Data prices must fall, and mobile networks must stop obfuscating and obstructing

Charles Molapisi, the CEO of mobile network giant MTN South Africa, reportedly assured shareholders in early June that MTN would grow revenue by continuing to implement inflationary price hikes. The reason for this increase, he said, was load shedding. 

This move will be to the detriment of consumers and should be avoided.

South Africa’s electricity crisis is very real. According to the CSIR’s power generation statistics, 2022 was the country’s most intensive load shedding year yet. December 2022 was the highest load shedding month ever and, on its own, had more load shedding than in any other previous year.

But this should not be an excuse for charging people more for basic services or a time to gain from a crisis, something we have seen other big businesses regularly do. Like in 2020, when businesses used the pandemic as an opportunity to cash in by hiking the prices of essential goods — including food.

In light of this, if MTN truly is doing the best it can, it’s important the company is transparent with regulators and consumers by quantifying the impact of load shedding on its operations.  

In 2020, both Vodacom and MTN reduced their data prices. This came after the Competition Commission published the final report of its Data Services Market Inquiry. The inquiry was initiated in 2017 at the request of the then minister of economic development, (now minister of trade and industry) after public outcry over the high cost of data in South Africa.

It was at this inquiry where instead of explaining the price discrimination faced by low-income consumers, the then MTN CEO, Godfrey Motsa, concerned himself with moralising about how people spend their money: “We want them to buy more internet. I wish people were buying more money [sic] on the internet than on alcohol and tobacco.” 

Consistent with amandla.mobi’s submission to the inquiry, the commission found the big networks’ pricing structure to be anti-poor and lacking transparency. “Lower-income consumers who purchased smaller data bundles were faced with inexplicably higher costs per megabyte (MB) relative to the consumers who purchased much larger data bundles,” it said.

The commission also made recommendations prioritising immediate relief for consumers on data pricing. One of the major recommendations was for Vodacom and MTN to drop data prices by 30% to 50% or face prosecution, with the two networks subsequently entering into agreements to reduce data prices in 2020.

Now, if MTN does indeed increase its prices, backtracking from its reduction in 2020, this would not only be to the detriment of consumers but would also undermine the network’s agreement with the Competition Commission to slash data prices. This is unacceptable.

One argument that mobile operators have made for years is that high data costs are the result of delays by the communications authority in licensing additional spectrum. This is a claim MTN continued to make even on the day the Competition Commission’s report was released in 2019, to which MTN responded by claiming that the “greatest hurdle to data pricing reduction remains spectrum”.

Without a doubt, spectrum constraint has been a barrier to coverage expansion and allowing for more effective competition. But as I have previously argued, it cannot be assumed that the licensing of spectrum will lead to lower data costs, especially for consumers living on average or below average incomes.

In March 2022, the communications authority concluded the first spectrum auction process, with another set to take place next year. MTN was a qualified bidder in this process and successfully bid. So, the planned price increases take place after the licensing of spectrum, further exposing the claim that additional spectrum will lead to price decreases to be untrue.

Yes, excessive load shedding is a crisis for many businesses — particularly small ones. But it cannot be ignored that this crisis has also had a negative impact on consumers — especially low-income consumers. An unjustified price increase will add to the burden. Given how operators in the past have failed to provide sound justification for the existing price differentials between prices on bundles purchased by low-income consumers versus more well-off ones, this should be of particular concern.

While the Data Services Market Inquiry did not solve all the problems in the telecoms sector, which it was never meant to do, it was an important step in the right direction. It is a step that has provided some relief for millions of consumers and should be safeguarded against those whose only interest is profit. DM