SA broadband shooting blanks
News that South Africa was going to witness its first “broadband shootout” – where consumers got to hear the five providers of high-speed Internet services explain why their wares, services and pricing give it the edge over the rest – was applauded, judging by the turnout at the event.
The auditorium at the SA Military History Museum was bursting at the seams with spectators trying to get a glimpse of the proceedings. Also, a screen had been set up outside the venue for people to watch what was happening, and the event was broadcast over the Internet.
However, hopes of getting to grips with reasons why prices for SA broadband are stubbornly high when compared with prices in both developed and developing countries went largely unfulfilled.
Representatives from SA’s five broadband providers – Telkom with its asymmetrical digital subscriber line services (ADSL) , MTN and Vodacom with 3G, and Sentech and Wireless Business Solutions (iBurst) with the wireless range – gave thorough presentations about their networks, future technological developments in the data sphere and what the pricing on current services is. But, there was no real breakthrough in understanding why prices are so high.
All providers said that it was only as more customers took up their services that economies of scale could be reached and that prices would come down.
Only one presenter – Winston Smith of Sentech – went out on a limb and made reference to the prohibitive costs of international bandwidth impacting on the final price point of Sentech products: “62% of our total cost is international bandwidth which we obtain from Telkom through the undersea cable they control. We feel for you, Telkom, but we would like to see more fair play here,” said Smith.
In its recent findings following complaints about pricing and service levels of Telkom’s ADSL offerings, telecoms regulator Icasa said it would be revisiting its enquiry into the undersea fibre-optic cable that brings international bandwidth to SA, to which Telkom controls access. Icasa says this will be completed by the end of the year. Also, Icasa’s Diane Ngoasheng told Moneyweb regulations following the enquiry would be finalised and made public in mid-September.
Telkom’s Steve Lewis said his company would like to see broadband usage become more ubiquitous: “Pricing comes down as more users get on the network. However, we are at the end of Africa and the undersea cable costs money. However, we won’t see prices as low as those in the USA, Europe, Japan and Korea. We know we need broadband to expand the economy and uplift education. It is not Telkom’s intention to have the whole cake.”
At this point, a number of onlookers shouted repeatedly from the back of the hall: “Monopoly.” The pent-up frustration was palpable.
What did emerge as questions were answered was that there is no real differentiation in price and quality terms across the range of products.
Viv Crone, the deputy president of the SA Institute of Electrical Engineers, described the environment of limited choice by saying: “As it stands now, consumers only have two questions to ask themselves when choosing which product to go for: ‘do I need work or home access as opposed to a mobile connection’, and ‘is there coverage in my area’. Pricing does not really come into play.”
A comment by a Moneyweb reader illustrates how users feel: “Until we deregulate and let the market place go like the "wild west" for a while we will not get true competition. True the effects of this deregulation would be consumers getting a hodgepodge of stuff that will range from ‘does not work and cheap’, to ‘works effectively but expensive’; but at least the market will decide what it wants and how much it is prepared to pay for it.
”Having our current cosy little club decide what we want and how much we will pay for it will just continue to fuel the consumer backlash.”