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The Big Saturday Read: Money, politics and data wars in Zimbabwe

January 14, 2017

Data wars

 

The start of the Zimbabwe’s New Year has been dominated by serious controversy over new prices for mobile data, the main channel by which most Zimbabweans access the internet and social media. On 9 January 2017, the Posts and Telecommunications Regulatory Authority in Zimbabwe (POTRAZ), the telecoms regulator, issued a regulatory notice announcing the introduction of floor prices for mobile data, voice services. A floor price represents the minimum price to be charged for these services. POTRAZ did not set a ceiling price, which meant a Mobile Network Operator (MNO) could charge anything at or above the floor price. Compliance with the regulatory notice was mandatory.

 

On 11 January 2017, in compliance with the POTRAZ regulatory notice, Econetannounced a new set of tariffs for its services. The new tariffs were quite steep and well above the floor price. The price for data was 5 times higher than the POTRAZ floor price. This escalation in costs of accessing data was received with shock by the market, resulting in a  huge outcry from customers. They complained that  that the new tariffs were excessive, unaffordable and prohibitive.

 

On 12 January 2017, the Minister of ICT, Supa Mandiwanzira and POTRAZ appeared to have succumbed to public pressure when they announced the suspension of the regulatory notice setting the floor price. Both Mandiwanzira and POTRAZ had issued strongly worded statements that appeared to attack Econet.For its part, Econet reversed the data tariffs and issued a public statement on 13 January 2017 stating that they had reversed their new tariffs of their own volition, and not because of the Ministerial intervention. In a terse statement, Econet essentially accused Mandiwanzira of presenting a “false and misleading” picture by purporting to have reversed the new data tariffs when the company had already made and communicated its decision to the authorities. Econet accused Mandiwanzira of being “inconsistent and duplicitous” and of having personally “captured” the Ministry. Econet has called on government to “movedecisively” against Mandiwanzira’s alleged misconduct. In his own statement the previous day, Mandiwanzira had in words that were clearly directed at Econet accused it of “gluttonous greed” after it raised its tariffs.  

 

There is clearly an unhealthy war of words between the Minister and Econet and this is likely to go on for a while since the two cannot avoid each other.

 

This murky affair raises a number of issues ranging from the legal and political to the economic and social. It exposes the various actors involved in the telecoms sector, weaknesses in the regulatory model, challenges facing companies in the telecoms sector, corporate greed, gamesmanship and dishonesty, civil society weaknesses, and much more. While focus has largely been on political conspiracies and accusations of corporate greed, I argue that there is far more that warrants attention and consideration beyond these common narratives. It is easy but pointless to apportion liability to a single party in a matter that is quite complex and multi-faceted. Instead, the parties that must shoulder responsibility for this debacle are numerous and apart from short term measures, it is necessary to consider long term policy issues regarding the telecoms industry. High charges for services are not the solution. But neither is maintaining a regime of low charges in an industry that is facing numerous challenges from the advent of new technologies.

 

Political conspiracy

 

I will start with the most common theory which is that the new data prices are part of a government conspiracy to curtail or limit the use of social media which has become an important space of political expression, association and mobilisation. The rise of social media as a significant space for political activity was confirmed last year during the hashtag citizens’ movement protests. It was through social media that the now-exiled clergyman, Evan Mawarire rose to prominence and mobilised thousands within and outside Zimbabwe through the hashtag movement #ThisFlag. Others such as #Tajamuka, #ThisGown, and more also became points of mobilisation through use of social media. Those in the diaspora used social media to mobilise resources and share information to support those protesting in Zimbabwe. Twitter, Facebook and WhatsApp became important spaces of ideation, debate, information-sharing and mobilisation.

 

This theory is given credence by government’s swift and typically repressive response to the citizens’ movements. Social media became a prime target of political attack and policing. The government regulatory authorities issued tough and intimidatory statements, warning people against so-called “abuse” of social media. On at least one occasion, there was a total blackout of mobile data internet services, prompting accusations that government was behind efforts to stop people from using social media to organise and mobilise others for a planned demonstration. The military also waded into the affair, declaring that it was ready for cyber-warfare. It was clear that the government had identified social media as a threat. Control of information is one of the priority functions of authoritarian regimes. They have done so through control of state media and restriction of private media. But social media has revolutionised the way in which people communicate and receive information and government has struggled to control this space.

 

In panic, the ICT Minister announced that a draft Cybercrime Bill was being crafted to regulate social media. Around the same time, it was announced that the government had suspended renewal of mobile telephony promotions, which included data bundles, which MNOs offered to customers for cheaper and easier access to social media. Econet confirmed in its statement on 13 January 2017 that their application for the renewal of promotions was declined by the regulator in July 2016. It also alludes to the view that the refusal to renew promotions was related to the citizens’ movement protests stating that “the ban on promotions was implemented against a background of Regulatory concerns over the perceived abuse of social media that we [MNOs] were accused of contributing to through our low tariffs”.

 

Most people interpreted the refusal to renew promotions as a way by a paranoid government to clamp down on social media activism. Also in October last year, government appointed a new head of POTRAZ, the regulator who according to a Newsday report at the time was a former top official in the Central Intelligence Organisation, Zimbabwe’s spy agency. This appointment is consistent with the trend where state institutions and statutory bodies are being run by persons from the security establishment. All this was seen as part of a broader strategy to restrict social media.

 

It is against this background that the policy of setting a floor price for mobile data has been introduced by the government. The view that government was the principal mover for setting a floor price for mobile data is supported by Econet’s statement of 13 January 2017, in which it points to the regulator as having “communicated its intention to fix a floor price for data and invited operators to contribute to the determination of the floor price” The regulator attributes origination to the MNOs, so no-one is taking responsibility but the fact is that they all agreed. If the regulator took the leading role, it would explain the view that this policy is designed to restrict access to the internet and use of social media. The criticism is that this policy is highly exclusionary since high costs of accessing the internet would mean fewer people can afford entry and participation. If people are priced out of the internet, government will have achieved its objective of limiting social media participation and activity not by passing a draconian piece of legislation or arresting people or shutting down the internet, but by simply making access more expensive and unaffordable. It is a soft but drastic way of limiting access to social media.

 

While the political theory is attractive, persuasive and popular, it is limited as it does not explain the energy with which Econet appears to have actively participated in the formulation of the directive and the zeal with which it embraced it. The political theory assumes that it was only government which proposed regulation by setting the floor-price for mobile data, whereas corporations were key proponents of this regulatory model. There must be other interests beyond the political which motivated the adoption of this policy. It is necessary, therefore, to consider other factors that might explain this development.  

 

Economic interests

 

The economic dimension is clearly a significant consideration. In this regard, both government and MNOs share a responsibility for the tariff hikes. Both parties have a strong financial interest in raising prices for mobile data and this could be an even bigger factor than the political considerations.  

 

Government

 

First, government has a financial interest in the business of MNOs since through POTRAZ, the regulator, it derives income directly from the revenues of the regulated entities. POTRAZ gets 6 per cent of the revenues of MNOs derived from the provision of mobile services. In 2014, Government also imposed a 5% excise duty on airtime and mobile data. In the 2017 Budget Statement issued in December 2016, the Finance Minister also proposed a new 5% levy on airtime and mobile data which he said would support a Health Fund. This is in addition to corporate taxes, VAT, employee income taxes and other contributions.  This shows that the telecoms sector is not only one of the most highly taxed sectors but that it has become a cash-cow for government. It follows that the more the MNOs earn from their services, the more government and POTRAZ can earn in revenues. This gives POTRAZ an incentive to promote the regulated entities’ ability to generate more revenue. MNOs can do this by expanding their customer base or becoming more innovative and offering more services. Another way is to raise the price of services to a captive market. The ever-expanding array ofof taxes in the telecoms sector reflects a government that is growing ever more desperate for revenue as its traditional sources are dwindling and zeroing in on an industry that it more efficient than most in collecting cash revenues. The interest in securing more revenue by setting floor prices is unsurprising.   

 

The bottom line

 

For their part, MNOs have an interest in setting a floor price to enhance revenue-generation After all the most important goal of any commercial company is to generate profits.. In an oligopolistic market, it is possible to fix prices since just a few service providers dominate and they can protect their mutual interests through setting a floor price. This will prevent one of the players from undercutting others as they are all obliged to charge at least the minimum. The higher the floor price, the more revenue they will be able to earn from the provision of the service.

 

MNOs are particularly concerned with the proliferation of social media and other Over The Top (OTT) services which ride on the traditional mobile phone services. These new OTT services, which include social media like WhatsApp, Facebook calls and other apps that offer free calling facilities have become the most dominant methods of communication, beyond voice calls and text messaging services. In its Third Quarterly Report presented in December 2016, POTRAZ reported a milestone when mobile data brought more revenue to MNOs than voice calls did during that quarter. The Report also showed that total voice traffic in the third quarter had declined by 5.2% from the previous quarter. Explaining the decline, POTRAZ wrote, “The substitution of mobile voice service with Over-the-Top services also greatly contributed to the overall decline in voice traffic.” The report also showed that telecommunication revenues had declined by 11.8% from the previous quarter.

 

It is against this background that there have been concerns among MNOs. That the economic imperative was critical in the introduction of floor-prices is reflected in a statement from POTRAZ issued on 12 January 2017 which states, “It has become apparent to us that the service providers have decided not to own up to the fact that they engaged the Regulator regarding declining revenues which were, according to them, threatening industry viability and service roll out. In fact, the MNOs met prior to the issuance of this determination and proposed even higher floor prices through their collective voice, the Telecommunications Association of Zimbabwe (TOAZ)”. According to this view, MNOs were firmly behind the introduction of floor prices and cited economic justifications for the proposition.

 

The significance of the economic interest is also corroborated by the behaviour of Econet soon after POTRAZ announced the directive. It duly complied with the directive, but set its prices at 5 times above the POTRAZ floor price, which had already been criticised for being excessive. In its statement on 13 January 2017, Econet admits that their pricing structure is “more expensive” than its rivals’ but justifies it on the basis that it carries a heavier weight of obligations compared to its rivals. It cites the fact of being the only MNO to have paid its full licence fee and the unpaid arrears owed to it by its rivals which are owned by government.

 

Evidently, MNOs cannot play innocent victims of government or regulatory heavy-handedness. The directive was not an imposition upon them. It is a product of their agreement andinput. Rather than feign innocence, they should be honest and upfront about it. If the economic justification is so important and their viability is indeed under threat, they should explain this to their loyal customers, as indeed, they might even be understood.

 

No clean hands

 

Econet have made themselves an easy target of public criticism by the haste with which they acted, the magnitude of their price increases and their poor attempt to shift responsibility for the setting of floor prices. However, fairness behoves us to look at the bigger picture and appreciate the role of each player in this murky saga. A fair assessment shows that responsibility must fall on the shoulders of all 3 MNOs in the sector and the regulator. The leaked minutes from the MNOs meeting in October 2016 demonstrate that a call for a floor price was made by all 3 companies. The MNOs cannot argue that the concept of setting a floor price was imposed upon them and that they were unwilling recipients of the policy. They cannot claim innocence and blame POTRAZ as if they were not participants in the process of coming up with regulation of the floor price. Indeed, Econet has confirmed that they participated “in good faith”. In fact, as confirmed by POTRAZ, the MNOs demanded higher floor prices than were eventually set in the directive.

 

This contrasts sharply with the conduct of the MNOs which suggests that floor-pricing was the regulator’s decision. In a statement to customers on 12 January 2017, Econet pleaded that it was merely complying with a regulatory directive. The statement suggests a loyal and law abiding corporate citizen that is merely adhering to the law imposed by the regulator. It conceals the fact that Econet and fellow MNOs proposed a higher floor price.  For their part, NetOne and Telecel also engaged in corporate gamesmanship. They maintained the old data charges while Econet implemented the POTRAZ directive. Their conduct conceals the fact that they were both involved in making the proposal for a floor price. It is dishonest of them to pretend that they are better than their rival Econet. Their conduct has left Econet looking like the greedy and unreasonable one among the MNOs.

 

But why would NetOne and Telecel retreat after they had proposed a floor price? Did they suddenly see the light or was it mere gamesmanship designed to embarrass their bigger rival? The decision seems to be motivated by gamesmanship and a dishonest desire to undercut Econet, which at 51,6% of the market has the lion’s share compared to its rivals. Indeed, a number of people have since announced their migration from Econet to either NetOne or Telecel on account of the different data charges after Econet was the only company that hiked its prices. Unsurprisingly, Econet reacted with annoyance at the duplicitous conduct of its rivals. In a public statement issued on 12 January 2017, Econet wrote, “It is clear that, for whatever reason, the other operators had not complied with the directive and therefore there can never be a level playing field when our customers are the only ones being affected by this position. This is not the first time that Econet has complied and other operators have not complied …”

 

POTRAZ, the regulator has also reacted bitterly to the MNOs’ apparent attempt to shift blame for the setting of floor prices. “As the sector regulator, we are concerned and disturbed by the conduct, double standards, negative utterances and refusal to take ownership of this decision by some MNOs.  It has become apparent to us that the service providers have decided to not to own up to the fact that they engaged the Regulator …” wrote POTRAZ in a public notice on 12 January 2017. It is clear that honesty has been lacking on the part of the MNOs handling of this matter. There is no need for them to act smart when it’s clear that they were acting to protect their economic interests. If they are honest, consumers might even understand their plight and why they are demanding more protection of their businesses. But if they withhold truths from the public and deliberately distort information on the issues, they will lose credibility and public trust. 

 

Illegality and anti-competitive behaviour

 

This saga reminds us once again of the problems of a restricted telecoms sector. With just 3 telecoms companies, the market is oligopolistic. It is easy for these companies to collude and prioritise their interests at the expense of customers’ interests. If the regulator is conflicted, as is the case with POTRAZ whose revenues depend on the revenues of regulated entities, customers are likely to come a distant last in the list of priorities. In this instance, there is a prima facie case of anti-competitive behaviour by the MNOs. The leaked minutes of their meeting in October 2016 and revelations by POTRAZ that the MNOs indeed lobbied for a floor price through their industry association suggests the MNOs colluded and may have engaged in an illegal practice known as price fixing. Competition laws prohibit businesses from discussing with competitors prices they are going to charge their customers. This is one of the most reviled business practices, prohibited under any country’s competition laws. Two of the UK’s biggest MNOs, Vodafone and O2 were fined a total of £20 million by the Dutch regulator, along with French and German companies for involvement in a price fixing cartel in The Netherlands.

 

While the details in this case are limited, it is important for the Competition and Tariffs Commission (CTC) which is responsible for promoting competition and policing anti-competitive conduct, to investigate the behaviour of MNOs within the telecoms sector which appears to implicate POTRAZ, the regulator.

 

Beyond this, it is important from a broader policy point of view to consider opening up the sector to more players in order to promote competition. Restrictions on the entry of foreign players are due to government paranoia and protectionism. But this has stifled competition and innovation within the telecoms sector. People are overly tied down to the same MNOs and with the takeover of Telecel by the government, this has left just one MNO which is privately-owned. There must be room for more players within the sector. Competition is good for the industry and for consumers.

 

Some animals are more equal than others

 

However, it is also pertinent to acknowledge Econet’s perennial complaint that the playing field within the telecommunications sector is far from level and this is one of the causes of the pricing anomalies. There is clearly an animal farm scenario in the telecoms sector, where some animals are more equal than others. Econet has to compete with two rivals which, like all state-owned entities, have traditionally been supported and shielded by the state. Although Telecel was privately owned for a long time before the recent takeover by the state, it always enjoyed a wide berth from government from the time it received its first operating licence. Both NetOne and Telecel get away with conduct which would land Econet into serious jeopardy. Ironically, Econet was the only MNO to actually comply with the POTRAZ directive, while its two rivals were reluctant or delayed compliance. Econet’s charges were exorbitant but this was not against the law. On the contrary, they were consistent with the directive, which simply set out the floor price but did not set out a ceiling price. Econet’s charges may have been outrageous from the consumer’s point of view, but they were certainly not illegal. The illegality was its rivals’ failure to comply with the directive. Unsurprisingly, Econet complained arguing that, “This is not the first time that Econet has complied and other operators have not complied”. It’s a statement that encapsulates its frustration at the preferential treatment given to its state-owned rivals. It is fair to assume that if the roles had been reversed and Econet had refused to comply with the directive, it would have been in trouble with the government yet nothing has been said of its rivals’ non-compliance.

 

A more significant example of the preferential treatment given to NetOne and Telecel is in respect of the licence fee. Econet was the only MNO to pay up its licence fee ($137,5 million) upon demand in 2013, at a time when the government was desperate for cash to fund elections. The other MNOs did not have the same pressure to comply with licence fee requirements. Telecel had a relaxed payment plan which they did not always comply with but still kept their licence. This means Econet has had to compete with rivals that do not have to carry the same financial obligations as it does, which is anti-competitive behaviour that it has had to contend with for many years. Econet has previously complained about this, citing discrimination and anti-competitive behaviour on an uneven playing field. Consumers may not be aware of these challenges that the company faces or they do not regard it as any of their business. Yet it has consequences on how the companies behave. While Econet might appear to be more aggressive than its competitors, this could be because the latter can afford to be relaxed and benevolent because they do not have the same commercial pressures and are, in any event, cushioned by taxpayer funds. If Econet’s profits are dwindling in a depreciating economic environment, how are the two rivals’ managing, with a combined market and revenue share of less than 30%?

 

Still on this, it has to be asked whether it is necessary to have two state-owned companies in the same sector. What is the point, especially when they are not performing well? The government could merge them and create a behemoth to compete with the more powerful Econet, but that would have the effect of reducing competition. A better option might be for government to open up bids for Telecel. It must be sold off to the private sector. A strong, well-resourced and experienced telecoms company is needed to give competition to Econet and NetOne. The protectionism that has shielded the MNOs is yielding negative results and malpractices as seen in the price fixing.   

 

Snatching victory from crisis

 

Over the years, ZANU PF has mastered the art of reaping glory by seemingly solving self-inflicted crises. They claim credit for solving mistakes they would have committed. This honour is usually reserved for Mugabe, who must always come away as the hero who comes to the rescue of the ordinary people. It is not unusual for a Minister to announce an unpopular policy but thereafter for Mugabe to emerge with a solution, often reversing the ministerial decision, to high acclaim from the public. Thus when Finance Minister Patrick Chinamasa announced the suspension of public servants’ bonuses in 2015, the highly unpopular decision was swiftly reversed by Mugabe a few days later, accompanied by a public rebuke of the Minister. ZANU PF led a chaotic land reform programme motivated by political considerations and without planning, destroying the agricultural productivity in the process. But year after year, they return to the rural areas handing out food donations to avert a famine but also in claiming the role of saviours in the process. They created the food crisis, but they use food aid, even from donors as an illustration of their benevolence.

 

In this case, the Minister responsible for the telecoms industry, Supa Mandiwanzira did not wait for Mugabe to reverse the regulator’s directive on floor prices for mobile data. After an initial misjudgement when he rashly tweeted that he was on annual leave and that he would “get to the bottom of it” upon his return to work at the end of the month, it later dawned on him that it was an opportunity to harvest some credit and goodwill. The next day he issued a statement suspending the tariff hikes announced by the regulator, POTRAZ. Although he did not mention it by name, he took the opportunity to criticise Econet accusing it of “gluttonous corporate greed”. It is this that prompted a strongly-worded response from Econet, accusing Mandiwanzira of “inconsistent and duplicitous” and pursuing a discriminatory and vindictive agenda against it. POTRAZ complied and suspended the directive. The news of this reversal was widely celebrated by the multitudes on social media and beyond.

 

Once again, the ruling party had emerged as the saviour, yet this was a crisis they created in the first place when POTRAZ set the steep floor prices. It is inconceivable that POTRAZ could have acted on its own without ministerial approval. Such a policy would have been discussed at the highest levels long before the directive was announced on 9 January 2017. To now claim to be reversing the directive to stop corporate greed smacks of an attempt to claim credit where none is due because the regulatory authorities are the authors and owners of that regulatory policy that presented that loophole. Instead of trying to earn credit, the Minsiter and POTRAZ should be taking responsibility and apologising to the public for a poorly crafted directive. For now, with Econet as the target of public anger, government, the Minister and POTRAZ appear like heroes who have been kind and understanding enough to respond to the people’s outcry. The villain is Econet, not the public authorities that are the authors and owners of the policy directive.

 

Networks of co-operation

 

The mobile data saga has also demonstrated the significance of networks of cooperation. When individuals or entities want to achieve an objective, it is better to form networks of cooperation. The leaked minutes of a meeting between MNOs where they discussed the issue of setting floor prices for their services demonstrates that through their association, the Telecommunications Operators Association of Zimbabwe (TOAZ), the companies have a network of cooperation that represents their interests. This network of cooperation enables them to speak with one voice, which is more powerful than their separate voices presented individually. Even though they are industry rivals, they are able to engage and negotiate with the regulator in order to achieve their mutual interests. This is the network of cooperation through which they lobbied the regulator to set floor prices.

 

Compare this to the position of consumers. There are millions of consumers using services of the three MNOs. Nevertheless, there is no association representing them in their dealings with the MNOs and the regulator. If a consumer is unhappy with POTRAZ or an MNO, he or she has to act individually to present their case. This is a daunting and costly exercise which often leaves the consumer helpless and without recourse. Social media has played a useful role in availing a space for creating an impromptu network of cooperation between citizens who made useful noise over the data price hike to the point that the government could not ignore it. Even the Minister who had dismissively told an enquirer that he was on holiday had no choice but to take action, leading to the reversal of the directive. This is a good example of a network of cooperation.

 

However, when the MNOs and POTRAZ were discussing the floor price, consumers were virtually unrepresented. The regulator’s CEO Gift Machengete, admitted in an interview with The Chronicle newspaper on 11 January 2017 that consumers were not consulted in this process. “In the case of the floor prices, consultations were carried out with operators and did not involve subscribers” he said. His reasoning was as follows: “This was on account of the fact that the scope of the consultations mainly focussed on the cost of service provision, which in our view did not warrant the involvement of subscribers”. It’s shocking that the head of the regulatory authority does not think consumers are stakeholders worthy of consultation when setting prices. He does not seem to be aware that the Constitution requires any laws, including subsidiary legislation, to be passed after undergoing public consultation. Perhaps POTRAZ and other statutory bodies need a crash course in the legislative making process and their constitutional obligations.  

 

While there is a Consumer Council of Zimbabwe, it’s hardly visible when consumers need it. Its voice has been conspicuously absent in this whole saga. The solution is to have sector-specific consumer organisations. In other jurisdictions, there is a consumer association for each sector. In this case there is need for an association of consumers of telecoms services. It will focus specifically on issues that affect consumers within the telecoms industry. It will be a stakeholder that engages the Minister of ICT, POTRAZ the regulator, the MNOs and other business and organisations involved in the provision of internet and related services.

 

Likewise, there should be sector-specific consumer associations for commuter transport services, retail business services, financial services sector, and other sectors. A bank customers association would engage banks and the Reserve Bank of Zimbabwe, the financial regulator, on issues that affect bank customers, such as bank charges. The banks know the importance of networks of cooperation, which is why they have the Bankers Association of Zimbabwe. Zimbabwean consumers need voices that can effectively represent them in all key sectors. Such associations are the networks of cooperation that will empower consumers and give them a stronger voice that will be hard to ignore both in policy-making and implementation processes. 

 

Consumer boycott

 

Zimbabwean consumers do not realise the power they wield in the market. Without their custom, businesses would struggle for viability. Businesses depend on their loyalty and custom. Yet in Zimbabwe, consumers have been conditioned to believe that businesses are supreme and that they can do what they want and consumers have no choice. Part of this is that while there are some consumer protection laws, they are hardly enforced and as noted above, there are inadequate networks of cooperation among consumers. The result is that consumers think of themselves as individuals, without the benefit of networks of cooperation. This is partly why the boycott strategy does not seem to work. If some consumers decide to boycott a business, there will still be a significant number that will still patronise the business anyway. This defeats the whole purpose of a boycott and only emboldens abusive businesses.

 

For a boycott strategy to work, there has to be sufficient consciousness and belief among consumers to appreciate that they wield a huge amount of power so that if they withdraw their custom from a business even for a temporary period it will truly feel the pain. Businesses care about making profits and the more consumers they can get, the better for their bottom line. The consumer boycott strategy hits businesses where it hurts the most- the bottom line – and if a significant number of consumers understand that, this can be a powerful tool to rein in errant businesses. This boycott strategy will have greater chances of success where there are sector specific associations or networks of cooperation that raise issues and mobilise people to have their weight felt. In this case, the migration of customers to other subscribers seems to have given cause for concern to Econet. It might well have reduced the data charges in response to market forces even if the Minister and POTRAZ had not reversed the directive.   

 

A flawed regulatory approach

 

In the understandable flurry of criticism directed at Econet, two of the more fundamental weaknesses of the regulatory system have been missed. The first is the relationship between the regulator and the regulated entities, while the second is the regulatory approach adopted by the regulator.

 

On the issue of the relationship, POTRAZ depends on the regulated entities for its funding. It retains 6% of the MNOs’ revenues generated from mobile services. Since the telecoms sector is one of the most lucrative and cash rich sectors, POTRAZ is probably one of the well minted statutory authorities. It earns so much that it was able to buy vehicles for the Minister and Deputy Minister of its parent Ministry of ICT. It also allegedly provided funding which helped the government to buy the majority stake in Telecel. Since POTRAZ relies on MNOs, it has a direct interest in the revenues that they earn. The more money they earn, the more POTRAZ earns, too. This is a dangerous set up in which consumer interests are marginalised. It’s not surprising that no consumers were consulted when the regulator and the MNOs agreed to set up floor-prices for their services.

 

The regulatory approach based on floor pricing is a direct result of this incestuous relationship between the regulator and the regulated entities. It sets a floor price but not a ceiling price beyond which an MNO may not charge for its services. This gives MNOs complete freedom to charge whatever they want, while tying customers to a minimum price on account of the floor-pricing model used. This regulatory approach is flawed in that it disproportionately favours MNOs. As I have already stated, the fact that Econet’s charges were much higher than the POTRAZ’s floor price does not mean that they were illegal. They were perfectly consistent with the POTRAZ’s directive which only sets a minimum price but does not regulate the maximum price. Even though the directive has been suspended, if POTRAZ issues a similar directive in future, without setting a ceiling price, any of the MNOs could still set their price higher than the floor price. It would be revolting but legal. It will be left to market forces to determine whether customers stay with one service provider or choose another but since it’s an oligopolistic market, these forces of competition might not be helpful. The solution to this, if POTRAZ wants to maintain a floor-price model, is to adopt a ceiling price and therefore a range within which MNOs may charge for their services. It would balance the interests of MNOs and consumers while allowing market forces to play their role. Still, in my opinion, a better solution is to open up the sector to more players and therefore, more competition. 

 

Innovate or die

 

While MNOs are looking to tariff hikes to protect viability, perhaps they are looking at the wrong point for a solution to the challenges they are facing, particularly since customers are already facing serious economic challenges. Raising prices is unlikely to be the solution, and the public outcry that accompanied Econet’s price hikes is an indication of public sentiments. MNOs should instead invest more in innovation and adaptation of technologies. There have not been many great success stories in the field of technology since Econet’s rise. But there are many young people with great ideas and potential who could do with the MNOs investing in their start-up projects. These are not immediate solutions of course but they could yield important outcomes in the long run.

 

Conclusion

 

In conclusion, everyone in the telecoms sector has dirty hands in this saga. As election season draws nearer, the ZANU PF government seems keen to implement its agenda of limiting public access to social media. MNOs colluded to fix the price of their products, itself anti-competitive and illegal conduct which violates competition laws. POTRAZ the regulator acceded to these price fixing demands, setting a floor price without regulating a ceiling price, leaving consumers at the mercy of profit-seeking MNOs. Econet went far beyond the POTRAZ floor price. While its conduct was not illegal, the new tariffs were excessively high and had the effect of pricing out a significant number of its loyal customers. NetOne and Telecel tried to act smart by pretending to care for customers when all along they had, together with Econet, actively participated in setting the floor prices. All three MNOs tried to shift blame to the regulator, POTRAZ, giving a misleading impression that the floor price was imposed upon them. This was less than honest on their part. Econet has received the highest amount of criticism, partly because of the haste with which it acted but also because of the high tariffs which it announced and its poor statements afterwards when it tried to explain its position.

 

But it is also important to understand Econet’s position, which is invidious. As the only non-state-owned company in the sector, it is saddled with far more onerous financial obligations than its rivals. Not only has it had to pay a huge licence fee while rivals got a moratorium, it is also owed huge amounts of money from its state-owned rivals. It does not enjoy the safety net of taxpayer funds if things go wrong. These factors mean its commercial circumstances are different from its competitors’ which can afford to relax. Consumers must be treated fairly and expect reasonable prices, but the long term viability of the corporation is also fundamental. NetOne and Telecel occupy less than 30 per cent of the market and have less than 30% of the infrastructure. Even if customers migrate from Econet, it is unlikely the two will be able to accommodate them and still provide a good quality service. Consumers must be protected but care must be taken not to kill the goose that lays the golden eggs. To my mind, one way to improve this sector is to open it up to more competition. It will push the current players while benefitting consumers with greater choice.

 

The easiest argument to make is that the government wants to restrict access to social media, but here, as I have argued, there is a complex mix of political and economic interests bringing together strange bedfellows in government and the corporate sector. What will happen in future? The reversal of the directive does not mean the war has been won. It’s just a reversal for corporate power by a populist regime which is also desperate for cash. They will return again with another price hike. The irony is that maybe Econet’s outrageous hike has done enough to persuade people that the proposed floor price of 2c per megabyte is not so bad after all. Yet that rate was already excessive anyway and should have been resisted in the first place. Both government and the MNOs may still get what they want.   

  • Consumers must form a sector-specific association to defend the rights of users of MNOs services

  • The Competition and Tariffs Commission must investigate MNOs for price-fixing and other anti-competitive behaviour

  • The playing field in the telecoms sector must be levelled to prevent discrimination, unfair burdens and preferential treatment

  • The telecoms sector must be opened up for more competition. There is no need for 2 state-owned companies, which in any event are performing below par

  • If POTRAZ is going to set a floor price, there must also be a ceiling price to protect consumers

  • POTRAZ must consult consumers before setting any floor or ceiling process or indeed any directives in the sector

  • The regulatory structure has flaws. The relationship between POTRAZ and regulated entities is too close and unhealthy.

  • Rather than restrict access to the internet and social media, government should be working towards broadening access and making it cheaper and free for the poorest in society.

  • Econet, NetOne, Telecel, POTRAZ and the Minister need to apologise to consumers and the general public for their shoddy conduct in this saga. Their “data wars” in which they are scoring points against each other may be a source of drama and light entertainment but in truth they reflect immaturity and a dysfunctionality in an important sector of the economy. Someone needs to show maturity and leadership.     

 

WaMagaisa

 

wamagaisa@gmail.com

 

 

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