Why is data expensive? Because we’re terrible capitalists – Safaricom

Usually telcos are quite guarded with the truth. Announcements and statements are filled with PR nonsense about aiding the greater good, but Safaricom’s new Chief Innovation Officer has been surprisingly honest.

“I don’t want to sound like a terrible capitalist, but I am a terrible capitalist,” said Safaricom’s Chief Innovation Officer Kamal Bhattacharya.

Bhattacharya was talking about the price of data and connectivity in Africa. Data tariffs might not seem expensive to us in the Western markets, but remember we have considerably more disposable income. Compared to monthly wages, data is expensive in Africa, but Bhattacharya has been surprisingly honest.

“It comes down to a commercial decision; I charge what I can,” said Bhattacharya.

What might be worth noting is that Bhattacharya is new to the job. He’s been Chief Innovation Officer for six months, and this is his first post in the telco space, having worked for IBM previously. This honesty might come at a cost or it might be seen as a refreshing change.

Either, nothing will happen because people don’t pick up on it. Or there will be public backlash as Bhattacharya has effectively admitted to holding the Safaricom customers to ransom. Or the industry will respect the own-it attitude Bhattacharya is showing. Safaricom is a commercial business, and it is focused on making money.

Let’s be honest, every telco executive probably holds the same attitude as Bhattacharya, they’ve just been media trained to give off the impression of the third rising of Jesus. They all want to make money they are just afraid to admit it.

So that’s one angle. Data is expensive because telcos want to be profitable. But why else? Operational and network efficiencies is one explanation. Another could be the tendency for customers to have a preference for prepaid plans. Both of these reasons could be down to market maturity. Networks will get better, and as data consumption becomes normalized across the continent, more will move to the more cost effective postpaid contracts.

What we have here is your typical chicken/egg situation; do the telcos wait for demand to increase before decreasing prices, or do they stimulate demand by decreasing prices. It’s an interesting question.

The telco business has changed over the last couple of years. Revenues attributable to voice and SMS have been slashed by the emergence of OTTs, and making money off data is tricky. Demand is increasing meaning more will have to be spend on the network, but the price is only going to head one direction. It sounds like a lose-lose situation.

The price will probably stay as it is for the moment, until a disruptor enters the game and changes the rules; the race to the bottom we’ve seen in more mature markets. This has led to the majority of telcos heading towards the role of utility, but there are a few operators who have made it work. Take T-Mobile US for example.

Data in Africa is still expensive right now, and the operators are keeping it that way. So either they want to keep profits high, or they are afraid of failure. Greedy or cowardly? We’ll let you make up your own mind.