Media release: COVID-19 highlights the critical need for more spectrum to lower cost of data

30 March 2020
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Media Release
28 March 2020

COVID-19 highlights the critical need for more spectrum to lower cost of data

Data is not a 'human right' any more than are food, clothing, transport, or medicine. Yet the Competition Commission (CompCom), which appears not to understand contestable markets or consumer sovereignty, demands much cheaper or even free services from mobile network operators (MNOs).

If government wants free or subsidised data it should, as with the police service, provide it, or, as with housing, fund construction companies charging full market prices.

No one suggests that RDP home builders should do it for nothing or fund subsidies. Why then, should MNOs be accused of 'anti-poor' policies and be bullied into pricing strategies that will curtail essential infrastructure investment and commercial value? By far the biggest victims of the CompCom's misguided interference will be the poor who are entirely dependent on network investment.

Government's own role in keeping data costs high, through its failure to allocate more radio frequency spectrum (airwaves), is not widely understood.

Data usage has sky-rocketed since the COVID-19 crisis, and now the lockdown, began. It has reignited misinformed howls of rage that data in SA in too expensive. MNOs are struggling to cope with the massive surge in demand yet, unlike in nearly all other competitive sectors, they have not increased data prices. Instead, they are reducing prices following the CompCom's dubious Data Services Market Inquiry report, released in December 2019. Far from MNOs being victimised by the CompCom and public pressure, they should be nurtured during and after the crisis. 

Free Market Foundation CEO Leon Louw said:

"There is a loony notion, a kind of 'madness of crowds', in which almost everyone believes whatever nonsense is regurgitated about SA supposedly having abnormally high airtime and data charges. This myth does not stand up to objective scrutiny. Pricing of data in SA has unique aspects, but nevertheless prices here, on average, fall into the middle range globally. Industry insiders say that the Competition Commission got its sums wrong. They should release the basis of their analysis, then we can assess the accuracy of their evidence and assessment."

The solution to supposedly 'high' data prices is for the government to release more spectrum, something it has failed spectacularly to do, not least due to its botched digital migration strategy. Without more spectrum, MNOs must add billions to the cost of squeezing more data into needlessly throttled bandwidth. Insufficient spectrum prevents prices from falling. The only incontestable 'law' of economics is "TANSTAAFL - there ain't no such thing as a free lunch". The cost of 'free' data must be imposed on someone. The ultimate victims are consumers, especially the poor.

The mobile sector is democratic South Africa's most spectacular success story. Instead of blowing its trumpet, the CompCom is trying to undermine it. SA has world-class networks despite the government's spectrum throttling. Our national coverage exceeds 90 percent – higher than some of the world's wealthiest countries. Instead of attacking our remarkable MNOs, the CompCom and the Independent Broadcasting Authority (ICASA), should implore Minister of Communications and Telecommunications, Stella Ndabeni-Abrahams, to get on with her job of releasing wasted spectrum. She announced that extra spectrum will be available during the COVID-19 crisis but, absurdly, this may have to be returned when the crisis is over.

MNOs are busy rolling out 5G. This will provide South Africans with cutting edge services, benefitting from rapid advances in net-based communications, entertainment and educational technologies. This rollout requires huge investments, and technical and commercial excellence.

Instead of applauding these companies, government is vilifying them. The findings of the CompCom's report and the recommendations may be as legally challengeable as they are economically misdirected. To their credit, both Vodacom and MTN – the market leaders – have already lowered data prices and are providing free or discounted services to needy communities. The CompCom report reflects ignorance regarding significant steps taken to bring down the price of data, to the detriment of future expansion in the industry. The question is: why?

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