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By Paul Colmer, Exco member of Wireless Access Providers Association (WAPA)
Wisps (wireless internet service providers) have a golden business opportunity while also closing the economic inequality gap in South Africa.
People who buy prepaid cellular data must pay R85 per gigabyte (more if they buy in smaller increments, slightly less for higher increments). People who qualify for contracts and can afford them for the 24-month period can now get 1,000 gigabytes (1 terabyte) a month, plus 110 gigabytes of night-time data.
At those rates, 1,000 people buying prepaid data get the same as just one contract subscriber. Buying in larger increments improves the situation a bit. You can get 100GB of prepaid data for R1,000. But it still takes 10 times the number of people to get the equivalent in subscriber contract data. Go the other way and 200MB is R29. It would take 5,000 of these people to reach the equivalent as one contract subscriber’s monthly allocation.
It’s never been so expensive to be poor. Is it extortionate? What do you think?
Particularly considering that prepaid comes without the administrative costs of invoicing, monthly bills, the occasional need for human interaction, and usually a handset or device. There’s also no risk that a prepaid buyer can default payment or defraud the system and make off with the handset before the costs are recovered and any profit made.
There’s no risk, the money is received upfront, and there is almost no administrative overhead, yet prepaid customers must pay 85 times (or more) the price of contract customers.
Wisps can provide data coverage for people who typically use prepaid using wide area hotspots for a fraction of the cost of cellular data.
But could Wisps reasonably take on the mobile networks?
Surely Wisps couldn’t compete if the networks decided to go to a price war?
Wisps are unlikely to be able to provide a hotspot service nationwide on a scale that competes with the cellular networks, which are essentially nationwide hotspots. Wisp services would be local or regional. The cellular networks would find it extremely difficult, more likely impossible, to drop prices in one place but not another. It would create a customer outcry they’d rather avoid.
Could a Wisp get away with it?
Would the mobile networks not find a way to tackle Wisps and put them out of action, scuppering their investment and potentially their business?
Unlikely. If a Wisp took just 0.01% of Vodacom’s annual revenues it would be about R9.8 million. That’s a mere one one-hundredth of a per cent. And Vodacom is small-fry next to MTN. MTN’s revenues grew by over R42 billion last year.
Would the mobile networks even notice this small loss in their revenues?
And would it be worth their effort to tackle a Wisp offering quality, affordable hotspots?
Vodacom made north of R98 billion last year. MTN Group considerably more. These companies spent a shade over R5 billion each on the recent spectrum auction. That’s before they even spend one cent building the networks to use that spectrum.
MTN ran into some regulatory hiccup in Nigeria and ultimately agreed to settle the matter to the tune of $53 million (over R750 million in 2022).
Suggesting their pockets are deep is like saying Kimberley’s home to a cute dent in the Earth.
But can a Wisp run a viable business without charging the same extortionate rates for data.
Yes. We ran a proof of concept that investigated the pricing and business model. It started at R10 per gigabyte and we proved it can work, including different ways to market the service, and a variety of offer packages.
We’ve honed that model even further now, offering uncapped day passes. It works. It’s profitable. And it offers huge benefits to the people who need it most.
Our members get access to the full report and its highly detailed data about what prices to charge, how to market in different parts of South Africa, how to tap various markets, how to set up the networks themselves, and more.
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