Data Price Floor Regulation in the Context of Universal Service in Africa
RIS’s latest report is on the role of price floor regulation in the digital era.
Fair competition will result in the optimal mix of investment in network infrastructure and affordable prices for end users. Price controls can be important tools for ICT regulators to establish and maintain fair competition. Price ceilings, at cost plus an appropriate profit margin, have been used successfully to limit the misuse of market power and are used for monopoly services, such as access to national backbone networks and submarine cable landing stations. Price floors have been used to prevent predatory pricing and club effects by dominant players for the voice market.
African mobile operators distinguish prices by validity, volume, and content type, and also offer fully individualised discounts based on consumption patterns. A fixed minimum price per MB would severely curtail an operator’s ability to design products. Broadband price floors can potentially distort competition, jeopardise investment and lead to significantly higher consumer prices. It also limits a mobile operator’s ability to design products that maximise customer value and network utilisation.
For mobile broadband, price floors should therefore be a measure of last resort and should only be used in combination with regulatory impact assessments and after having conducted a cost study. Price floors should be temporary, time-limited, and narrowly tailored to address competition issues. The only ex-ante regulatory application is to prevent predatory pricing. However, less intrusive regulatory alternatives exist to establish or maintain fair competition.