Beyond the data price headlines, a broader data reform package holds much promise

It was probably inevitable that the media and industry commentators would focus on the headline-grabbing recommendations for immediate price relief on mobile data prices by the Competition Commission. However, what has been missing from the public debate is a discussion of the broader package of reforms that the data inquiry recommended be put in place.

These reforms aim to ensure a competitive and inclusive data market going forward, serving the interests of both consumers and business in the digital age. They also aim to assist the operators themselves to reduce costs and overcome regulatory hurdles, both of which support investment in the sector.

The inquiry has long championed the immediate release of spectrum in recognition that it is a factor affecting pricing, albeit not the only or primary factor. This was one focal point for the provisional findings, whose loud calls for action assisted in kickstarting the regulatory process that is now under way. The inquiry called for a licensing process focused not on revenue maximisation for the state but rather supportive of competition and universal access. This would involve some caps on spectrum to the larger operators, but also seeing the benefits of spectrum resulting in cost reductions and price commitments to enhance affordability rather than being used to plug a gap in the fiscus.

Aside from spectrum, the inquiry has identified a suite of wholesale interventions to reduce costs and enhance competition. There is scope to reduce investment costs through greater infrastructure sharing, which the inquiry recommends be achieved through legislative changes. These would enable cost-based access to essential infrastructure, including the ducts and poles of Telkom, which provide the fibre backhaul for mobile networks. The recommendations also extend to municipal infrastructure, looking to unblock access to electricity/lighting poles, speed up permission for wayleaves and put an end to exorbitant charges for those rights of way.

Roaming agreements are also essential for smaller mobile operators to compete effectively, especially in rural areas where they lack coverage. The latest set of agreements fix the quality of roaming, but the inquiry found that the rates are often higher than the retail prices of the roaming provider, namely Vodacom or MTN. Bringing these rates down to wholesale pricing levels — a discount on effective retail prices — will promote more aggressive competition from the smaller networks in SA’s poorest areas.

The inquiry has a lighter touch on support for retail service providers (mobile virtual network operators and branded resellers) given the policy decision to support a wholesale open access network (WOAN). The WOAN will take time to put in place but will have to provide competitive wholesale rates if it is to survive, given that it will not have its own retail operations. In the meantime, the inquiry recommends that the rates to retail service providers are wholesale rates, and that specific support is provided to ensure the WOAN’s success.

Many cite regulatory failure as a reason for the concentration in mobile. What is seldom discussed is that the legislative framework makes the regulatory process cumbersome and onerous. The legislation either does not provide scope for regulation, for instance of roaming, or requires communications authority Icasa to go through the notorious section 67 process, which can take years. The inquiry has therefore also recommended legislative reform to enable more effective and rapid regulatory interventions by Icasa.

The final part of the package is a longer-term programme to build alternative infrastructure, including fibre to the home (FTTH) and public Wi-Fi networks in lower-income areas. This infrastructure is more suited to cheaper, high-volume data services, and the same fibre is the backbone of future 5G mobile networks. Wealthy consumers already benefit from FTTH and Wi-Fi at work, and the anti-poor pricing structures are in part because these options are not available to lower-income consumers. Addressing that deficit is critical to ensuring a more inclusive digital infrastructure and supporting economic growth within the fourth industrial revolution. The inquiry has recommended investment incentives for FTTH in low-income areas and a public-private partnership initiative to provide Wi-Fi in public places, commuter points and government buildings.

This package of interventions should make the market for data more competitive and inclusive in future, but this will not happen overnight. It is for that reason that some immediate pricing interventions are necessary and justified. Ensuring fair pricing is not only within the enforcement powers of the commission, but is also incumbent upon firms entrusted with a scarce national resource, namely spectrum.