Cell giants bleeding SA dry
SA's cellphone giants are hurting the economy and consumers with sky-high data prices, and making tidy profits in the process, according to Competition Commission boss Tembinkosi Bonakele.
"Until now, for them [mobile operators] it has been about profiteering. It has not been about helping the poor or the economy," Bonakele told Business Times.
He was speaking in an exclusive interview after Wednesday's release of a damning preliminary report on mobile operators and high data tariffs.
The report slammed market leaders MTN and Vodacom for their pricing.
Data costs consumers up to six times as much in SA as in other countries where they operate, and there is a lack of transparency in terms of out-of-bundle data rates, the report said.
Both companies disagree, claiming to have slashed tariffs and out-of-bundle data rates by more than 70% this year. MTN and Vodacom also said they have invested billions to grant more South Africans access.
But Bonakele is adamant that prices still need to fall.
"During the inquiry's hearings, most companies accepted that their prices did not favour the poor. It's not overdramatic to say current pricing is anti-poor.
"When companies like Cell C and Telkom dropped their prices, there was no impact on the market leaders - Vodacom and MTN. The lack of fair prices shows there is simply no competition in this market."
Bonakele said the commission wants mobile operators to sign commitment agreements by August to significantly cut prices. The companies concerned have until June 14 to provide it with feedback on its report, findings and recommendations.
Both MTN and Vodacom told Business Times that they intend to engage the commission on the report. The companies also said delays in granting further access to spectrum have backed them into a corner.
"The telecommunications policy environment has essentially forced the telecommunications industry down a more expensive route in a quest to satisfy customer demand and choice, given the lack of spectrum," said MTN spokesperson Jacqui O'Sullivan.
Bonakele, in turn, believes current legislation will hamper South Africans' fight for drastically cheaper data.
The Independent Communications Authority of SA (Icasa) - the communications regulator - cannot act on the commission's findings and will have to perform its own study before it intervenes.
Icasa, Bonakele said, is hobbled by parts of the Electronic Communications Act. "I believe that when legislation was written there was heavy lobbying by operators to ensure it is the way it is, especially when it comes to enforcement. That's why there has to be a relook at legislation so regulators can act based on our findings."
Icasa said on Friday that it is pushing ahead with an inquiry of its own.
Bonakele said although operators clamour for greater access to spectrum - the frequencies used to transmit sound and data to cellphones - this will in part reduce the cost of data, but it is not the only solution.
"It's just one part. When it comes to spectrum the companies have a point, but we must be wary, especially given the lucrative value of spectrum."
He said it can't be right that the highest bidder simply receives the spectrum.
"That must be guarded against because it will lead to future anticompetitive behaviour. It needs to be a situation where companies get told: 'Right, we will give you more spectrum, but you will be subjected to stringent measures which ensure the poor benefit."
He said a timeline for the commitments the commission wants signed will be revealed after the June deadline. "There is the threat of an investigation, which is not limited by the inquiry, but the problem with an investigation is that you levy fines, which is not what we want in this case. In this case we are pursuing price reductions to fix a very serious problem which the country faces."The state could have intervened earlier to level the playing field, said Bonakele. "I don't know why they didn't intervene. MTN and Vodacom have made it difficult for others to develop infrastructure, with smaller operators either having to lease these companies' infrastructure through unfair terms, or being constructively refused access to it. There have been multiple layers of failure."He said the sensible thing will be for companies to slash their prices, otherwise they will be penalised.Vodacom said it will continue to focus on lowering the cost of communication to all and achieving other objectives such as coverage, quality and speeds."Vodacom has already lowered the cost of communication significantly, and this will be accelerated once spectrum is made available," it said.MTN said it has invested R77bn over the past decade and has plans for another R50bn in the next five years to ensure all South Africans have access.- Additional reporting by Asha Speckmanhoskeng@timeslive.co.za