacom are having to invest more than double per subscriber than they do in other countries. MTN’S R303 investment per subscriber in SA is nearly three times the R118 it invests in Nigeria, for example.

Duncan Mcleod, the editor of Techcentral (and a former FM staffer), put it best: “There hasn’t been market failure, as Patel repeatedly insisted — rather, the reasons for SA’S relatively high data prices are policy related, coupled with political interference and bungling over important projects such as digital migration and spectrum allocation.”

If Patel cares about the mobile sector, he would do well to look at what happened in banking. If anything, it was the arrival of new unthrottled technology, and fewer barriers to providing that technology, that made it possible for upstarts like Tymebank to directly challenge the lazy and complacent incumbents.

Now, it’s true that there are corners of industry where more rules are needed, like microlending. But you can hardly invoke new regulation as a starting point in the mobile industry when the government has firmly strapped the industry’s arm behind its back.

The government has spent years sitting on this spectrum. So competition and prices suffered