Abstract
Access to mobile telecommunications services, in particular high-speed data, results in numerous economic and social benefits accruing to society. In South Africa, the mobile telecommunications sector has functioned as an effective duopoly, where two large operators (MTN and Vodacom) hold significant market power. This market is subject to inadequate competition. The smaller operators that contest this market had not adequately curtailed larger operators’ ability to price data products at levels that would have prevailed in the presence of strong competition and well contested markets.
The market power which MTN and Vodacom enjoy has been derived in part from the nature of the mobile telecommunications market. This market is characterised by the existence of significant barriers to entry, network effects, and first mover advantages. These economic characteristics have resulted in the sector being subject to ex-post and ex-ante regulation. One of the key barriers to entry which operators face is access to infrastructure. To reduce costs operators therefore frequently share/lease infrastructure. This research study assessed the impacts and underpinning reasons for ICASA’s regulatory actions with regard to infrastructure sharing as an attempt to reduce data costs for consumers. The research compares and contrasts this with the Data Services Market Inquiry (DSMI) process undertaken by the Competition Commission of South Africa (CCSA) also aimed at reducing data prices.
The study, which relies on extensive document review, utilised submissions to the regulators, company reports and other publicly available data to analyse the impact of the respective regulators’ actions on prices, revenue, investments and market dynamics. The research also utilised publicly available information, which was analysed in light of the economic literature on the competition and regulatory economics of telecommunications markets, to explain the performance of the regulators.
The study found that the CCSA’s DSMI regulatory process resulted in significant price reductions being enjoyed by consumers, while its impact on the revenues of operators was inconclusive. The study also found that the DSMI process did not negatively impact competitive dynamics. The study found that ICASA’s 2015/2016 infrastructure sharing regulatory decision, whereby no regulations were enacted, and the status quo maintained, was ineffective as it did not ameliorate the problematic issues which faced market participants (particularly smaller operators) and undermined competition. The research found that institutional factors and context largely underpinned the differing levels of effectiveness between the two regulators, which in turn shaped the effectiveness of their interventions to reduce data prices.