Bill shock as operators lift data fees to replace voice

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NOTICE anything funny about your cellphone bill lately? If so, you may have been blind-sided by prevailing mobile data trends. The first thing many consumers have been noticing is an increase in their monthly bills. The cause, in many cases, is an underlying shift in operators’ business focus, from voice to data.

This is in part the result of a decline in voice communications due to the widespread use of over-the-top (OTT) messaging and voice applications such as Viber, Skype, WhatsApp and even Twitter.

Another reason is diminishing voice margins. Between 2010 and April 2014, the communications regulator forced down cellular voice tariffs by lowering the interconnect rate (the price per minute that mobile operators pay each other to terminate voice calls) from R1.25 to 20c. As a result, voice revenue can no longer sustain cellular operators’ profits; Vodacom reports having lost R400 million in three months to the plummeting interconnect rate. Operators are therefore looking to data to maintain the lifestyles they’ve become accustomed to.

In response, data prices are going crazy.

In the case of Cell C, data rates rose in May from 15c a megabyte (MB) for all data to 99c/MB for out of bundle data – a 660 percent increase! Since then, it has taken to warning its subscribers when they are about to run out of bundle, but the upside is getting the same service at a much, much higher cost.

It should be mentioned that MTN and Cell C dropped voice call rates recently, but all eyes should now be on the data game.

Roaming is another way for operators to focus on charging more for data and subscribers to run up a heart-stopping bill.

On a recent trip to Europe, roaming charges would have been R17/MB if I had not opted for a roaming saver plan of only R30 a day plus R2/MB for data use (100MB in a day could have cost R1 700 instead of R230). The networks are justifying exorbitant roaming charges by saying overseas operators add their charges on top, but the disparity between the charges is simply too great for this to hold water.

I’ve also noticed that some European roaming plans offer a price per quantity of data and number of voice minutes. But on more expensive packages the data allocation increase does not proportionally match the increase in voice minutes. In fact, it is invariably significantly less.

Fixed-line operator Telkom approaches the data opportunity by loading data products with voice minutes. More often than not, these minutes remain unused.

For example, the price of an analogue business line from Telkom has just gone up from R189 a month to R209 (excluding VAT). Included in the price is 100 voice minutes. But small businesses widely use analogue lines for ADSL broadband access, which means they often do not use the voice minutes.

The problem is that Telkom will not offer “naked ADSL” lines, meant solely for data use. And therein lies the trap.

What is a customer to do? It’s obvious: use an OTT application like Skype or an alternative network provider such as Connection Telecom, which offers smartphone-based softphone apps over any wireless data connection, such as wi-fi.

Fairly ubiquitous in malls, airports, hotels, coffee shops, lobbies and even private homes, low-cost wi-fi may yet lead to a degree of consumer backlash.

Neotel is already rolling out wi-fi to municipal buildings, allowing the City of Cape Town to offer internet access backhauled over fibre links to the public. AlwaysOn offers wi-fi hotspots in public spaces, and MWeb offers its subscribers the opportunity to allow guest access to their connection on a cheap data plan. Various alternative network providers are rolling out wi-fi as a consumer option for their business customers.

Network operators are between a rock and a hard place. Consumers have more bargaining power than ever, and are refusing to tie themselves into 24-month contracts with high per-minute charges when cheaper smartphones and OTT voice applications using voice over internet protocol technology are a reality today.

Operators have threatened to stifle OTT providers by charging more for voice data over their networks, and some have hinted darkly at “unlicensed” OTT providers. But in reality, change is coming thick and fast.

Rob Lith is a director of Connection Telecom, an independent provider of carrier-grade internet protocol private branch exchange solutions to southern African businesses.


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