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south africa
SUMMARY OF FINDINGS
AND RECOMMENDATIONS
NON-CONFIDENTIAL
competition commission
south africa
YEARS
2 DECEMBER 2019
1. The Data Services Market Inquiry (the which had received limited input in the
“Inquiry”) was initiated by the Competition initial submission and hearings.
Commission in terms of Section 43B(2) of
the Competition Act No. 89 of 1998 (as 3. This report provides the final findings and
amended) (“the Act”) in August 2017. The recommendations of the Commission.
initiation of the Inquiry followed persistent
concerns expressed by the public about the BENCHMARKING AND
high level of data prices and the importance PROFITABILITY ANALYSIS CONFIRM
of data affordability for the South African SOUTH AFRICAN PRICES ARE HIGH
economy and consumers. The purpose
of the Inquiry as set out in the terms of 4. The Terms of Reference required that
reference is to understand what factors or the Inquiry undertake an international
features of the market(s) and value chain benchmarking of South African data prices.
may cause or lead to high prices for data Notwithstanding the challenges involved,
services, and to make recommendations international price comparison studies do
that would result in lower prices for data have some probative value by providing
services. a simple and effective cross-check on the
general level of advertised prices in a market.
2. Following the initiation, a formal Call Their use has become relatively standard
for Submissions was published on 20 internationally and the Commission was able
September 2017. Sixteen submissions were to draw on an extensive volume of existing
received, including the major operators benchmarking exercises including that of the
and consumer rights organisations. The International Telecommunication Union (ITU),
Commission’s Inquiry team also held public Tarifica, the Independent Communications
hearings in Pretoria from 17 to 19 October Authority of South Africa (ICASA), and
2018 where oral and written submissions Research ICT Africa. Whilst these focus on
were received from 15 stakeholders. advertised prices for 30-day bundles and the
The Commission has also requested and effective prices, which incorporate free data
received information on services and prices offers and short-validity bundles but also
from major operators as well as information data expiry, may differ to advertised prices,
from other market players. The Provisional this is the case for all countries and not just
Report of the Inquiry was published on South Africa.
24 April 2019, outlining the provisional
findings and recommendations. Seventeen 5. The existing international comparisons on
submissions were received in response mobile prepaid data prices collectively
to the Provisional Report. Following the indicate that South Africa currently performs
submissions, the Inquiry team had further poorly relative to other countries, with prices
engagements with all the operators as generally on the more expensive end.
well as other stakeholders. This involved
5.1 The ITU data shows that South Africa
further requests for information or clarity
ranks poorly when compared across a
related to their submissions, but also further
worldwide selection of countries and is
investigation of the fixed line supply gap
considerably more expensive than the
Source: Adapted from ITU 2018 Measuring the Information Society Report
FIGURE 2: COMPARISON OF 1GB PRICE FOR SA AGAINST 36 AFRICAN COUNTRIES (Q3 2015
TO Q3 2019)
cheapest offers. The ITU also finds that 5.2 The more recent Tarifica Global
South Africa also ranks poorly relative to Benchmark Report for Q1 2019 confirms
other African countries as a group. Whilst that not much has changed over time.
there is a lag in the release of the data, Tarifica looks at usage profiles and
its findings are relatively consistent year examines the cheapest data bundles
to year and domestic headline prices available for that usage group. For
have not been declining substantially. mobile prepaid data-only plans, Tarifica
Furthermore, prices in other markets are ranks South Africa 22nd out of 25
also on the decline. The figure above countries for heavy users and 18th for
shows the international comparison moderate users. Its light user measure is
based on ITU data. not meaningful as a large number of the
countries do not offer small packages.
5.3 Research ICT Africa (RIA) RAMP index prices are higher than most countries by
data which has prices up to Q3 2019 some distance, even in Lesotho where
across 37 African countries, concludes Vodacom is the effective monopoly
that not only does South Africa perform provider. This is notwithstanding the
poorly relative to our continental peers, recent price reductions of Vodacom
but this has worsened over time. This South Africa which are captured in the
result is independent of exchange rate figure above.
fluctuations and is driven by headline
prices declining in other countries but 6. Vodacom and MTN have argued that such
not South Africa. comparisons are uninformative because
cost and quality differences across countries,
5.4 Furthermore, current comparisons of the including spectrum allocations, may account
prices charged by Vodacom and MTN for the differences in pricing. They have
in other African markets in which they also argued that such comparisons involve
operate also reveal that South African headline 30-day tariffs and that effective
TABLE 1: VODACOM FINANCIAL PERFORMANCE IN SOUTH AFRICA AND OTHER MARKETS (FY2019)
Source: Vodacom Group Annual Report year ended 31 March 2019, Vodacom Pty Ltd Annual Financial Statement for the year
ended 31 March 2019 (Confidential); Commission calculations
Source: Own construction based on data collected from Vodacom’s website as at November 2019
12. Firstly, whilst price discrimination can be 13.3 The gathering and analysing of
welfare enhancing, it can also be exploitative. personal data usage in order to make
As recognised by the OECD (2016), personalised offers also seems to be
firms with market power can make use of premised on identifying opportunities
partitioning strategies to facilitate greater to expand revenue per subscriber
levels of price discrimination in order to rather than offer lower prices to more
raise the overall level of margins and prices price sensitive subscribers.
above what they would otherwise achieve.
Partitioning strategies include taking steps 13.4 As identified in the Provisional Report,
to prevent arbitrage, to distinguish between the complexity of pricing structures
sophisticated and naïve customers, to alone often leads to behavioural biases
distinguish between high volume and low that are exploited by operators, a
volume purchasers, as well as gathering common critique of price discrimination
and analysing data on individual customers’ in telecommunications markets.
willingness to pay for a product. Complex pricing structures can
discourage consumers researching
13. The pricing behaviour of the dominant the best price (incl. across operators),
operators in South Africa and the outcomes resulting in consumers sticking to
of high profit margins are consistent with what they are familiar with even if it is
FIGURE 6: PRICE DISPARITIES BETWEEN PREPAID AND POSTPAID DATA PLANS ON VODACOM
Telephone Number:
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Email Address:
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