Data prices could start falling from next month - here's why

Business Insider SA
(Instagram, @vodacom)
(Instagram, @vodacom)
  • Next month, for the first time in fourteen years, new spectrum will released to cellphone companies.
  • The four biggest mobile operators in South Africa believe this will reduce data prices. 
  • But they cautioned that if the new spectrum is too expensive, consumers may be disappointed.  
  • For more stories, go to Business Insider South Africa.

South Africa’s largest mobile operators believe data prices could start falling once the government releases additional spectrum from next month. 

But much will depend on the cost of the spectrum.

In his State of the Nation Address (SONA) two weeks ago, president Cyril Ramaphosa said the state will start a process to release spectrum by August after repeatedly missing earlier deadlines

This will be the first time in 14 years that additional spectrum is released in the country. 

Mobile operators have long blamed the lack of spectrum for the country’s high data prices which are some of the most expensive in the world. 

Spectrum refers to the radio frequencies needed for cellphone companies to transmit data - they can't transmit wireless signals over the same frequencies in the same markets at the same time. These frequencies are also used by TV and GPS.

But in South Africa, spectrum is limited because television broadcasting is still hogging frequencies. The move from analogue TV system to digital terrestrial television would help free up spectrum. This was supposed to have happened in 2012. However, government has missed its own deadlines for this “digital migration” year after year.

Also read: Yes, SA data is more expensive than it needs to be, Vodacom says – and it is all government’s fault

Vodacom, South Africa’s largest mobile operator, says the release of the 700-800mHz spectrum band, which is the most efficient carrier of a 4G network, will be key. This spectrum band is called the "digital dividend",

“Having to build a 4G network that uses spectrum other than the ‘digital dividend’ means that we have had to needlessly build significantly more towers,” a spokesperson told Business Insider South Africa. 

When the spectrum is released, it would not have to invest so much in infrastructure thanks to the more efficient spectrum bands. This should lead to lower data prices. 

“At MTN, we are confident we will be able to introduce further and significant reductions to the cost of data, when we are able to access 4G and 5G spectrum,” Jacqui O’Sullivan, MTN corporate affairs executive, told Business Insider South Africa. 

Also read: Vodacom just launched a super-fast 5G service in Lesotho – because SA's spectrum policy is a mess

However, all of the cellphone service providers - including Vodacom, MTN, Telkom and Cell C - have cautioned that much would depend on the cost of the new spectrum, which will probably be sold via auction.

"Acquiring spectrum at a price that is significantly higher than its fair value would have an adverse impact on input costs and with it limits the ability to reduce effective data prices," a Vodacom spokesperson. A MTN spokesperson also warned against excessively high prices 

Cell C said to maximise possible data price reductions, the country should allocate spectrum in such a manner that it allows smaller and bigger operators to compete. 

Vodacom has warned that government conditions as part of the sale could result in even higher data prices.

"Acquiring spectrum with a condition, for example, that requires us to build a network that delivers 4G connectivity to 100% of the population with download speeds above 100mbps would require a staggering investment in the network. This would naturally increase input costs and could in fact result in higher rather than lower data prices," a spokesperson said. 

Also, O’Sullivan cautioned that other factors - including the exchange rate, inputs costs such as electricity and fuel, and theft and vandalism of cellphone towers - also have an effect on data prices. 

Also read: Telkom added 4.5 million users by piggybacking on the competition – and selling data for R50 less per gig than Vodacom

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