Prepaid cellphone users, who are generally lower income consumers, are paying up to twice as much as middle and high-income contract subscribers in South Africa. This is according to the communications regulator discussion document on mobile phone pricing.
The Independent Communications Authority of South Africa (Icasa) document says: “The fact that handsets for contract customers are subsidised and the usage rates are lower raises concerns of prepaid users potentially subsidising post-paid users.”
The report says the pricing models adopted by the operators are widening the wedge which exists between prepaid and post-paid users, aggravating the digital divide and questions why South Africa, unlike other countries, has not managed to decrease the difference between pre-paid and post-paid services.
“While initial arguments for premium rating prepaid services may have some purchase, there are strong arguments suggesting that these costs have declined and a corresponding decline in prepaid rates should follow,” says the report.
Vodacom’s Corporate Communication Director Dot Field says that post-paid users are subsidising pre-paid users as they provide the guaranteed income used to maintain and further develop the network.
“Prepaid users do not pay a fixed monthly tariff and thus pay more per peak minute and the same for off-peak minutes,” says Field.
MTN’s Ravin Maharaj says that the cellphone industry in South Africa is a lot younger than the countries it is compared to in the report and that a more mature industry with more users will bring prices down.
There are 25-million South Africans, or 49% of the population, who are cellphone users. Of these, 21-million are prepaid with only four-million contract users.
Maharaj says that despite the lack of credit risk with prepaid users, they were more of a business risk owing to the large number of inactive users taking up expensive network capacity.
Cell C spokesperson Happy Zondi says it disputes the fact that there is a substantial difference between prepaid and post-paid services, drawing attention to its prepaid per second plan. “Off-peak charges on this tariff plan resemble contract off-peak charges quite closely,” says Zondi, but she did not produce the comparative costs for peak times.
The discussion document forms part of an inquiry into cellphone call costs, which resulted from a complaint lodged with Icasa by the Communications User Association of South Africa.