The Committee was briefed by the Department of Telecommunications and Postal Services (DTPS) on the cost to communicate and the spectrum framework in South Africa. The Information Communication and Technology (ICT) uptake and usage showed that in 2015 there were 3 846 332 fixed line subscriptions, 43 666 fixed public phone subscriptions, 72 423 365 prepaid mobile subscriptions, 46 468 285 mobile data subscriptions and 14 561 818 post-paid mobile subscriptions. This changed in 2016 to 3 515 607 fixed line subscriptions, 26 424 fixed public phone subscriptions, 68 710 864 prepaid mobile subscriptions, 50 270 969 mobile data subscriptions and 12 603 599 post-paid mobile subscriptions.
According to the mobile price Index, South Africa was ranked 25th out of 49 African countries surveyed with regard to comparative data tariffs. The cheapest tariffs were offered in Egypt. In South Africa, Vodacom, Cell C and Telkom charged the same amount for 100MB data. MTN was the most expensive for 500GB, 1GB and 20GB, while Telkom was the cheapest for 500GB, 1GB and 2GB data. In Egypt, the cheapest rate for 1GB of prepaid data was US $1.41, while in South Africa the equivalent was offered by Telkom Mobile at US $7.50. South Africa came last out of six of some of the most dynamic telecommunication markets in Africa in the second quarter of 2017. The cost of 1GB in SA was three times the cost of the same amount of data in Ghana and Tanzania, and more than twice the cost of 1GB in Nigeria. Among Southern African Development Community (SADC) countries, South Africa was ranked sixth behind Mozambique, Madagascar, Mauritius, Malawi and Namibia.
Members raised concerns about the high cost to communicate and ICT accessibility in the rural areas. They questioned the market study methodology, interrogated the comparison of South Africa to other countries with regard to the market pricing index, and asked why consumers were not migrating to operators where cheaper options were available. Affordability and quality issues were also discussed.
The meeting began with the election of Mr J Mahlangu (ANC) as the new Chairperson of the Committee.
Election of Chairperson
Ms D Tsotetsi (ANC), who had been acting as Chairperson of the Committee following the redeployment of the former Chairperson, Ms Mmamoloko Kubayi -- who became Minister of Energy, and then Minister of Communications -- thanked the members of the Committee for their support and called for nominations for the position of a substantive Chairperson. Mr J Mahlangu (ANC) was nominated unopposed, and therefore elected as the new Chairperson of the Portfolio Committee on Telecommunications and Postal Services. Mr Mahlangu was a member of the Portfolio Committee on Arts and Culture, and also served on the ad hoc Committee on the SABC Board Inquiry.
Cost to Communicate: DTPS
Ms Mameetse Masemola, Acting Deputy Director General: Information Communication Technology (ICT) Policy Development Branch, said the National Development Plan 2030 recognised that inclusive economic growth in South Africa was critical to addressing inequality. Therefore increased access to communications technologies, in particular broadband, and the services and content carried on ICT networks, was an important means of promoting growth. The government’s Medium Term Strategic Framework (MTSF) identified the high domestic cost of broadband internet connectivity as a major hindrance to socio-economic development in the country.
The National Integrated ICT Policy White Paper indicated the need to address the high cost to communicate that inhibits the widespread use of ICT. Most households in South Africa accessed telecommunication services using mobile devices (cellular phones). Just over half of South Africa’s households (53.5%) had at least one member who used the Internet either at home, workplace, place of study or Internet café. The Western Cape and Gauteng provinces had the highest access to the Internet. The ICT uptake and usage showed that in 2015, there were 3 846 332 fixed line subscriptions, 43 666 fixed public phone subscriptions, 72 423 365 prepaid mobile subscriptions, 46 468 285 mobile data subscriptions, and 14 561 818 post-paid mobile subscriptions. In 2016, there were 3 515 607 fixed line subscriptions, 26 424 fixed public phone subscriptions, 68 710 864 prepaid mobile subscriptions, 50 270 969 mobile data subscriptions and 12 603 599 post-paid mobile subscriptions. The data showed that the mobile data subscription increased by 8.2% between 2015 and 2016.
The Global IT 2016 Report of the World Economic Forum showed that South Africa had moved 10 places up, ranking 65th out of 139 countries. The International Telecommunication Union’s ICT Development Index ranks South Africa 88th out of 175 countries. South Africa performs well in terms of policy and regulatory environment and business innovation, but performs relatively poorly on access, affordability and skills. According to the Mobile Price Index, South Africa was ranked 25th out of 49 African countries surveyed with regard to comparative data tariffs. The cheapest was offered in Egypt, at US $1.20. The cost of 1GB in South Africa was three times more than in Nigeria. The ICT sector performance showed that mobile data revenue increased significantly by 25.4% from 2015 to 2016. Local outgoing mobile traffic to the same mobile network increased by 17.4%, local mobile traffic to other mobile networks decreased by 0.6%, and local mobile to fixed networks decreased by 1.4%.
The Committee was informed that Vodacom, Cell C and Telkom charged the same for 100MB of data, while MTN was the most expensive on 500MB, 1GB, 2GB and 20GB of data. Telkom was the cheapest with regard to 500MB, 1GB and 2GB. 22% of the disposable income of people earning less than R388 a month was spent on a very limited basket of services, including only 7 SMS and 77 minutes of calling time a month. Approximately 69 710 864 of South Africans were prepaid subscribers, yet 1GB of data had remained R149 for almost two years. SA Connect targeted 5% as a percentage of disposable income that people could dedicate to communication services.
Recommendations of the Portfolio Committee on Telecommunications with regard to the ‘Cost to Communicate’ hearings included the need to offer consumer protection, ensuring price transparency to empower consumers to make informed decisions when choosing service providers, and ensuring that service providers included user guidance and product awareness so they could make informed decisions about which product/package best served their needs. The Department must fast-track the finalisation of the rapid deployment policy in consultation with all spheres of government to accelerate network expansion, encourage the entrance of new operators into the market, including community networks and cooperatives, especially those that could serve under-serviced areas, ensuring that they have access to appropriate spectrum at an affordable cost.
With regard to policy and regulatory interventions, there were supply side measures, demand side measures and policy directions and regulations. The supply side measure was a policy that allowed for effective service-based competition and ensured accessible, affordable, high quality and reliable services for consumers. It would increase network coverage, and enable the rapid deployment of broadband infrastructure and services. It encouraged and promoted shared and equal access to broadband infrastructure. Key interventions included the establishment of the Competition Commission and Data Services Market Inquiry.
The objective of the government was to ensure that spectrum was accessible to all. The licensing of spectrum should contribute to the adoption of open access principles, the achievement of universal access to broadband and entry to the market for historically disadvantaged people. The National Development Plan of 2012 was to ensure that spectrum could be assigned with set asides, or obligations, to address historical legacies and inequalities in the sector, but this should not delay its allocation. In 2013, a ministerial policy directive was considered as a priority on how best to ensure that the release of high demand spectrum fulfilled policy objectives and how best the application of open access principles to the assignment of broadband spectrum would be achieved.
In 2016, the National Integrated ICT Policy White Paper was developed. This set aside spectrum for use on an open access basis, and through joint private sector investment in infrastructure. The Department was in the process of developing a draft policy direction to licence spectrum for deployment of the Wireless Open Access Network.
On the demand side measures, the strategy addressed the fragmentation of e-Government initiatives, the duplication of resources and lack of synchronization to digital transformation, ensuring that all South Africans could access quality public service and government information from anywhere at any time. The strategy also sought to reduce the cost of public administration and facilitate the efficient delivery of roadmap public services across South Africa.
With regard to the implementation of the Minister’s policy direction on effective competition in broadband markets, Phase 1 (market study) of the four phases of this project was currently under way. The due date for submission of information was 10 October 2017. Phase 2 would consist of the release of the discussion document, and stakeholders would be given 45 working days to make written inputs. Public hearings may be undertaken (Phase 3) if necessary. The process would culminate in the release of the findings document on 31 March 2018, which would provide details in terms of the list of markets that were prone to ex ante regulation and a list of priority markets to be subjected to Section 67(4) of the Electronic Communications Act (ECA).
One of the key interventions of the Independent Communications Authority of South Africa (ICASA) was the review of end user and subscriber service charter regulations. The amendments were aimed at empowering consumers and addressing current challenges in respect of market practices. At the 2016 parliamentary hearings, one of the key issues raised by stakeholders was the disappearance of data. In this regard, the amendments to regulations increased the validity periods of purchased data bundles, and sought to eliminate the charges of unexpected out of bundle data charges.
With voice and SMS services, operators would be required to send notifications of service depletion to the end-user at set intervals, while licensees would be required to conduct quarterly campaigns to educate end-users on the use of smart phones, the use of data, as well as the services and products that the service providers offered. Following the intervention, new data expiry dates were proposed, to 10 days, 30 days , 60 and 90 days for 50MB, 500MB, 1GB AND 5GB of data respectively. For 10GB, 20GB and data bundles above 20GB, 180 days’, 12 months’ and 24 months’ validity respectively were proposed.
The Competition Commission would be enlisted to probe the high costs of data. The Commission had released the terms of reference and a call for submissions to gain a clear understanding of the data services value chain, to assess the state of competition in the market at every stage of the value chain, as well as to establish whether data supply quality and coverage was adequate by international standards and the country’s developmental needs. Calls for submissions to the inquiry expired on 1 November, and the release of interim findings and recommendations were designed to attract further submissions in April 2018, with the final report due on 31 August 2018.
Ms M Shinn (DA) asked if the figures and data used for the report were current, and wanted to know exactly when the studies were conducted. When would the report of the market study done by ICASA be made available for public comments? Why was there no mention of the market impact and financial feasibility study in the presentation? Referring to the market study which was done by ICASA, she also wanted to know what factors would be used in determining if public hearings would be conducted or not.
Mr C Mackenzie (DA), referring to the global perspective, wanted to know if the type of networks used in those countries had been compared to the South African system before the conclusions were made. Speaking on the low price cost of Telkom, he wondered why Telkom did not have as many mobile subscribers as the other network providers. Regarding the National Development Plan (NDP), which speaks to spectrum, he wanted answers as to what was being done to encourage fibre optics usage.
Ms Tsotetsi asked what the Department was doing to encourage the entrance of new operators into the market, including community networks and cooperatives, especially those that could serve under-serviced areas, ensuring that they had access to appropriate spectrum at an affordable cost. Speaking about infrastructure, she said the rural areas were lagging behind and wanted to know if there were any plans to address this.
Ms N Ndongeni (ANC) referred to the proposals to increase the validity of data bundles, and wanted to know what the cost of those proposals would be.
The Chairperson stressed the importance of affordability. He asked why South Africa was not deploying satellite services in the ICT industry. Regarding the availability of infrastructure, he wanted to know the plans and timelines for the rural areas. On the high cost of data bundles in South Africa when compared to other countries, he asked for details of the indices which were used. Was there an explanation for the reduction of prepaid subscribers in 2016, despite an increase in population?
DTPS and ICASA: Response
Mr Tinyiko Ngobeni, DDG: ICT Infrastructure Support, DTPS, responded to the question of what the Department was doing to encourage new entrants. He told the Committee the policy White Paper ensured that there was enough spectrum capacity to encourage those who were new entrants. He stressed, however, that the infrastructure roll out was very capital intensive. He agreed that the use of satellites was very useful for coverage, but pointed out that the capacity was very expensive. South Africa currently had a satellite which it used, but the broadband was limited. South Africa was also currently exploring the possibility of launching a communications satellite.
Investment in infrastructure was limited in the rural areas, and ICASA was trying to ensure that the licencees expanded their coverage in the rural areas. The cost of infrastructure in these areas was more expensive because of the level of demand. The communication companies had been encouraged to share infrastructure to tackle this problem. He stated that the White Paper on open access had clarified all the outstanding issues, and there were currently engagements on how this government objective could be achieved.
Mr Paris Mashile, Acting Chairperson: ICASA told the Committee there was a need to always go through a market study, as this helped to determine the significant market players and decide if there was a need to split wholesale and retail. ICASA encouraged competition to ensure that there were innovations in the industry, making the market vibrant and giving the consumer a right of choice among operators. He stressed that the need for competition was non-negotiable in the market.
He spoke about the cost of infrastructure in the rural areas this and the frequency that would be available, since these areas were sparsely populated. The key issues to be looked at when considering rural areas were coverage and capacity. He also said that technology would address issues of interference with frequencies.
In Southern Africa, Telkom remained the cheapest operator with regards to data. Making comparisons with other countries, he stressed that as a regulator, the focus was on high quality of service and low price, and those two could not be compromised.
Mr Junior Khumalo, General Manager: Policy Research Analysis, ICASA, referred to the data which was used in producing the reports, and told the Committee the available data had been collated from the various network providers. Responding to Ms Shinn’s question on public hearings, he said that public hearings would be conducted based on the quality and extent of responses received.
Ms Masemola said there was a strategic document in place which addressed the usage of ICT compared to other countries, and the issue of affordability and availability. There was a need to understand and create an awareness programme among citizens on the availability and usage of ICT. She stressed the need for affordability of devices and the demand for these devices. On the ranking of the South African sector in comparison to other countries, she said that ICASA was doing a lot of work to ensure that the right information on ICT in South Africa was projected correctly internationally. Responding to Mr Mackenzie’s question on why Telkom had a lower prepaid client base, she attributed this to brand recognition and the rigorous marketing done by the other network providers. She also spoke about the non-desire of customers to switch their numbers within networks. Regarding the quality of networks, there were internationally determined standards which had been set.
Research ICT AFRICA
Mr Onkokame Mathobi, Senior Researcher: Research ICT Africa, said there was a need to extablish why South Africa was not carrying out sector performance reviews and beyond access surveys. Research ICT Africa was concerned with the data comparison between 3G and Long-Term Evolution (LTE) networks respectively and based on this, the quality of service was important. He used Globacom Nigeria as a case study, where prices were low because the quality of the services provided were also low. Some operators in the telecommunications industry had a market advantage over others, based on the time of their entry into the market.
He said the post-paid packages were usually cheaper than the prepaid packages, with Telkom offering the cheapest pre-paid services, but the market trends had not changed with regard to customer demands. He attributed this to consumer behaviour, where people did not easily move from one operator to another due to factors such as the time consumed in making such switches.
Mobile broadband services remained very expensive for low-income users in South Africa. 55% of the South African population did not use the Internet. About 15% of non-Internet users stated that the Internet was too expensive, while 36% had no access to smartphones or computers. The prepaid services were far more expensive than contract or post-paid, despite prepaid contracts being less costly and risky. Prices of 1GB monthly prepaid data bundle had remained fairly constant, between R149 and R160 over the last nine quarters, except for Telkom, which offered same at R99. According to Research ICT Africa 1GB data pricing information, there had been minimal price competition in the prepaid mobile broadband market in the last two years, as the Telkom strategy to undercut other operators had not initiated any response from other three operators.
A comparison of Africa’s cheapest prepaid mobile data prices showed that the lowest price for 1GB of mobile data puts South Africa 27th out of 49 African countries for the second quarter of 2017. In Egypt, the cheapest 1GB of prepaid data was sold at US $1.41, while in South Africa the cheapest was offered by Telkom Mobile at US $7.50. South Africa came last out of six of some of the most dynamic telecommunication markets in Africa in the second quarter. The cost of 1GB in SA was three times the cost of the same data amount in Ghana and Tanzania, and more than twice the cost of 1GB in Nigeria. Among Southern African Development Community (SADC) countries, South Africa was ranked sixth behind Mozambique, Madagascar, Mauritius, Malawi and Namibia. The cheapest 1GB data in South Africa was three times the cost of the cheapest 1GB available in Mozambique. In terms of the voice market, South Africa was doing relatively well with regard to price. There was a need for the regulators to look at the market as a segmented market. There was also the need to look at the coverage and capacity of the operators.
Discussion and responses
Mr Mackenzie asked about the sample style which had been used in collecting the information. He also wanted to know if Mr Mathobi was aware of the reasons South Africa was not carrying out sector performance reviews and beyond access surveys. He asked if factors such as economic and regulatory regimes were considered when comparing South Africa to other countries,.
The Chairperson expressed his concern with regard to the cost of communication in the rural areas. In his view, the consumers in the rural areas should pay less for data bundles and communication costs when compared to those in the urban areas.
Mr Mathobi, responding on the question of sampling, said that categorisation into urban and rural areas had been considered. Based on this, there were about 1 200 respondents which were both individuals and households. South Africa participated in the survey and would be compared with other countries based on certain ICT indices. With regards to the sector performance reviews, unfortunately in South Africa this did not happen. This looked at issues of demand and supply, regulatory policies, competition, dominance and pricing. On the issue of countries to which South Africa was compared, he stressed that the market that was being considered was the prepaid market, especially people on the low income ladder. He emphasised that the quality of the networks was very important in terms of uploading and downloading, and a new price index was being developed by Research ICT Africa. He commented that it would be expected that countries with better economic status would have cheaper communication rates, but comparing South Africa to the rest of Africa, the reverse was the case.
Mr Mashile stated that the big challenge in the industry was the implementation of policy statements, hence the need to work in tandem with the regulators and operators to achieve the desired results.
Ms Masemola, in her closing remarks, said that a new licensing framework was being established to address the issues of poverty and inequality.
Mr Ngobeni, in his closing remarks, described what was being done to leverage the existing infrastructure. He said that a request for information had been issued nationally, and this information was being used to develop a national broadband network, and the focus was to take it to the rural areas.
The meeting was adjourned.
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