Loading ...10Mbps uncapped ADSL pricing comparison
Afrihost has recently launched their first 10Mbps uncapped ADSL service for under R1,000. This is how it stacks up against its competitors.
10Mbps uncapped ADSL for under R1,000
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Uncapped ADSL: Pricing and service levels
| Rudolph Muller | April 11, 2010 | No comments |
Rudolph Muller
Rudolph Muller is the editor at MyBroadband and covers telecoms and broadband news. Rudolph comes from an academic background, but left the University of...
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Numerous ISPs have launched affordable uncapped ADSL services recently, but do you get what you pay for?
MWEB stunned the ADSL market in March when it launched its affordable uncapped ADSL services. At R219 for an uncapped 384 Kbps service and R539 for an uncapped 4 Mbps account MWEB significantly undercut their competitors.
The initial euphoria is however wearing off, and early adopters of some of the new, low-cost uncapped ADSL offerings have started to face the reality of high contention ratios – which result in poor speeds – and fair use policies (FUP) which limit data usage.
Numerous uncapped ADSL users are complaining about poor speeds and heavy shaping of services, while others are greeted with unexpected throttling of speeds when they exceed certain monthly data usage limits.
ADSL wholesale costs
This is however not unexpected considering the cost of provisioning an ADSL service in South Africa. According to one source the current wholesale per-GB cost in South Africa ranges between R50.16 – R34.49 per GB for peak periods and R39.50 and R21.09 per GB off peak.
These prices make it unfeasible for a reseller ISP to launch an uncapped service using a wholesale per-GB service, which is why larger ISPs use their own IPConnect service to provide uncapped ADSL services. The costs however remain prohibitive.
The cost of an IPConnect connection from Telkom – which is needed to provide wholesale ADSL access – is around R3000 per Mbps per month. Add international bandwidth to this, at a cost of around R4000 per Mbps per month (or local bandwidth which retails for around the same price), and you sit with R7000 per Mbps per month for wholesale ADSL bandwidth.
If a 1 Mbps connection is used at full capacity for 24 hours a day, 30 days a month one can get a data usage of 316 GB. This equates to a wholesale data cost of R22 per GB.
The true wholesale cost for ADSL is however significantly higher as the 24/7 bandwidth utilization is most likely closer to 70% and the pricing above excludes other costs like data centre rack space, transmission capacity to its point-of-presence, billing systems and support expenses and VAT.
But even at a cost of R22 per GB it is challenging to create a sustainable business model for a 4 Mbps uncapped offering priced at around R500 per month. To make such a business model work, users must on average use around 15 GB to 20 GB per month – anything higher and the ISP will start losing money.
Sustainable business model
The basic business model for uncapped accounts is simple: high end users who use tens or even hundreds of Gigabytes of data per month are subsidized by low end users who use less than 15 GB per month.
In South Africa the cross subsidization can also take place with 384 Kbps and 512 Kbps ADSL subscribers – where adequate bandwidth allocation is less challenging than with 4 Mbps – subsidizing the high end users.
Various broadband and ADSL service providers, including Neotel and iBurst, have questioned the sustainability and service levels of uncapped ADSL offerings at rates of between R200 and R500 per month. Their concerns seem to be justified in the case of some ISPs.
When things don’t work out as expected
In South Africa there is a pent-up demand for broadband bandwidth, and early adopters of uncapped ADSL services are often high end users. This can put strain on the business model of an ISP offering uncapped services, and this is when service levels start to slip.
Unless ISPs continue to allocate adequate bandwidth in line with the demands of their growing user base, subscribers will start to compete for highly contented bandwidth and slow speeds will become commonplace.
At this point ISPs may employ practices like traffic shaping, rolling thresholds and throttling high end users to try to provide an acceptable user experience to the largest portion of their user base.
In some cases an ISP will continue to sign up new subscribers without upgrading their network because of financial constraints, leading to very high contention ratios and hence poor average throughput.
Unsurprisingly all of this has happened over the last few months after the first affordable uncapped ADSL services emerged from providers like DigiChilli and Screamer Telecoms late last year.
While the high prices, low speeds and restrictive monthly usage limits of broadband services have dominated ADSL discussions over the last eight years, service levels is a new prominent addition to this list.
Uncapped ADSL prices and service levels << discussion
