Following the announcement that government would officially begin regulating a plan around “data must fall” in South Africa, the Free Market Foundation (FMF) has warned that it will likely have the opposite effect.
According to the FMF this is because government does not have a clear understanding of what drives the data market in South Africa.
“There is indeed scope to reduce data prices – if government relaxes regulation, allows free competition and releases more spectrum,” it said.
“Price control is not the answer, nor is the proposed Wireless Open Access Network (WOAN).”
The FMF highlighted that while it supported the idea of “data must fall”, it was unfair to make comparisons between South Africa’s data prices and those of other countries.
“Prices vary from zero to hundreds of rands, from regional or national providers, from once-off packages to contracts, from in to out of bundles, from voice to text, and so on,” it said.
Other factors affecting data prices include country size, population density, coverage, geography, regulations, subsidies, licensing fees, spectrum availability, quality and level of development.
“There is no such thing as a free lunch, so costs associated with ‘free’ data must be passed on to consumers,” it said.
“Data is not a public good or a human right. Vodacom and MTN between them have spent around R20 billion over the last year or two on new infrastructure.”
“That money comes from profits. No profit, no infrastructure. Data traffic and innovation continue to explode, demanding continued and significant capital investment.”
According to the FMF there was no concrete evidence of anti-consumer collusion in the communications market and the biggest issue in the sector continued to be government regulation and the Wireless Open-Access Network (WOAN) proposed by the ICT Policy White Paper.
The WOAN is an effective nationalisation of the telecommunications infrastructure, it said.
“A WOAN might create the illusion of lowering data prices in the short-term, as government might artificially force the price down through price control,” it said.
“Prices will, however, drastically rise, as the government infrastructure monopoly is unable to expand quickly enough to meet market demand, or adopt latest technology in the fastest developing area. It will fail along the lines of Eskom’s inability to expand, leading to declining supply, and SAA’s inability to correct management chaos.”
“Such failings are virtually unheard of in the private sector, where the market demands efficiency.”
The FMF praised the current communications industry, highlighting that over 95% of the population enjoy network coverage – ahead of some of the world’s most advanced countries.
In addition, South Africa currently boasts more active cell phones than citizens.
“It isn’t broken. Don’t fix it,” it said.