Vodacom said on Monday it will review the provisional report published by the Competition Commission and will meet its 14 June deadline for making further submissions and comments on both the recommendations and findings in the provisional report.
The company said it will also use this round of consultations to provide accurate data, which does not seem to have been built into the provisional report.
It remains committed to its pricing transformation programme to reduce the cost to communicate.
For example, Vodacom said it recently announced a significant reduction in out-of-bundle prices by up to 70%, in addition to fully complying with Icasa’s End User and Subscriber Services Charter. These initiatives have resulted in a 34% decline in average data prices in the past calendar year and a 57% reduction in average data prices over the past three years.
In recent years, there has been a significant shift by pre-paid customers to hourly, daily, weekly and fortnightly bundles through the MyVodacom App and Just4You platform. Monthly bundles now account for 22% of pre-paid bundle sales compared with 66% in 2015. All pre-paid customers can buy 1GB of data valid for a day for R29 while a 1GB WhatsApp bundle valid for 30 days is R35. Through NXT LVL, a platform for under 25s, both these 1GB bundles cost R19. Vodacom spends just over a billion rand per annum on providing free internet services by zero-rating numerous sites on its network to assist learners and job seekers, amongst others.
Driving down the cost of mobile devices is another important factor in addressing the cost-to-communicate.
Vodacom added that it has significantly reduced the price of its 3G and 4G branded devices in the past two years to R279 and R599 respectively.
“We achieved this despite investing R26.7 billion in our network over the past three years to make speeds faster, widen population coverage and enhance overall customer experience. This includes additional investment into our accelerated rural coverage programme to ensure that remote communities also experience the various economic and social benefits of mobile connectivity,” the company said.
“In this calendar year we will connect an additional 200 villages, taking our 2G and 3G coverage to over 99.9% and 4G coverage to over 90% of South Africa’s population. At the 2018 Investment Conference, we committed to spending R50 billion in South Africa over the next five years.”
Unquestionably, the most significant obstacle to reducing input costs and, by extension, data prices is the fact that no new spectrum has been allocated in South Africa in the last 14 years. Lengthy delays in completing the digital migration and allocating 4G spectrum has curbed the pace at which data prices could have fallen.
High demand spectrum – or what is often referred to as the ‘digital dividend’ spectrum – is in the 700-800mHz band and can only be allocated once the digital migration in South Africa is completed. This spectrum is called the ‘digital dividend’ because it is a highly efficient carrier of 4G signals.
“Having built a 4G network with over 90% population coverage using spectrum other than the ‘digital dividend’ means, for example, that we have had to build significantly more towers at great expense. This increases input costs and was not an efficient method for allocating resources.”
A prime example of how timely allocation of spectrum at reasonable market-related terms can positively impact data prices is in neighbouring Lesotho, one of the first countries in the world to assign 5G spectrum.
Vodacom said the research used by the Commission shows data prices in 2016 and 2017 when average data prices have dropped by 57% in the past three years.
“The information used is outdated and doesn’t take into account hourly, daily, weekly and fortnightly bundles, which is 80% of our volume sales in pre-paid offerings. In addition, the Commission’s provisional report does not take into account that countries used in its comparisons have already licensed their 4G spectrum. This has the effect of driving down their cost of producing a Gigabyte of data,” said the company.
“This underpins Vodacom’s view that an analysis of prices across different countries that does not take into account crucial aspects such as amount of spectrum allocated, population coverage and network quality is not particularly useful as the cost of delivering mobile services varies considerably across countries.”
Some of the costs are set by governments such as taxes, spectrum license fees, import duties and rental fees for undersea cables. Others relate to the geographic size of a country, its population density and the availability of fixed-line infrastructure that connect mobile base stations with the rest of the network.
Countries with enormous populations can leverage economies of scale while the more urbanised the population is also making it easier to cover from an infrastructure perspective.
“The cost of services in rural areas, in particular, is very high as this requires the funding of everything from access roads and diesel for generators, to microwave repeaters for connectivity. Often this rural infrastructure does not provide an economic return and it is, in effect, subsidised by urban areas,” explains Vodacom.
“Despite these challenges, Vodacom provides 4G services to over 90% of the population at great expense. Timeous allocation of 4G spectrum would have aided tremendously in reducing these costs.”
It is also important to highlight the fact that Vodacom Group has operations in South Africa, Tanzania, Mozambique, DRC and Lesotho.
“Contrary to the research used in the Commission’s provisional summary report (and subsequent media articles), Vodacom does not have operations in Angola or Nigeria. Nor does Vodacom operate in Egypt, Vodafone does.”
Vodacom said it will engage with all relevant stakeholders, including the Commission, in addressing various societal needs such as the high cost to communicate. Vodacom recognises the need for affordable data prices and appeals to policymakers and the regulator to license 4G and 5G spectrum to drive down the costs of producing a Gigabyte of data.
“To ensure South Africa does not get left behind in the Fourth Industrial Revolution, a concerted and collaborative effort between Government, Business and Civil Society will be required in coming up with a policy and regulatory framework that will benefit all South Africans. 5G spectrum in particular is crucial for the Fourth Industrial Revolution to ensure that infrastructure becomes available for the realisation of its digital opportunities.”