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South Africa’s stubbornly high communication costs are facing renewed scrutiny, with the department of communications & digital technology set to launch a market analysis study that could pave the way for tougher pricing interventions in the telecommunications sector.The move signals growing government frustration that one of its flagship interventions to reduce data costs — the long-delayed release of high-demand radio frequency spectrum — has failed to deliver the expected benefits for consumers. When spectrum was finally auctioned and assigned to operators in 2022, policymakers argued that it would reduce network costs, improve coverage and drive down data prices. But, four years later, those expectations remain largely unmet. In a newly issued tender, the department, headed by minister Solly Malatsi, says the study will identify the policy and strategic choices needed to “address the high cost of communications in South Africa” and examine why previous interventions have not delivered affordable voice and data services. The study aims to provide evidence‑based recommendations for future policy interventions. It will assess how competition, investment patterns, and regulatory decisions influence pricing and whether additional measures are required to improve affordability.“The allocation of spectrum played a significant role in improving development, thus reducing network costs and enhancing market competitiveness... Despite this, the cost of communication remains higher,” the tender document states.The document argues that deeper structural problems continue to keep prices elevated. “Structural issues such as market concentration, spectrum allocation and the financial burden placed on prepaid consumers require intervention through current policies,” it says.“Further reviews to enhance the policy agenda and regulatory interventions are needed to ensure that data costs become fair, transparent, and aligned with the objectives of universal access.”While the department acknowledges that South Africa has made progress in lowering mobile data prices following intervention by the Competition Commission and the Independent Communications Authority of South Africa (Icasa), it says prices remain too high in 2026 despite recommendations arising from the 2019 Data Services Market Inquiry.Arthur Goldstuck, CEO of World Wide Worx, said there was no question that data prices still needed to decline, particularly for small prepaid bundles purchased by lower-income consumers. However, he cautioned that any meaningful review must examine the entire telecommunications value chain rather than focusing solely on operators.“The tender acknowledges many of these cost drivers, but it remains to be seen whether government is willing to change the policies that inflate costs,” he said.Goldstuck argued that while spectrum enables operators to carry more traffic at a lower unit cost, those benefits can be diluted when licences are acquired at high prices. “The tender asks why data remains unaffordable, and government should also examine its own role in keeping costs high. Spectrum gives operators the capacity to carry more traffic at lower unit cost, but that benefit is undermined when spectrum is auctioned at a premium.“Operators have to recover the licence costs while still funding towers, fibre, backup power and rural coverage. In other words, the state cannot treat spectrum as a revenue windfall and then act surprised when communications remain expensive.”According to the tender, the study will examine whether existing policies have worked, identify the biggest drivers of communication costs — including infrastructure, spectrum and taxes — and recommend new policy interventions to improve affordability.Among its objectives are assessing the effectiveness of Icasa’s regulatory measures; evaluating progress in implementing the Competition Commission’s Data Services Market Inquiry recommendations; benchmarking South Africa against leading African and international markets; and proposing strategies to lower communication costs without undermining investment in the sector.The study will also compare South Africa with the continent’s top-performing telecommunications markets on issues including international bandwidth, submarine cables, pricing mechanisms and quality of service.The department argues that expensive connectivity is limiting broader economic participation.It says disparities in the current policy framework have become “a significant barrier for many citizens”, restricting their ability to participate in the digital economy, while affordable smartphones have become essential for accessing government services, digital banking, education and employment opportunities. The tender acknowledges that while temporary spectrum assigned during the Covid-19 pandemic helped operators manage surging traffic more efficiently and supported the growth of mobile virtual network operators, those gains have not translated into sustained affordability for consumers.Instead, the government believes further policy action is required.“Targeted policy instruments are still required to continuously monitor and refine the current policy vacuum. This will ensure that the benefits of lowering data costs are equitably distributed across all South Africans,” the department says.The successful bidder will be expected to deliver a comprehensive “Cost to Communicate Roadmap” setting out short-, medium- and long-term reforms, together with detailed reports analysing cost drivers, consumer behaviour, infrastructure constraints, tax impacts and progress on previous regulatory interventions.The local telecoms market’s key players are Vodacom, MTN, Telkom and Cell C. In recent years, a growing number of mobile virtual network operators — ranging from retailers to banks — have entered the market, using existing operators’ networks to provide data and voice services to customers. In its cost-of-living report published in March, the Competition Commission said that between April 2025 and January this year, the price of wired internet remained stable at just below 15% and below headline inflation. Wireless internet prices increased slightly in May last year but stabilised thereafter, averaging around 2%.The commission said that while it was encouraging that both wired and wireless internet prices remained below overall inflation, “the overall cost of data in South Africa still has room to decrease”, with the country ranked 31 out of 45 African countries in the second quarter of 2025 for the cost of a monthly 1GB mobile data package.Business Times
