How to Reduce Data Costs in Malawi

There has been a lost of buzz on social media on the issue of internet pricing in Malawi, especially after this report which showed Malawi as having the highest internet prices in the world! In this guest blog piece, Wilson Kyumba discusses ways to reduce Internet Costs in Malawi.

There are a number of factors that can be attributed to the high cost of data in Malawi but the main one is the market failure (insufficient competition). The major telecom players in Malawi control both data wholesale and retail markets. They dominate the entire data supply chain. This has ended up creating a monopolistic environment of some sort. These players are themselves carriers of bandwidth right from Malawi’s borders to the end consumer. To achieve data affordability for the country there are short-term measures to provide temporary relief and there are medium to long term measures which will bring sustained affordability in the long run.

Short Term measures

1. Operationalize the universal access fund quickly and channel the resources to the wholesale market of data to drive wholesale costs down and allow relief to retail space
2. Regulate data wholesale tariffs with immediate effect. This too will create relief on the retail side where consumers carry the burden of the cost.

These measures are short term and can be implemented quickly. Once the market distortions are corrected these measures can be withdrawn

Medium to Long-term Measures

MACRA needs to take deliberate efforts to increase competition. It is now 4 years since the new telecommunication law came into effect and there has been no major player not even an increase in a number of small players into the market. And here are reasons why

1. There are huge barriers to entry into the market
2. The monopolistic power created by the dominant players across the telecom supply chain is not easy to challenge 

Malawi is a liberalized telecommunication market economy but internet data has now become a staple food for communication consumers and the call for affordability can not just be ignored by both MACRA and industry players. It is important for policy makers and MACRA to seek an optimal mix of market and regulatory involvement in determining data service prices and investment decisions. 

Medium term Solutions

1. MACRA/Government should incentivize new entrants to the market. No new major player can enter the current market and expect any fairer return on their investments as the landscape is extremely skewed towards the two major players. 
2. MACRA should specifically open up the data wholesale market for more players.
3. Opening up the data wholesale market or regulating it will allow the mushrooming of small retail players which will in turn provide competition in the consumer market.

Regulatory failure

At the dawn of mobile cellular telecommunications in Africa in the 1990s every operator built their own towers investing massively in such passive infrastructure to the point that one would see 4 towers of different players next to each other. This was the case and still is the case in Malawi. These legacy investments could have been avoided with regulatory hindsight then. Today most Regulators including MACRA have woken up to the fact that the right way is infrastructure sharing between operators though a bit late. This allows more investment to go into more productive areas of the business.

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Wilson Kyumba is a

 freelance Telecoms Business Management Consultant. He has over 18 years of telecom work experience in Africa and the Middle East with various operators including TNM, Airtel and Zain Group.