Competition Commission instructs MTN, Vodacom to cease price discrimination strategies

Competition Commission instructs MTN, Vodacom to cease price discrimination strategies

CAPE TOWN – Vodacom and MTN must independently reach an agreement with the Competition Commission to cease ongoing partitioning and price discrimination strategies that may facilitate greater exploitation of market power and anti-poor pricing.

This was part of the findings of the Data Services Market Inquiry that was initiated on August 18, 2017, by the Competition Commission in terms of the Competition Act.

The initiation of the Inquiry followed concerns expressed by the then Minister of Economic Development (now Minister of Trade and Industry) Ebrahim Patel, about the high level of data prices and the importance of data affordability in South Africa.

In its summary of findings and recommendations report the commission said all mobile operators must reach an agreement with the Commission within three months to offer all prepaid subscribers a lifeline package of daily free data to ensure all citizens had data access on a continual basis, regardless of income levels. 

“This agreement must then be given formal legislative or regulatory effect within six months. Access to affordable data is of paramount importance for economic and social inclusion and thus mobile pricing must be addressed.

“Notwithstanding the most recent price reductions, Vodacom and MTN must independently reach an agreement with the Commission 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 percent to 50 percent,” reads the report in part.

MTN said in a statement that it had noted the release of the commission’s final report on data pricing and would study the full report once it was received from the competition authorities.

The mobile operator said while it was not yet able to comment on the detail of the report, some general observations could be made, regarding factors driving the cost of data. 

“For more than a decade, the government and regulators have failed to release the spectrum that the mobile industry has so critically required to bring down the cost to communicate. To simply lay the blame for data costs at the foot of the operators is wrong. 

“MTN in South Africa has had to compensate for the lack of spectrum by spending over R50 billion in the last five years to build a world-class network for all South Africans, covering over 95 percent of the population with 4G coverage, without any 4G spectrum having been allocated,” said the mobile operator.

Ahmore Burger-Smidt, director and competition law specialist at Werksmans Attorneys, said it was doubtful whether the timeframes prescribed by the Inquiry would be achieved and the impact on mobile network operators will be significant.

“The data services market inquiry indicates that Vodacom and MTN engage in excessive pricing. In the race for 5G capability, who is to pay for the necessary infrastructure and who should ensure that the necessary infrastructure is available? 

“If not Vodacom and MTN, who will do this? Where should the funds come from for infrastructure enhancement? Vodacom and MTN should be profitable to be able to make the billions of rand of investment annually. Will other market participants contribute?, asked Burger-Smidt.

Burger-Smidt said in the midst of the 4th Industrial Revolution the government and mobile network operators should take hands to uplift the South African economy and capability. “Indeed this is required, but are those that are enabling the country to move forward punished? But for being a success, are the regulators actually stating that no further spectrum should be allocated to the two biggest incumbents? What about efficiencies that networks worldwide require?”