In south Africa

1. Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
PRESENTATION ON COST TO
COMMUNICATE TO SELECT
COMMITTEE ON LABOUR ND
PUBLIC ENTERPRISE.
BY MR THEMBA PHIRI, DDG ICT
POLICY & STRATEGY
31 JULY 2013
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2. SOUTH AFRICAN ICT
LANDSCAPE (i)
 South Africa with a population of about 51m is the
largest economy in Africa.
 It is also the 28th
largest economy in the world.
 It is classified as an upper middle income economy in
Africa by the World bank.
 The total since 1994 has been increasing at an average
rate 3.3% with a GDP per capita of R35,905.
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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3. SOUTH AFRICAN ICT
LANDSCAPE (ii)
 The ICT landscape is characterized by high access and
usage cost, low PC ownership and weak IT literacy.
 Growth in the sector is supported by the middle to high
income groups who are able to pay high prices.
 The high percentage of the population have been
financially excluded from the Knowledge economy due
to the high cost of the ICT services/prices.
 The South Africa fixed line market is dominated by
Telkom and Neotel the new entrant has less than 10%
of the market share.
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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4. SOUTH AFRICAN ICT
LANDSCAPE (iii)
 The Mobile market is also dominated by the two biggest
operators who between account over 91% of the market
share.
 The internet market is characterized by high prices and
low penetration.
 The high prices of the Broadband services have kept
penetration levels low.
 The telecommunication sector is plagued with high prices
for both retail and wholesale products.
 In recent study conducted by Research ICT Africa, South
Africa was ranked 30th
out of 46 as having the most
expensive prepaid mobile tariffs among African countries
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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5. THE SOUTH AFRICAN
TELECOMMUNICATIONS
MARKET STRUCTURE (i)
 The South African Telecommunication sector grew from about
R7billion in 1992 to over R100 billion in 2009, a growth has however
been masked by a number of unintended Policy and regulatory
outcomes which include:
- Negligible fixed line growth;
- High retail wholesale prices;
- Widespread job losses in the sector accompanied by super profits of
incumbents;
- Minimal new foreign direct investment;
- Institutional inability to anticipate, regulate and mitigate these
challenges;
- Pricing Information are presented in a complex manner that, even
the most sophisticated consumer cannot comprehend for informed
decision making;
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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6. - Whilst the prepaid mobile prices have reduced to some
extent, the prices are still too high;
- We are convinced that the current MTR rate of 40cents is
still far above the cost of an efficient operator;
- The level of fair competition which is expected to
contribute to stimulating further reduction in prices is slow
and radical Policy and regulatory interventions are
needed.
- The South African telecoms market continues to reflect a
market with a number of vertically integrated operators
with two very strong incumbent mobile operators and a
fixed line incumbent operator.
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
6
THE SOUTH AFRICAN
TELECOMMUNICATIONS
MARKET STRUCTURE (ii)

7. PRICE CHANGES IN MOBILE
TARIFFS, 2010-2013
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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PRICES OF MOBILE CALL RATES BETWEEN MARCH 2010 - MARCH 2013
OPERATOR CALL TARIFFS
OPERATORS
CHEAPEST MOST EXPENSIVE
2010 2013 2010 2013
On-net Off-net On-net Off-net On-net Off-net On-net Off-net
VODACOM 1.95 1.95 1.4 1.4 2.85 2.99 2.6 2.89
MTN 2.5 3 1.2 1.2 2.89 2.89 2.59 2.79
CELLC 2.5 2.85 0.99 0.99 2.5 2.85 2.5 2.85
PERCENTAGE PRICE CHANGES OF MOBILE CALL RATES BETWEEN MARCH 2010 - MARCH 2013
OPERATOR CALL TARIFFS
OPERATORS
CHEAPEST PACKAGE
MOST EXPENSIVE
PACKAGE
2010 - 2013 2010 - 2013
On-net Off-net On-net Off-net
VODACOM 28% 28% 9% 9%
MTN 52% 60% 10% 10%
CELLC 60% 65% 0 0

8. MOBILE AND SMS TARIFFS (ii)
 Mobile retail prices are still relatively high particularly for the major
network operators with SMP (Vodacom & MTN in our example).
 The small operators who in total have less than 10% of the market share
(CellC & others) in the mobile voice market, are more price competitive
on their lowest package offering to prepaid clients.
 On the other hand, the highest package price for Operators with SMP
range from R2.60 – R2.89 per minute which is much higher than that of
non SMP operators.
 While MTRs reduced by 80% between 2010 and 2013, the most
expensive packages of the SMP operators are below the percentage
reduction for the same period.
 Our observation is that the operators with an SMP are most resistant in
passing the MTR price reductions to consumers and are mainly
responsible for the high mobile voice prices in South Africa.
 We strongly recommend that, tariff package information should be
published in simple and clear format for the understanding of the
unsophisticated consumer.Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development

9. DOC`s INTERVENTIONS TO
ADDRESS THE HIGH COST
TO COMMUNICATE
Measures being undertaken by the DoC to contribute to the
lower cost to communicate include the following:
Broadband Value Chain Analysis
Policy Directive on Price Transparency
 Development of the ICT indicator Portal
Policy Directive on Premium Content
Marginal Termination Rates
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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10. DOC`s INTERVENTIONS TO ADDRESS
THE HIGH COST TO COMMUNICATE
Measures being undertaken by the DoC to contribute to the lower cost
to communicate include the following:
Interventions Time Lines
- Broadband Value Chain
Analysis
- Policy Directive on Price
Transparency
- Development of the ICT
indicator Portal
- Policy Directive on Premium
Content
- Marginal Termination Rates
March 2013 - 2014
March 2013 - 2014
March 2012 - 2014
June - December 2013
June 2013 - March 2014
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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11. BROADBAND VALUE CHAIN
ANALYSIS
 DoC is currently collaborating with ICASA conducting an electronic
communications network and services value chain analysis of the
South African telecommunications industry.
 The purpose of the study is to analyse the broadband market
identify challenges in the market propose potential remedies to
address market failures.
 The project implementation team consisting of Senior Manager from
the DoC and ICASA are being constituted to guide and project
manage the study.
 The final output coming from these project will contribute to the
development of various interventions that will assist in the lowering
the cost to Communicate.
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
11

12. POLICY DIRECTIVE ON
PRICE TRANSPARENCY
 The former Minister Pule, during the budget vote speech for 2013
announced the intention to issue a policy directive on transparent pricing as
part of cost to communicate currently holding consultations with the authority
the solicit support to implement the Policy Directive.
 The scope of the policy directive aims to ensure that the information
disclosure on the retail tariffs, costs and service quality information of the
telecommunication services that include voice, sound and data for fixed and
mobile services consumed are presented in simplified and transparent
formats to assist end-users/consumers to make informed decision on the
services they wish to consume.
 Lower prices cost to Communicate and transparency in price information will
stimulate competition in the market and contribute further to price reduction
and job creation and economic growth in the country
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
12

13. DEVELOPMENT OF THE ICT
INDICATOR PORTAL
• The Doc, ICASA AND STAT SA have collaborated and developed a
Data Portal that gives access to timely, accurate information on
ICTs.
• This ICT Data Portal will serve as an intelligence information centre
to provide storage and retrieval of critical ICT
• The ICT data is populated on quarterly basis and is currently
available for only this group of stakeholders use at the moment .
• The Co-operation received in providing information to the Portal has
confirmed the willingness of the Private sector to team up with
Government in developing adequate information Portal for the ICT.
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
13

14. POLICY DIRECTIVE ON
PREMIUM CONTENT (i)
 The market for wholesale access to premium TV content is of
increasing importance to competition in the broadcasting and
electronic communications markets. This market includes in
particular access to premier sports events and major movies in their
first subscription TV release time window, and possibly also some
premium TV content (e.g. TV content from many of the major
Hollywood film studios).
 Currently, experience indicates that rights to these types of content
are often sold on an exclusive basis, giving the TV provider
obtaining these rights a very strong competitive advantage in the
pay TV sector that it can leverage into the traditional voice and
broadband markets through the bundling together of these
services.
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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15. POLICY DIRECTIVE ON
PREMIUM CONTENT (ii)
 This has led to competing service providers finding it difficult to compete on an
equal footing with the TV provider that has obtained these rights on a level
playing field, as obtaining access depends on the market pricing, terms and
conditions set by the TV provider obtaining these rights.
 The Department took a decision issue a policy directive to ICASA to begin
with the market definition process in order to address the wholesale and retail
market, particularly the lack of effective competition and to create conditions
that will contribute to ensuring that all bottlenecks can be addressed.
 ICASA will continue with its on-going work to address the wholesale
transmission market definition issues, this Directive directs ICASA to also
recognise the wholesale market for access to premium TV content and/or the
bundling in retail market definitions. The policy directive on premium content is
being consulted upon within the Departmental structures after which it will be
submitted to the Minister for formal consultation with ICASA in August 2013
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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16. MTR MARGINAL
TERMINATION RATES
 The DoC and ICASA are collaborating in conducting a
comprehensive market review of the Impact of the Call Termination
regulation of 2010.
 The objective of this study is understand the extent to the MTR
intervention has achieved its stated objective.
 Necessary corrective actions will be speedily implemented from
both policy and regulatory perspectives based on the outcome of
the study and its recommendations to further support the reduction
of the cost to communicate in South Africa.
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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17. THANK YOU
Making South Africa a Global Leader
in Harnessing ICTs for Socio-economic Development
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