The Zambian Parliament (unanimously) adopted a motion encouraging the government to ban internet service providers from having internet bundles that expire.
The MP who proposed this motion felt that bundles should be transferable as this would benefit consumers and the current set up of expiring bundles actually benefits service providers more.
Earlier this year, there were similar calls by politicians in South Africa. The only problem with this argument is that data which expires is significantly cheaper than non-expiring data. It’s a trade-off. Telcos give you cheaper data but put an expiry date on it.
However, what is seldom mentioned is that the price for expiring data is significantly less than non-expiring data. Breakage and expiring data allow mobile operators to design products which cost less than what they would have if the data did not expire. To stop operators from offering data bundles which expire will limit consumer choice and result in higher data prices. To call for the end of expiring data bundles will therefore not help consumers, but rather limit their choice and result in higher-priced data.MyBroadbandZA
NetOne CEO Lazarus Muchenje said as much at NetOne’s recently held AGM. He was asked whether the company would remove the expiration of data and Mr Muchenje explained that the data bundles which expire are subsidised and therefore the expiry dates are what make them viable.
In South Africa, MTN CEO explained the benefits of expiring data as follows:
MTN provides a wide variety of data bundles to the market to suit customers’ needs and usage requirements.
A variety of prepaid bundles are available to customers, ranging from a validity of one hour to one month. These bundles can be used on prepaid and can be added on to post-paid packages.
This enables customers to select a product, which meets their volume and validity needs.
The prepaid bundles are cheaper when the validity period is the shortest. For example, a customer can purchase a small data bundle for as little as R1.50 for a short validity period.
These small purchases are typically made to update a status on social media or check and send messages without having to make a large financial commitment.
Smaller purchases allow customers more control over their spend and increases data affordability by lowering the cost barrier.
At the same time, it allows the network to be used consistently over a period so that the investment in infrastructure does not lie idle.
This is an efficient utilisation of network capacity that may otherwise not have been used. Expiry rules are also important for data network capacity and coverage planning purposes.
MTN must take into consideration the data service requirements of customers over a specific period of time and for specified data volumes. This information is vital for planning purposes.
Planning occurs well in advance, at least 18 months ahead, due to the long lead times for network deployment.
Capacity is planned to cater for this requirement and in addition thereto to allow for a margin of headroom on the network for unexpected traffic growth volumes.
If traffic exceeds these volumes, the quality of service experienced by customers on the network will be impacted negatively.
If, however, capacity is over provided for and not utilised this in turn will impact the ability of the network operator to manage the cost of providing data to customers.
If MTN were not able to determine the data requirements of customers and the period over which it will be used (indicated by expiry periods), the quality or cost of data will be affected.
It is important to note that MTN would need to pay its upstream providers for said capacity, regardless of whether customers utilise the capacity or not.
A longer expiry period would result in a substantial increased liability on balance sheet. MTN is not able to recognise revenue for data bundle purchases until the data is utilised.
The increased financial unearned revenue liability on the balance sheet would have a negative impact on the MTN’s overall cost of capital.
As a result, the price of data would need to increase because the cheaper bundles with shorter validity would effectively become redundant.
MTN would need to rebalance data tariffs to cater for longer or no expiry rules.
This would mean that the current discounted in-bundle rates would not be available, and customers will pay a higher tariff for data.Jacqui O’Sullivan, MTN SA’s executive for corporate affairs
Whilst this is a lengthy explanation, it is necessary as consumers only see their side of the story when it comes to expiring bundles.
What could end up happening, in reality, is that the expiration dates could get banned/removed and then telcos stick to offering data that doesn’t expire but at a much greater cost than what exists. It seems this is a less-discussed aspect when people talk about this issue, but the reality is that if consumers are not careful about what they wish for, data could end up being more expensive than it already is.
The Zambian issue will be a good case study to follow and if implemented the impact will be something worth noting.