Backbite and sneerwell

‘Special offers’ show scope for cuts

South Africa’s bandwidth remains doggedly expensive. Everyone points fingers, but operators have shown they can do more.
3 January 2012
Ivo Vegter is a freelance writer and columnist. Follow him @ivovegter on Twitter.

According to a study earlier this year by market research firm Ovum, South Africa ranks dead last among 19 emerging markets, when it comes to data pricing.

This probably doesn’t surprise those who use the internet in South Africa. While protesters worldwide stream live video to the world and check in to demonstrations using location-based services, the notion of always being connected remains the province of a wealthy few in South Africa.

That this is so is partly the result of a long history of bungled regulation, as central planners ineptly chased even the low benchmarks set by emerging-market peers.

However, it isn’t terribly hard to make money as a telco in South Africa. Dividends of billions, even exceeding the value of capital investment in infrastructure, show there is huge scope for price cuts.

One special offer, which runs for only two months during the holidays, constitutes an 86 percent discount on the standard rate for data. How does that operator justify a rate seven times higher, once the holiday season is over?

There’s no particular reason to pick on one operator, of course. All are equally well positioned, with just as much scope for competitive flexibility should they feel threatened by competition.

The fact is that data, like voice, is becoming a commodity business. The value to users is not in a megabyte of data, but in being constantly connected at high speed. Software nowadays assumes such a connection, constantly accessing social media services and data feeds, even while you’re not actively using your device.

Ovum’s research and the operators’ own pricing demonstrate that South Africa remains unready for this modern world.

Cheap infrastructure for staying in constant touch with news, suppliers, customers, ideas, education and friends offers as much scope for productivity increases and quality of life improvements as desktop computers did in the 1990s, washing machines did in the mid-20th century, and personal motor vehicles did before that. South Africa needs to grow much faster than projected to make a meaningful dent in unemployment and poverty, and cheap, mobile connectivity is an important part of what needs to happen.

The days of profiting from mere voice calls are over. The days of profiting from mere data transport are waning.

Operators can continue to profit as a cartel by extorting customers for essential services. Or they can profit by innovating to supply the true needs of the market. South Africa needs telecommunications that are cheaper, not more expensive, than those of our emerging-market competitors.

Customers shouldn’t even think twice about streaming video, let alone worry about data costs whenever they download a new app or buy their first smartphone.

Besides quality of service and data speed, operators ought to compete on the scope of their value-added services. They should offer products to manage supply chains, operate home security cameras, or track lost dogs. Build custom app stores. Negotiate discounts with online retailers. Try seamless WiFi roaming options paid for by bars, restaurants and hotels.

The market is rapidly changing, and opportunities in this mobile age are endless. Some products will be free, to drive usage and engagement. Others will drive revenue. As the lower levels of network infrastructure become low-margin, high-volume commodities, future profit will have to come from such services.

Operators have shown that there is scope for drastic price-cutting. Turning to new, innovative, and high-margin services instead of ripping South Africans off for mere data will, happily, also serve the needs of South Africa’s struggling economy.