Critical Consumer Pat Sidley
ON April 1, consumers looking for a bargain in cellular telephones will receive a jolt. And later in the year, having signed up for bargains this week, they will get yet another jolt when tariffs rise.
This is because the two networks (MTN and Vodacom) are cutting back on the size of the subsidy they pay their service providers for each subscriber signed up to the network. Consumers will find that telephone instruments will be less discounted generally than they were for the first year of operation.
There is, says Vodacom’s Joan Joffe, no collusion here — the timing was set in the contracts signed by service providers and networks and both, coincidentally of course, ended on March 31. MTN’s Stephen Goodie, however, gave a much vaguer explanation for the coincidence, talking about “duopolies” as he denied
South African consumers, who are naturally oversuspicious at times, may still be uncomfortable with this explanation as the two networks co-operate nicely in certain other areas. They are, however, at loggerheads in some areas: Vodacom won its battle against MTN’s advertising campaign in which it described itself as the “Better Connection”. For this critical consumer’s penny’s worth, this should have been left to market forces to decide — the ad campaign was great, and certainly provided better value for money than the radio programmes it interrupted.
Meanwhile, what this coincidental act of non-collusion ought to mean for consumers, in the short term, is a price hike in handsets of an average of R1 000. This may not always be the case, as there is nothing to stop Teljoy, Nashua, Office Mart and the rest from putting their own dough into discounting handsets instead of using the network’s money, but the more likely option is a marked increase for a while in handset prices. This will be followed by a tariff increase, provided Vodacom (and presumably MTN) get the go-ahead from the regulator of the industry, Postmaster General Ters Oosthuizen. If he is as consumer conscious as he is supposed to be, he may use the opportunity to give them a rough time, as he is doing at the moment.
He has written to Vodacom asking the company to ensure that its service providers do not charge amounts which are not included in the tariff structure. He has also suggested that he would like to tighten up the procedure by which the networks are punished when they fall foul of their licensing agreements.
According to the licenses issued by the government to the industry, breaches can result in losing licenses or stiff fines.
This puts the focus on other things that consumers are paying for when they get hooked into cellular phone connections –the extra services provided and the tariffs charged on each call. It should also focus consumers’ attention on what they are paying and what they get for their money. There are all manner of charges that consumers may not fully understand they are in for, such as rental fees, connection fees, transfer fees, cancellation fees and so on, and that’s aside from the exorbitant charge per call. It is also aside, it appears, from the tariffs charged by some service providers, sometimes to make up for the loss on the phone, sometimes to offer a better deal, and sometimes to make a quick, unobserved buck on the side.
Consumers of cellular phone services, for instance, are seldom if ever told that “toll free” 0800 numbers are only toll free to Telkom users. Cellular phone users pay their normal charges for the calls. “Toll free” calls to foreign destinations in order to make reverse charge calls are charged for on cellular phones but, according to Vodacom, only at the local regular charge rate. That can mount up if you spend one hour talking because you believe your office in Holland is collecting the charge.
One service provider believes the most likely arena in which competition will play itself out will be tariffs. That is how it should be, but naturally there will be some anti-competitive forces in South Africa which will inhibit this.
One of those is the instinct of large companies and monopolies to hedge the scope of competition in case they have to work harder for their profits.
Telkom, for instance, owns a significant stake in Vodacom and has brought a supreme court action against MTN networks to stop them undercutting Telkom’s prices. This will eventually decide the power of the statutory regulator to set prices either above or below Telkom’s pricing structures. When MTN dipped its toes into cutting prices on its tariffs, it attracted the court action. One hopes, in the name of consumer interest, that Telkom will see its way clear to allowing price cutting, so that the industry will become more competitive. This, naturally, would have to be accompanied by some careful policing of the industry to iron out any suspicion of collusion, and to force real competition in the industry.
Vodacom, however, believes that extra services which add value to the basic service is where more of the competition lies. The company also believes consumers will respond to “network coverage” when they are hunting for deals.
Published tariffs are meaningless if they are not adhered to. Vodacom’s Alan Knott-Craig sees this slightly differently, believing that as long as nobody charges more than the published tariffs, they should be able to offer other deals.
On the other hand, if consumers were really able to bargain over what goes into their contracts (like taking issue with clauses they do not like) they would be better off.
The problem is that the major operators in the industry are more likely to want to have their cake and eat it. They will make the tariffs flexible to suit themselves. Contracts, however, are almost always inflexible. So consumers are unlikely to be able to influence the process in their favour. The choice is only as free as Vodacom, MTN and Telkom will allow it to be.
Far worse than this, is the fact that there is always an escape clause in the contract which allows the service provider to alter the tariffs. Consumers do not have the same privilege. The whole system prejudices consumers — and some way should be found of making the system fairer.
It would be good advice to take out a short-term contract only. Two years is often too long if the system turns out to be unsatisfactory for you.
Insure the handset for the full retail price. If your R40,00 set is stolen, you will find the set may cost R5 000,00 to replace.
The R40,00 one was discounted for the contract. Afrilink is now advising all its customers to insure for the full amount. But check insurance costs carefully.
Some of the policies tailored to cell phone use are exhorbitant and they are probably best placed on the all risks section of a householders’ policy.
* Check on what you’re in for if your set and sim card are stolen. Despite promises from the industry to make things more secure, no security system is yet in place. And you’ll continue paying rental at least, even after your set has been redistributed.
* One measure you can take yourself is to find the IER number (an identity number) on the handset, or get the service provider to do this, and make a note of it. If the set is stolen this will help in finding the phone and can mean that the phone will be disabled.
* Be agressive about your rights. If you have no luck when you think you are being over-charged, call the regulator in Pretoria.
* Try to remove clauses which prejudice you unfairly from your contract. This is an uphill battle, but if enough people are asking for particular items, the market should tell the service provider to respond
* Shop around — in the post April Fools Day environment there will be different types of deals available and lots of service providers looking for your business.
* Make certain that what you see is what you get. Hidden costs which pop up afterwards should be agressively handled (short of violence that is).