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Money, politics and data wars in Zim

THE start of 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.

Alex T Magaisa,Lawyer

On January 9, the Posts and Telecommunications Regulatory Authority of 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 January 11, in compliance with the Potraz regulatory notice, Econet announced 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 five 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 the new tariffs were excessive, unaffordable and prohibitive.

On January 12, Information Communication Technology minister 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 January 13 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 called on government to “move decisively” 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 January 13 that its 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 January 13, 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% 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, Finance minister Patrick Chinamasa 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 of 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 January 12 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.
…to be continued.

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