The Cost of Mobile Data in South Africa – A Hindrance or an Opportunity?

The cost of mobile data in South Africa has been the subject of much scrutiny of late, with movements such as #DataMustFall fiercely campaigning for a reduction in these fees. Currently, South Africa has the fourth most expensive data in Africa while it places second when compared to its developing world counterparts. In addition to these figures, South Africa’s average download speed clocks in at a sluggish 119th place globally.

Given these Global Statistics, are the Complaints Justified?

After analysing the figures, it’s immediately apparent that the answer to this question is purely a matter of perspective. If you happen to own or work for a major telecommunications company in South Africa, you will likely argue that the high price of data is in fact justified due to the high cost of the required infrastructure, the additional jobs that the extra revenue creates and the space that it leaves for additional competition within the sector. However, if you happen to be literally anyone else, the high price of data can only be regarded as a hindrance.

This is particularly true for students, who are increasingly dependent on data to access online resources and to submit their assignments when away from their campus Wi-Fi. It has been widely held that South Africa’s inelastic data price disproportionally affects poor students, as they are effectively forced to choose between paying the high data rates or falling behind in their studies.

So what has Caused this Current State of Affairs?

According to a World Bank report issued in 2016, the root cause can be attributed to a lack of competition in the telecommunications industry. Currently, two firms (Vodacom and MTN) hold a 70% market share between them. Thus, the existence of this duopoly of sorts enabled the two firms to peg the price of data at the current exorbitant rate. Although economic theory dictates that this high price should encourage new firms to enter the market and undercut the current price – leading to ‘a race to the bottom’ which would in turn result in an (economically) efficient industry price where the costs of supplying data would be equal to the price charged, such a scenario has simply not transpired. Instead, smaller firms such as Cell C have simply been content to match the prices offered by the bigger two firms as opposed to undercutting them, resulting in the reinforcement and entrenchment of the current artificially inflated data price.

Ultimately, the telecommunications industry requires both technological developments to reduce the cost of infrastructure as well as competition regulation, as the current price of mobile data is delaying not just economic growth within the country but is also serving to hinder the academic aspirations of the country’s youth.

Reducing the price of data is a necessary undertaking but it is also a task that will require extensive technological and economic research to achieve. If the challenges within these relevant research areas interest you, be sure to investigate the extensive list of academic programmes at VUT-Research to see what you can do to make a difference.