Cut? What cut? New data tariffs won’t benefit majority users

Zimbabwe's telecommunications regulator has ordered a price cut for out-of-bundle mobile data

LAST week, the Post and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) and the Ministry of ICT and Cyber Security announced an almost 60 percent reduction in out-of-bundle mobile data.
This was welcomed as a progressive move that would promote Internet access in the country. With effect from 1 July 2018, out-of-bundle mobile data is now charged at 5 cents per megabyte. In this short article, the Media Institute of Southern Africa (MISA) seeks to determine whether this revised rate is affordable and what the reduction will mean for the average consumer.

Internet access has become an important part of social and professional life. It is therefore
normal that in Zimbabwe the bulk of communication occurs via Internet-based services such as WhatsApp, Facebook, Skype, and general email.

The amount of Internet access in any specific place relies on a number of factors such as
network infrastructure, availability of power, and most importantly the cost of accessing the Internet. POTRAZ’s sector performance reports consistently show that the majority of
Internet users in Zimbabwe access the Internet by means of mobile devices, usually mobile
phones and tablets.

The high uptake of instant messaging applications, such as WhatsApp and Facebook, has
increased demand for mobile data in Zimbabwe. This high demand for instant messaging
and social media services has directly influenced how mobile network operators package
and sell their mobile data.

It is cheaper for a consumer to buy a social media bundle that only gives access to
WhatsApp, Facebook, Twitter or a combination of social media services.

On average, consumers across Zimbabwe’s three Mobile Network Operators (MNOs) pay an average of $5 for a 30-day social media bundle. The cost of these social media bundles remains unchanged by the reduction announced last week.

Other services such as email and general websites are not accessible through mobile data
bundles. A consumer must, therefore, buy mobile data at out-of-bundle rates that are far
more expensive when compared to bundled data. A natural consequence of the current
pricing regime is that the majority of consumers will opt for bundled data as opposed to the
more expensive out-of-bundle data.

This means the reduction in out-of-bundle data will not benefit as many consumers as initially thought because most consumers do not use out-of-bundle data anyway.
The discussions around the price reduction also showed how hard it is to measure the
affordability of Internet access. One common way is to take a comparative look at what other countries in the region charge for mobile data.

An example of such a comparative approach is the RIA Africa Mobile Pricing Indices
(RAMP). According to RAMP, Zimbabwe has the fourth most expensive mobile data in
Africa. This is based on the average cost of $30 for 1 gigabyte of out-of-bundle data.

One major disadvantage with the comparative approach is that it does not cater for unique
market forces that determine the cost of mobile data within the different countries compared in the research.

For example, Zimbabwe’s MNOs state that the reason their mobile data prices are high is
that they are still paying off their network capitalisation costs. The case is probably different for MNOs in more developed African countries.

The Alliance for Affordable Internet (A4AI) has come up with a formula that caters for each
country’s unique conditions. The A4AI argues that Internet is affordable if 1GB of mobile
out-of-bundle broadband data is priced at 2% or less of average monthly income.

If for example, the Zimbabwean average monthly income is $400 a month, then 1 gigabyte
of mobile data must cost less than $8. Under the new data price regime, 1 gigabyte of out-of-bundle data will cost a minimum of $50. This is much higher than the A4AI threshold, a clear indicator that Zimbabwean mobile data is still exorbitant.

MISA Zimbabwe has, in its engagement with government and POTRAZ, always pushed for
the reduction of Internet access costs. The current reduction in out-of-bundle data is a
positive step, but MISA urges government to act on the price of bundled data which is more
widely used than out-of-bundle data.

Limiting the reduction of mobile data only to a specific class of data that is only used by a
minority of the market will not improve Internet access in any significant and meaningful way.

MISA Zimbabwe