We need to focus on why the poor are paying more for data
Then in August, Dark Fibre Africa announced that it will start building fibre to the home networks in new affordable housing schemes with rentals as low as R4,000 per month. This follows Vumatel’s plan to build fibre to the home in Alexandra. Vumatel has announced it will offer residents uncapped fast fibre connections for R89 per month.
ICASA also announced changes to how mobile operators can charge their customers for using data. And after challenges from operators, these changes will come into effect next year. The most important of these is that people will no longer automatically go to ‘out of bundle’ pricing.
Fifty-three percent of the South African population now use the internet. Fourteen million people use Facebook on their phones. Seven million use Twitter. Pre-paid mobile data has made the internet accessible to the majority in South Africa. The biggest problem now is that it is not affordable. This is not just because the majority of South Africans are poor. Its because there is a poverty premium for data — the poor pay more for data than the rich. Much much more. If the internet is to become something everyone can use effectively, strategies for reducing data costs must now focus on addressing this inequality.
If you have sufficient cash in your pocket, you’ve benefitted from significant reductions in data prices recently. You can now buy 10GB of data from Vodacom, the country’s leading mobile operator, for R599. That’s about R60 per GB. Cell C and Telkom offer even cheaper rates. But most people don’t have that kind of cash. They buy in small bundles. The smallest bundle you can buy from Vodacom costs R10 for 15MB. That’s R667 per GB, or more than eleven times more expensive.
So the rich pay a small fraction of what the poor pay for data.
It’s not unusual that the poor pay more for the benefit of being able to buy in small quantities. If you purchase the leading brand of washing powder (Sunlight), you can buy a 5kg box for R99 or about R20 per kilo. If you buy in small sachets you’ll pay R10 for 250g or R40 per kilo. The sachet price is double the bulk price. So why is the difference so much greater for data?
The extra packaging and distribution costs of putting washing powder into small sachets does incur costs for the manufacturers. In comparison, mobile operators have very small additional costs in dealing with small bundles. They have to communicate via SMS more often. They have to store a little more data about their clients. Neither of these things is likely to add substantially to their costs.
South Africa has excellent mobile networks, amongst the very best on the continent. It has the highest penetration of mobile phones and the highest levels of internet use in sub-Saharan Africa. Almost all phones bought today are capable of using the internet and research suggests that almost everyone with a phone would like to use the internet. But it is also clear that the internet is unaffordable for many if not most South Africans.
For those of you about to set off driving to your holiday destinations, you will be feeling the pain of the year’s price increases. Cars need fuel. You will probably also be using your mobile devices as you drive — hands-free of course — whether you are map reading with your favourite GPS app in the front, or your kids are watching YouTube videos in the back (if you can afford it). Your phones also need fuel and that fuel is data.
There is a significant difference between buying petrol and buying data. Whatever the size of your tank, your salary or your engine, you pay the same price. This is not unusual. You and your neighbour probably pay the same price for your water and your electricity. But not for data. Amongst all basic services, data is the only one where the poorer you are, the more you pay. But data is much more like water or electricity than it is like soap powder. The unit cost is largely due to the costs of building and running the bulk network infrastructure. And domestic customers of these utilities pay the same rate whether they consume a little or a lot. This is often the result of regulation.
With colleagues Alette Schoon at Rhodes University and Marion Walton at the University of Cape Town, I have been investigating what the high cost of data means for those on average and below average incomes. We have found that although many people on low incomes are using the mobile internet, including those living on incomes below national poverty lines, they are much less connected than the readers of this publication. Their connections are fragile — mostly off, not ‘always on’. One of the diarists, a young hairdresser who works from home, explained that she spent R12 each month on data. She only uses the messaging application WhatsApp, She would like to look up hairstyles on the web or Facebook but for her that is unaffordable. And to keep to her budget she doesn’t leave WhatsApp on. “I only open my data when I want to check messages, or if maybe I want to send someone a message.”
Data is not a luxury. Our evidence shows that mobile phones and mobile data are now vital in maintaining incomes, in learning and in keeping in touch. In a country and region where migrancy is so common, communicating with families and communities of support is vital. We found many examples of WhatsApp church groups, savings clubs and distant family groups in the diaries. One diarist even received her grandchild’s isiZulu lessons on her phone.
The Competition Commission is conducting an inquiry into the high costs of mobile data. The Treasury’s mandate directs the Competition Commission, “…to make recommendations that would result in lower prices for data services.” The Independent Communications Authority of South Africa (ICASA) has introduced new rules on pricing which will extend the life of data bundles and eliminate ‘out of bundle’ bill shock from early in 2019. Based on our research, there are three things the Competition Commission and ICASA could still act on.
The regulators should focus on the costs of data for the poor, not the rich. It’s in the ‘out of bundle’ and small bundle prices that the market is failing.
The regulators should make operators disclose, on a quarterly basis, the amount of their revenues that comes from ‘out of bundle’ and small bundle data charges to pre-paid customers so it is possible to monitor the extent to which competition is working for low-income users.
Lastly, regulators should act to close the price gap between large and small bundles and evaluate operators’ justifications for the scale of this gap.