Image Credits: The Daily Monitor
(e-Way Tech & Info. Sys Ltd | Kampala) – Internet users in Uganda are paying some of the highest rates for mobile data than elsewhere in the region, according to several industry study rankings reviewed by Sunday Monitor.
In East Africa, Uganda competes with Tanzania in terms of high costs, with results varying on who of the two neighbours provides more expensive data to users.
Information from 230 countries and territories about the cost of data compiled by Cable.co.uk, a Broadband, TV and Mobile Phone Price Comparison Site, shows that Ugandans pay on average $4.69 (Shs17, 231) for 1GB [gigabyte] of data, the second highest in East Africa behind Tanzania, where 1GB costs $5.93 or Shs21,787.
Consumers in Rwanda, according to the report, pay the least, with 1GB costing $0.56 or (Shs2,057). In Burundi and Kenya, the same goes for $2 (Shs7,344) and $2.73 (Shs10,024) respectively.
Neighbouring DR Congo pays $0.88 (Shs3,231) while consumers in Sudan pay on average $0.68 (Shs2,496) for the same.
Zimbabwe pays the highest price both in Africa and in the world; $75.20 (Shs276,134), and countries such as Equatorial Guinea; $65.83 (Shs241,728) and Saint Helena; $55.47 (Shs203,686) also pay highly.
Cost of data is a major limitation of Internet use in Uganda.
In the 2017/2018 National Information Technology survey, 76 per cent of the Ugandan Internet users cited price of data bundles as a key limitation while 49.2 per cent cited slow Internet.
“When subscribing to the Internet, individuals consider maximum download speed (35 per cent) more important than the price of the subscription (30.9 per cent). Individual Internet users mentioned the high cost of using the Internet (76.6 per cent), the slow speed (49.2 per cent) and poor connectivity in some areas (41.4 per cent) as the three top barriers to using the Internet,” the March 2018 study report conducted by The Collaboration on International ICT Policy for East and Southern Africa (CIPESA), reads in part.
A report released by Ecobank Research, last year, shows that Uganda has the most expensive mobile data in East Africa.
Researchers in this survey compared the monthly income of a given country’s population to the cost of 1GB of data. Results show Rwanda has the cheapest data in the East African region, followed by Kenya, Burundi, and Tanzania.
Industry experts we spoke to, however, say the retail prices do not reflect the wholesale prices that distributors acquire the same for. Surprisingly, countries such as Rwanda, with the cheapest Internet costs, acquire the same more expensively than Uganda.
The hard economic rule of Internet pricing comes down to distance which translates to cost, an industry expert who prefers not to be named said.
“The farther a user is from the thing it wants, the more expensive it is to deliver. Someone has to pay for all the infrastructure in between,” he adds.
This means that if all users in Uganda are consuming content that is hosted in Europe, it will be fairly expensive to deliver. But, if they are consuming content that is hosted in Nairobi, that is cheaper.
“In my view, as an industry expert, it is the wholesale costs are the most important number to pay attention to, and the figure most closely associated with how effective government policy is (or is not) when it comes to infrastructure and competition. The reason the wholesale costs matter more is because it’s the hardest thing to achieve and, the lower they are, the lower access prices can be,” the source explained.
In wholesale terms, Kigali is the most expensive, as expected. Dar es Salaam is second, Kampala third, Nairobi fourth. So Kampala has the second cheapest Internet in East Africa for the industry. Why then is the final pricing the second most expensive and most expensive according to some studies.
“Tanzania is on the coast and should be cheaper than Kampala as a result, but their wholesale pricing is more expensive, which indicates there is an artificial reason why and my view is their government’s crazy telecoms policies,” the source said.
Separate sources told Sunday Monitor that Kampala’s wholesale Internet costs are the second cheapest in East Africa largely due to the hot competition in infrastructure and services that resulted from the government’s liberalisation campaign started in the 1990s.
If, however, it is cheaper to deliver Internet to Uganda than Rwanda and Burundi, why are the retail costs in the latter two countries lower than Uganda per the various studies and industry reports.
This is how Dan Howdle, a consumer telecoms analyst at Cable.co.uk, categorises countries with the cheapest data.
“Some have excellent mobile and fixed broadband infrastructure and so providers are able to offer large amounts of data, which brings down the price per gigabyte. Others with less advanced broadband networks are heavily reliant on mobile data and the economy dictates that prices must be low, as that’s what people can afford.” He adds: “At the more expensive end of the list, we have countries where often the infrastructure isn’t great but also where consumption is very small. People often buy data packages of just tens of megabytes at a time, making a gigabyte a relatively large and, therefore, expensive amount of data to buy.”
Many countries in the middle of the list have good infrastructure and competitive mobile markets, and while their prices aren’t among the cheapest in the world they wouldn’t necessarily be considered expensive by their consumers.”
Tanzania is the highest cost, in big part, precisely because their government has created a national government monopoly on backbone fibre, got directly involved in the datacenter business, and are now forcing the IXPs to move into the government data centres.
“They also forced telecoms to list on the stock market. All of this has been disastrous because it has kept prices high (monopolies) and completely scared off private investment which might introduce competition,” the source said.
This already has an impact on the costs in Uganda because Tanzania is the feasible alternative for Uganda away from Kenya. Also, if Uganda goes the Tanzania way, there will be impact.
“Uganda is, unfortunately, starting to go the same way. I increasingly get calls from investors who are thinking of entering the market but are scared off by the uncertainty around government telecom policy, and are particularly frightened by the new national broadband policy. I wish I could reassure them that everything will be alright but I honestly can’t,” the source added.
The cost of Internet has many dependencies, notably the cost of landing services in the country from the fibre links at the coast lines, cost of back haul through our neighbouring countries; Kenya and Tanzania and the cost of redundancy and protection to ensure that the service is always up.
Redundancy through multiple routes results in double costs but is necessary. Backhaul routes through Tanzania is unjustifiably expensive from their port to the border, but it is not commercially advisable to rely only on routes via Kenya due to service instability due to terrain.
In addition to this, to secure affordable wholesale prices, our local operators are expected to commit to IRUs [Indefeasible Right of Use] of 10 to 15 years prepaid and other costs to upstream providers of Transit Internet IP connection and international Internet bandwidth providers like EASsy, Teams and EIG, which results in a significant upfront expenditure to the operators that they need to recover.
Furthermore, due to low penetration of smartphones and other data devices, the number of subscribers using data on a regular basis is still very low. This continues to impact the unit cost of data.
Despite the above, Uganda has maintained fair blended data pricing as compared to other countries in the region and Africa.
Voice vs Data – voice continues to be the higher revenue generator for telecom operators despite the continued increase in data usage. This again is due to the affordability and penetration of data devises in the market. Competition is one of the major measures the government has put in place to bring down the cost of data. UCC has licensed seven mobile network operators and 13 ISPs. These are all operational.
UCC further approves the retail prices of data for all operators to ensure the fairness of pricing.
“Our [MTN Uganda] pricing is determined by several factors such as costs of operation, maintenance and spectrum plus capital investments in the network infrastructure,” Mr Martin Sebuliba, the MTN Uganda spokesperson says. He adds: “Uganda has one of the lowest rates in terms of mobile data in Africa; the average blended cost to the customer is about Shs6,000 per GB. Blended rate (small to big bundles, daily to monthly bundles).
The corresponding net revenues (without VAT and Excise Duty) to MTN are about Shs4,500 per GB; while the cost to MTN per GB is more than Shs10,000”.
On bringing the costs down, he said “MTN continues its efforts of democratising access to the Internet by investing in infrastructure/coverage and reducing the cost burden on fewer users, by recruiting more data customers through offering discounted bundles and affordable data enabled handsets like the Kamunye, KaFit and Fero phones that we’ve launched in the recent past”.
Airtel Uganda spokesperson promised to respond to our queries on mail, but had not done so by press time.