Call of the wild
2009-08-21 10:57
Imagine you could cut your cellphone bill by 90% without changing your calling habits one bit. R30 instead of R300 - it's a no brainer right? Well, it may be a lot closer than you think.
The secret is in that magic little word - data. Right now a five minute call on an average contract costs you roughly R10. If you use the equivalent amount data that same call costs you around 70c, not to mention SMSes which are effectively free.
Even more startling is the fact that the same call can cost as little as 9c if you buy in bulk. Since all cellphone networks do (or have ever done) is push data around in slightly different forms, this gives you a rough idea of just how much profit they have been raking in over the years.
Ok, so why aren't we all doing it already? Three reasons: technology, entry costs and big unfriendly gorillas.
Firstly you can't pull this trick on any old phone - you need one of the fancy "smart phones" like an iPhone or HTC. These phones have the raw computing power needed to run the applications (apps) that allow you to talk using data - more commonly referred to as Voice Over IP or VOIP.
But remember just three years ago when a camera on a phone was a big deal? And three years before that when the brick-like Nokia 5310 was a top of the line phone? Technology gets cheap very quickly. By 2011 most people will have smart phones - it's inevitable.
Secondly, if you don't buy their overpriced contracts, the cellphone service providers won't give you the phone for free. Of course they've never actually given it to you for free - it's always been included in the total cost of your contract - but they like you to think that way.
Yet all it takes is some enterprising fellow to start selling smart phones on terms - no contract needed - and the problem is essentially solved. Yes, it adds R150 to your total monthly cost for a couple of years, but you'll have another year or two of R30 bills after that.
Still it's the third reason, the big unfriendly gorillas, that is the most difficult to overcome. Vodacom, MTN and Cell C are three of the biggest companies in Africa. They didn't get that way by discounting their services by 90%, and they won't take this lying down.
Since they are the handset makers' biggest customers they have a stranglehold on what phones can and can't do in South Africa. If they don't like a feature it gets removed or crippled. That's why you can't make Skype calls from an iPhone or HTC to another smart phone, even though the technology is all in place.
But, as the success of MXit has already proved, the networks are fighting a losing battle. When all the phones support VOIP as standard, and all your customers are asking for it, what do you do? If you resist they simply go around you, "hacking" their own phones to allow it.
And if you raise the cost of data, you encourage new competitors to jump into telephony. There's essentially nothing stopping a player like iBurst or MWEB from setting up, for instance, city-wide WiFi telephony networks.
So are other mobile networks around the world quaking in their boots about this? Not really. Competition forced down their margins long ago. Calls are close to free in America and Europe already, and mobile data is expensive by comparison with their cheap and ubiquitous broadband.
It's only our terrible trio, nestled in their comfy pile of money, that have maintained their fat margins over the years. But by continuing to rest on their bank notes they are only making their fall more inevitable.
As the gap between their charges and their costs grows, they become increasingly juicy targets for a nimble competitor who can undercut them by half and still make a mint. I, for one, will not shed any tears when that day comes.
- Alistair is Social Media Manager at 20FourLabs.
Send your comments to Alistair
Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.
- News24