Top CEOs call out CompCom over #DataMustFall

Drawing from industry experience, top CEOs have chastised the Competition Commission (CompCom) over its stance on the cost of data, warning that government price controls could stifle the telecoms sector in SA.

Telkom CEO Sipho Maseko and Johan van Zyl, CEO of African Rainbow Capital, which is a 20% shareholder in mobile data-only network, Rain, have called the competition watchdog’s decision “blunt and archaic”.

The two executives were reacting to CompCom’s decision that SA’s leading telcos, MTN and Vodacom, must cut their data pricing by up to half.

The CompCom threw a curve ball to the telcos last week, saying they have to reduce data prices, otherwise it will consider prosecution for exorbitant pricing.

After two years of investigating the cost of data in the country, the CompCom concluded that, notwithstanding the most recent price reductions, Vodacom and MTN must independently reach an agreement with it on substantial and immediate reductions on tariff levels, “especially prepaid monthly bundles, within two months of the release of the report.

“The preliminary evidence suggests that there is scope for price reductions in the region of 30% to 50%.”

Furthermore, it said Vodacom and MTN must independently reach agreement with the commission within two months on a reduction in the headline prices of all sub-500MB 30-day prepaid data bundles to reflect the same cost per MB as the 500MB 30-day bundle, “or cost-based differences where such cost differences have been quantified, as well as the cessation of partitioning strategies that contribute to anti-poor pricing and/or inferior service outcomes”.

This, Maseko and Van Zyl believe, is wrong.

In a candid opinion piece published by the Business Day on Monday, Maseko said what the CompCom “purported to give back to consumers with one hand, it took away a thousand times with the other”.

Regulatory diktat

He added: “Instead of directing its remedies towards fixing the failure of competition, the commission rather went for the blunt and archaic tool of price control. As in any market, consumers win when prices are as low as possible and service quality as high as possible. Both those factors are driven by fair competition, not regulatory diktat.”

Maseko placed the blame on the Independent Communications Authority of SA’s (ICASA) front door, saying the regulator’s failure is far more egregious than that of the CompCom.

“We are where we are primarily because the main sector regulator (ICASA) has been asleep at the wheel as the duopoly developed and strengthened its grip over the industry, and ultimately the economy.

“We should not forget that the existence of Vodacom and MTN is the result of deliberate legislative, policy and regulatory action to redesign the landscape of the telecoms sector from one dominated by Telkom (then a fixed-line state monopoly) to a diverse, innovative and prosperous sector defined by private sector participation and investment. These actions succeeded, providing the blueprint for how the state and regulators can intervene positively to change the fortunes of an industry,” laments Maseko

He argues further: “Price regulation is not the answer. It is an ineffective instrument and may ultimately have unintended and deleterious consequences on employment and future levels of investment. It may ultimately even push smaller players out of the market completely.”

ICASA is yet to respond to CompCom’s pronouncement directly, but its spokesperson, Paseka Maleka, told ITWeb last week: “There will be continued engagement between ICASA and the Competition Commission on the outcomes and recommendations of the data services market inquiry in line with the provisions of the memorandum of understanding between the two entities.”

Government intervention

Speaking to investors on Friday, Van Zyl also added his views on the matter.

“Data prices will fall as more competitors enter the market. It’s not good for the government to intervene. It should instead incentivise competition,” Van Zyl is quoted in the Business Day.

With the latest development, it means the list of top executives opposed to the CompCom’s decision is growing.

MTN fired the first salvo last week, saying: “We respectfully disagree with the analysis and recommendations contained in the summary report and, as we study the full report, will continue to engage constructively and vigorously defend against over-broad and intrusive recommendations.”

It added: “We remain committed to providing high quality, affordable data and connectivity to our customers in all our markets. We will continue with our pricing transformation initiatives across all our markets to make our services more affordable for customers.”

Agreeing with MTN, SA’s leading operator said: “Vodacom has consistently stated that delayed spectrum allocation has impacted the rate at which data prices could have fallen. Vodacom has reduced the effective price of data by circa 50% since March 2016.”

Vodacom spokesperson Byron Kennedy said: “South Africa’s prices are neither extremely high nor very low in relation to other African countries or compared to countries that are more similar to South Africa in terms of their size and level of development. When put in further context with data on speeds and LTE coverage, it is clear that customers in South Africa are benefiting from a much higher quality of access than those in other African countries.”