Government can and should lower data prices but not by strangling the industry

25 March 2017
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President Jacob Zuma’s announcement in his State of the Nation Address – directed to “the youth,” no less – that government has prioritised the lowering of data prices, should immediately have raised our scepticism about the viability of his claim.

After the thorough debunking of the #DataMustFall campaign because of the questionable statistics used, his statement can only be based on the assumption that government has a magic wand that will render data prices lower. The President, no doubt, was referring, implicitly, to some kind of regulation or price control already contained in the new Department of Telecommunications and Postal Services telecommunications policy.

Jan Vermeulen at MyBroadband has pointed out that government – not service providers – is best placed to lower data prices. According to Vermeulen, allocating radio frequency spectrum, allowing the rand to strengthen, and reducing red tape, would be the recipe for success. I largely agree, but I do not think “better regulation,” as Vermeulen calls it, is the right way to describe it. This is an environment that demands little to no meddling by government.

It is crucial that the telecommunications department immediately abandon the onerous provisions in the new policy that make the acquisition of a licence more difficult for service providers, and, potentially, establish a new monopoly in the sector in the form of a (single) Wireless Open Access Network (WOAN). In the latter, government threatens to expropriate spectrum already allocated to private service providers for the WOAN to use. Government says this would be in the interest of ‘sharing.’

Spectrum are the radio frequencies – a finite resource – that mobile operators use to provide services to consumers, often referred to as “the lifeblood of the industry.” The more high-demand spectrum a service provider has, the higher the capacity and better the quality of the service it provides. The Independent Communications Authority’s (ICASA) recent postponement of its much-awaited auction of spectrum, was cause for further consternation throughout the industry.

Making it more difficult for mobile network providers to do business will not lower prices, even if the government engages in price control. Prices will rise as service providers attempt to compensate for the new regulatory burden, and, where the Electronic Communications Act empowers the government to enforce price control, the quality of service will decline. Investment in our ICT industry will grind to a halt.

The telecoms industry is the most viable vehicle for substantive socio-economic transformation in South Africa, a fact often overlooked. With a 98% mobile penetration rate across the country and a virtual-100% penetration rate in poor urban communities, what has been achieved in terms of technological empowerment is one of South Africa’s greatest success stories.

The licensing regime in South Africa is already highly burdensome. Licensing and spectrum fees are expensive, besides which, service providers are required to provide discounted data to schools, hospitals, and institutions of higher learning – a cost ultimately borne by paying consumers.

Not only the direct cost of government regulation leads to higher prices. When we had load shedding, for example, service providers had to acquire and maintain diesel generators and back-up batteries. South Africa’s prospects for sustainable electricity generation remain bleak.

If government shelves the new telecoms policy, allows ICASA to allocate spectrum, and significantly reduces the regulatory burden, South Africa’s premiere substantive transformative industry can continue to provide pocket-sized means for life-changing empowerment. Any substantive regulation, as intended in the telecoms policy, should be put to the test of a Socio Economic Impact Assessment (SEIA) to determine whether or not any unintended consequences of the policy will harm the industry, and also be subjected to intense public consultation in good faith.

In the case of the telecoms policy, neither an impact assessment nor public consultation was done appropriately. South Africa is going to be beleaguered by a regulatory regime, the consequences of which are completely unpredictable (other than the truism that the consequences will be unintended), that neither the industry nor the people will fully understand.

The question for government is whether the most important goal we should strive for is the wellbeing of South Africans or the furtherance of a particular ideology. Two separate goals that are mutually exclusive.

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