Policy Brief 3, 2017: South Africa
Almost half of the South African population is still not using the Internet. A major contributing factor to this low Internet penetration could be the high cost of data products and smartphone devices. At the same time, consumers are not subscribing to the cheapest products on the market, such as the 1GB data bundle offered by Telkom at the substantially cheaper price of R99. This is a clear indication that in a data environment, subscribers are not only concerned about the cost of going online; other factors such as quality – coverage and speed – appear to be something for which users are willing to pay a premium. This is evidenced by subscribers sticking with the operators who offer the most expensive data products have invested significantly in their 3G and LTE networks.
Operators continue to squeeze the remaining revenues out of voice services by slowly reducing their mobile prepaid voice prices. The cost of an OECD basket in South Africa, however, is still three times 1that of the best-performing country, Egypt, and twice the cost of an OECD basket in Uganda and Tunisia. While the supply-side data informs analysis of price trends, it does not provide any information on why a large portion of South African citizens are not online. As a way of providing answers to this important policy question, Research ICT Africa (RIA) is currently conducting a nationally representative household and individual survey on ICT access and use. These RIA Beyond Access Surveys are informative as they capture income levels, usage, education, age, gender and location, which can be used to inform policymakers about affordability of both mobile broadband services and the technical devices suitable for accessing the Internet.
Highlights:
1. The price of 1GB of data in South Africa from dominant operators has remained consistent at between R149 and R160 for 8 quarters.
2. Despite offering 1GB for R99, Telkom appears unable to exert pricing pressure on the other operators.
3. Innovative mobile bundles that offer more value for money, usually with large volume discounts, tend to have complex cost structures and conversion strategies.
4. Vodacom has the largest data revenue at R21 billion in 2017, while Cell C has managed to bring in R15 billion in the same period thanks to handsome data growth.
