Business Day column: Best way for the state to deal with spectrum is to get out of the way

13 December 2017
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Data must fall. Not because regulators and do-gooders say so, but because of "market forces". That mobile data charges "must fall" is as inevitable as rivers running downhill. Unless regulators and activists get involved. If their policies are implemented, grubby little hands will slow the rate at which charges fall, or stop them falling altogether.

The degree of policy bad faith was revealed on Friday when an absurdly brief one month was allowed for comment on the Electronic Communications Amendment Bill before Parliament. Virtually no one knows about it or comprehends how severely it will affect them personally.

Are the data deities behind the bill just silly or driven by perverse interests? To begin with, too many are involved. Their left hand does not know what their other left hand is doing.

Who do you think should regulate telecommunications and mobile charges? Parliament? The Treasury? The Department of Communications? The Department of Telecommunications and Postal Services? The Department of Trade and Industry? The Department of Economic Development? Their portfolio committees? The Consumer Commission? The Competition Commission?

Or the judiciary? The Council for Scientific and Industrial Research? One or more of the role-playing nongovernment organisations? The Independent Communications Authority of SA (Icasa)? Organs of state that use spectrum (radio waves) such as the SABC, the police or the National Intelligence Agency? Or the supposed locus of expertise, the Department of Science and Technology?

Stop thinking about it. All are involved. None have overarching expertise and some have divergent views. The Treasury, for instance, wants to sell spectrum to finance such failed follies as South African Airways. The Department of Communications wants to nationalise spectrum without compensation. Icasa wants to auction spectrum.

The implications for you and the country are serious. We are moving into a world in which virtually everything will be data dependant because virtually every device will connect to a single system. That is not science fiction. It is imminent. You will soon, if delinquent regulators get out of the way, have your health monitored by smart apparel; vital information will go directly to your pharmacy, insurer and doctor; your surgeon, like mine recently, will deploy a robot for cutting edge (so to speak) surgery; you will converse with devices instead of using keyboards and touch screens; your smart phone will wake you as instructed, tell your coffee machine when you want coffee, ensure that your fridge and grocery shelves are stocked and tell your car to calculate the ideal route; home and office windows will close themselves when it rains, baths will never overflow, you will pay for what is in your trolley by walking past a checkpoint; whatever music, news or movie you want will be at your behest wherever you are, and much more.

It is hard to comprehend the importance of rules of the game that will ensure dynamic access to optimally priced technology, innovation and capital. The internet of things, which defines our future, requires omnipresent and constantly updated technology. Daunting privacy implications aside, your existence will cause so much data transmitted via landlines and airwaves that an efficient data system will be as vital to you and your country as an efficient nervous system is to you and your body.

For the system to be remotely efficient, all the ingenuity, capital and creativity of fast-moving liberalised private enterprise will be required. Yet, as if they are Alice in Wonderland, moribund politicians, bureaucrats and activists want to impose a labyrinth of micro-controls and a new doomed-to-fail "open access" monopoly.

"Data must fall" hysteria at surprisingly high levels relies on a feeding frenzy of disinformation regarding local and international data prices, how optimal and competitive prices are established, the nature of competition, why privatisation outperforms nationalisation, how spectrum is or should be allocated and the like.

"Must" in "data must fall" is, of course, ambiguous. It could refer to what happens automatically – what goes up must come down – or to what ought to happen – people must pay debts.

The data cost discourse is bedevilled by three fatal myths: that there are objectively correct prices, officialdom knows what they are, and government monopolies lower prices.

There is no such thing as an objectively "correct" price. "Price theory" teaches that the "price mechanism" is the only efficient way to determine prices. For it to perform its magic, markets must be "contestable". Contestability exists when there are no regulatory barriers to competition. All businesses always compete with all other businesses. The popular misconception is that only identical products compete. All the Competition Commission should do is remove regulatory barriers. Instead it adopts a "compete, but don’t win" approach while ignoring such measures as the new bill.

Data mythology includes the belief that mobile data is cheap elsewhere. According to a false news "four-country" list, we pay R150 per gigabyte compared with R11 in India. Almost everyone has fallen for the lie that our data "expires" or "disappears" prematurely. In truth, the Indian R11 offer was a temporary loss-leader, and we could buy data that lasts a year for R8/Gb.

Regarding "disappearing" data, suppliers do whatever it takes, short of going under, to attract consumers. If consumers really want and are willing to pay higher prices for stuff that does not "expire" — air miles, loyalty credits, insurance etc — suppliers will oblige.

SA started with two licensed network operators mistakenly called "monopolies", Vodacom and MTN. Then Telkom and Cell C were allowed. Two more have been licensed and the government wants to create a nationalised seventh. Since it has an insatiable appetite for unnecessary, inefficient and wasteful state-owned enterprises, it wants a wireless open access network. It wants the other six nationalised into a bureaucratic nightmare. It appeared to be backing off such madness towards a "hybrid" … until the bill appeared.

In the proposed fairy tale a nationalised wireless open access network, a kind of cellphone Eskom, will outperform free enterprise. Surrounding rhetoric promises cheap or free data for marginalised people. But virtually everyone already has a cellphone and buys data. We have more active phones than the entire population. The best way to subsidise indigent people is to give them vouchers with which to buy data.

The communications ministry seems to be unaware of the "price mechanism". It has the spooky belief that if it has details of costs, it will know what prices should be. Not even industry experts with superior expertise are that delusional. They establish prices by trial and error in competitive markets.

We will enjoy imminent 5G technology, tumbling prices and the internet of things only if our government abandons the bill, allocates superfluous spectrum and gets out of the way.

Louw is executive director of the Free Market Foundation.
This article was first published in Business Day on 24 November 2017


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