SIHLE BULOSE AND SAVANNA STEPHENS | Lower mobile data costs may not be on horizon yet

When SA completed its latest, long overdue radio frequency spectrum auction in March, it created an expectation in the minds of consumers that mobile data costs will be reduced. 

The Competition Commission and the Independent Communications Authority of SA (Icasa) have previously flagged the delay in the allocation of additional spectrum as one of the reasons behind high mobile data costs in SA. With the vast majority of South Africans relying on mobile data for internet access, lower data costs are critical for our developing country’s quest to improve access to education, employment and information. 

However, prices are driven by a range of factors such as the levels of competition between network operators, infrastructure build costs and regulatory intervention. It seems consumers may have to be patient in waiting to see how the increased spectrum allocation translates into more affordable mobile data costs. 

During the recent auction MTN, Vodacom, Rain Networks, Telkom and Cell C successfully acquired spectrum allocations. In total, the various bidding firms spent in excess of R14.4bn. 

In addition to the fees, the successful bidders are likely to incur additional capital expenditure to put these spectrum allocations to good use. 

But, they are likely to benefit from reduced maintenance costs, arising from the low frequency bands. For example, in areas less populated, the number of base stations required to achieve coverage would be less than in more populated areas. 

In essence, 5G operates on a much shorter wavelength than older network technology standards. As a result, 5G can carry a lot of data much faster than 4G. It can also support many more devices. Where 4G can support about 4,000 devices per square kilometre, 5G can support around 1-million. 

But it also means a much shorter range. You need many more 5G towers per square kilometre than you do 4G towers. While it’s possible for each of those towers to be smaller in size and less costly, the capital expenditure to erect and maintain them is still significant. Because the cost of infrastructure build and maintenance is one of the factors that drive mobile data costs, there is no certainty that the additional spectrum may lead to more affordable mobile data costs.

That said, there is one way the additional spectrum might bring about lower mobile data costs and that is through increased competition among the mobile operators. Rain Networks, for example, has been able to provide competitive prices on unlimited mobile data packages, and in doing so it has competed with both other mobile networks and fibre providers, and this has resulted in lower overall costs of connectivity. This is especially important in areas such as townships, where affordable internet access will make the most difference. 

The role of the authorities, such as the Competition Commission and Icasa, is critical. They need to ensure that South Africans are getting a fair deal when it comes to buying mobile data.

In addition, various stipulations in the auction process mean there will be other positive outcomes. These include connecting previously unconnected citizens and public institutions (such as public schools, health facilities and unconnected police stations) within a specific 36 months from the date of issuance of the spectrum licences. 

There is also likely to be a positive economic impact. Expanded 5G networks, in particular, are crucial to emerging technologies such as the Internet of Things (IoT), which must be developed in SA to achieve its stated Fourth Industrial Revolution (4IR) ambitions. 

So, while South Africans may not see dramatically lower mobile data costs anytime soon, there is no doubt consumers will see some impact in the long term. What we hope to see from the latest spectrum auction is that the stakeholders provide more South Africans with access to data services and information, in a quality manner and, most importantly, at a lower cost. 

• Bulose is partner: Corporate/M&A; while Stephens is senior associate, Corporate/M&A, at CMS South Africa