Mobile internet price hikes in Tanzania. What could go wrong?

For the past few weeks mobile internet subscribers in Tanzania have been rudely awakened to the fact that the leading telecom operators – Airtel, Tigo, and Vodacom – have decided to almost double the prices of data bundles.

These operators, known for vociferously banging their drums when they have some ‘offers’ to promote, did not even offer a ‘how do you do’ this time around: they quietly lurked in the shadows until their unsuspecting customers were out of data and, when they wished to recharge them, bam!, they were confronted with the new charges!

While the price hikes have caused many discussions in social media, a cursory glance at the local newspapers and related websites paint a disquieting picture – total silence. This is odd considering how keen most of these newspapers are to report on anything telcos-related. Why not this issue of significant interest to millions of internet users in Tanzania?

Similarly, a visitor at TCRA’s website – the industry regulator – will also draw a blank. It’s as if nothing has happened despite the fact that the price hikes are a bit too much to ignore, and the fact that these operators have unleashed them simultaneously is quite disconcerting. Is there a hint of collusion? TCRA and Fair Competition Commission (FCC) will know better.

What’s going on, and what could go wrong if the dynamics persist?

First things first. Late in 2019, Research ICT Africa (RIA), an ICT policy research think tank based in South Africa, published a report that appeared to suggest that Tanzania had the lowest internet data costs in East Africa. RIA’s report had two lists – one, the one of cost of 1GB per month, and two, the one of the cost as a percentage of Gross National Income (GNI).

Taken uncritically, the first list suggested that internet prices were the cheapest in Tanzania. However, given the second list, a hugely different story emerged. RIA knew that – and I should know, because I was in RIA’s conference in Nairobi ten years’ ago when they unveiled a methodology that addressed that very distortion, before The International Telecommunications Union (ITU) developed its 1GB Basket Methodology which is being used now. So, the media reports were quite erroneous.

The fact is, when cost is adjusted to GNI, what Tanzanians pay for data is more than twice what Kenyans pay, seven times what Vietnamese pay, and 26 times what Israelis pay. According to ITU’s ICT Price Trends 2019’s report, Tanzania ranked number 155 out of 183 nations. Surely, increasing data prices when this is the situation is an awfully bad idea.

All this happened when operators were having many cost advantages in the past five years. Firstly, Google, YouTube, and Facebook brought their servers to Tanzania. This means significant savings on international traffic. Secondly, the number of internet subscribers have continued to inch forward little by little, thus increased scale. Thirdly, the operators’ cost per Mbps must have dropped by at least 70 percent in my estimates, thanks to increased supply. And, finally, 4G deployments enable operators to pump up to four times more traffic in comparison to 3.5G solutions.

Ideally, this would have warranted into a significant price decrease, but, astonishingly, since 2016 data prices have almost flatlined. In that duration, for example, data prices in Nigeria have decreased by 75 percent.

What that means is that internet users in Tanzania have been hoodwinked to believe that they are receiving great favours from their service providers while they are gently and consistently being skimmed.

So, again, what could go wrong if this situation is sustained?

Firstly, fewer people will have access to the internet.

ITU observes that ‘an increase of 10 per cent in mobile broadband penetration yields an increase in 2.0 per cent in GDP’ in low income countries. This is a figure that is generally being quoted even by policymakers, but one wonders whether its full implications are appreciated. In short, Tanzania needs a very coherent strategy to promote internet penetration to capitalise on that.

Secondly, people will regulate their usage to minimise their cost.

The benefits of internet arise not only from access but also from the quality of service provided. The advent of fast broadband – particularly 4G –made rise to services such as WhatsApp, YouTube, Facebook, TikTok, and thousands of other apps. The resulting ecosystem has created millions of jobs and billions of dollars in value. However, without proper infrastructures and quality of service, that value internet value won’t be created. You want to use internet services, not the other way round

Finally, the whole economy will become uncompetitive.

Internet is a catalyst for innovation, and this is a race. If a nation doesn’t move fast - it will never have its own Netflix, WhatsApp, or Jumia. This is an era for the fourth industrial revolution and any decision that doesn’t promote that agenda, whether by operators or government, is inherently misguided.

According to Google’s e-Conomy Africa report, there are nearly 700,000 professional developers across Africa with more than 50 percent concentrated in five key African markets: Egypt, Kenya, Morocco, Nigeria, and South Africa. While Kenya has 58,000 tech talents, Tanzania has only 15,000. That means, there is so much that needs to happen in Tanzania to make it more competitive in the digital age.

These happy-go-lucky internet price hikes surely don’t help that cause.