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Cellphone network operators were trying explain (or justify) to parliament the high data tariffs South African consumers are being charged. In all my years in the telecoms industry, I’ve never heard such blatant boloney. And they expect us to believe it.
For over nine years I engaged the telecoms industry in various management roles, including three exciting years at two South African mobile network operators. The mediocre representations that parliament heard from the industry recently were not only pathetically undermining, absurd and a sham; they are critical cause for pause. Raising more questions than answers, the hearings demonstrated the need for operators to be more transparent about what’s really driving up data costs.
Data costs spiralled relentlessly while operators had hoped that consumers would pick up the tab without complaint.
Thousands of people feel they are being ripped off with the high data fees charged by South African cell phone companies.
MTN Nigeria charges R44 for a 1.5 GB bundle, Namibia Teleco charges R139 for a 1 GB bundle and the cost for a 1 GB bundle in Mozambique is R21.
In South Africa MTN charges R160 for a single 1 gig data bundle and Vodacom R149. That is the most expensive of all the countries mentioned – all while these networks have been in South Africa for the longest time. One would think their established infrastructure and economies of scale mean lower prices for consumers.
The real reasons for high data costs in South Africa are missed opportunity, aging network infrastructure and operational inefficiency. Let’s briefly look at them.
Missed Opportunity
The biggest story in all this is that cellphone network operators squandered their massive head start, letting each wave of new technology in search, social, and data pass by. They are digital dinosaurs that remained unchanged from a decade ago — wireless channels that millions of users rely on for value added services (VAS) like chat, news, weather, email and mobile fantasy games.
Much of the revenue generated by those VAS services derived from WASPs.
As market focus shifted to smartphone apps, those primary revenue sources – voice and sms – have dried up. They missed a great window of opportunity to convert an early lead and millions of users to more than an OTP network, failing to appreciate that the airtime growth season had expired, this market had reached maturity.
In some industries, maturity can be an attractive attribute. It can be a sign of predictable profit and stability. But in the fast-paced mobile industry, that sort of maturity means sudden death.
As a result other new entrants like Whatsapp, Facebook, and Google exploited a relatively untapped SA data market with new platforms and creative apps.
Network infrastructure
In the past, Vodacom and Cell C invested much on maintaining costly Nokia Siemens core network infrastructure while MTN was running on Sony-Erricssen systems. Due to the limited capabilities, failings and high running costs of their aging network infrastructure, operators embarked on massive system upgrades, migrating to new core networks. There is a strong industry preference for agile and cost-effective core network systems like Huawei. But such upgrades are costly and should bear fruit in the long term.
Operational Efficiency
While in the industry, I witnessed how much resources were wasted on confused strategies, mismanagement, excessive brand marketing and ill-planned product offerings. One operator I worked for changed their retail store interior design three times in two years. Not to mention, the never-ending customer billing problems.
Other factors such as the lack of leadership continuity, poor management decisions, which for example led to MTN Nigeria’s heavy fine and aggressive merger & acquisition programs also impact on operational costs.
But what networks just don’t get is that a lot of the product offerings are still premised on outdated business models of a bygone era.
Spectrum
Once again, spectrum is the pretext for high data costs and mediocre service. But the two issues are mutually exclusive and unrelated. Last year, when the issue of high interconnect charges came under the spotlight operators used the same excuse. It’s a ploy to divert focus from the real issue: South African consumers deserve better data rates.
More spectrum, however, is not the instant fix for high data costs. Vodacom argued that the main reason why data costs were so high was due to the so-called “spectrum crunch” in large, urban areas. Nonsense.
They tried to reassure the committee that it “is using the limited capacity efficiently.” Wrong again. The truth is that networks operators are not managing their spectrum as optimally as they should.
The parliamentary hearings clearly exposed major flaws in the regulatory pricing policies overall, including data costs. Hopefully, ICASA will step up to the plate to overhaul and reduce data pricing regime.
