ADSL IPC price reduction uncertainty

ICASA discussing their promised ADSL IPConnect price cut intervention with Telkom

By - February 12, 2012
ADSL money

The Independent Communications Authority of South Africa (ICASA) said in its local loop unbundling document (released on 30 November 2011) that “ICASA will engage with industry to reduce the price of Telkom’s IPConnect (IPC) service. This will be from 31 March 2012”.

The lack of clarity on what will happen by this deadline – ie. will the engagement start then, or will prices be reduced by 31 March – is frustrating many industry players.

MyBroadband asked ICASA to clarify this statement on two occasions, but the regulator only gave the following response:

“ICASA has engaged Telkom in respect of a price reduction for IPConnect services. Once discussions have been finalised, the Authority will inform all stakeholders of changes in the wholesale access regime for fixed line services.”

Telkom confirmed that the regulator has engaged with them regarding a possible price reduction for IPConnect services. “Once discussions have been concluded, both parties will release media statements, if necessary,” said Telkom.

The uncertainty, and ICASA’s historically lackluster performance, means that there is scepticism from industry players about timely and significant IPC price cuts.

Industry players respond

MWEB ISP CEO, Derek Hershaw, said that ICASA has not engaged with them yet, but that they are expecting an IPC price reduction by 31 March 2012.

“It needs to be significant and we would expect / hope for a double-digit reduction. It should also not be a once-off occurrence – the pricing should be reviewed and reduced on an ongoing basis,” said Hershaw.

Vox Telecom also confirmed that ICASA did not engage with them yet, and said that it is unlikely that we will see IPC price cuts by 31 March 2012.

“At the end of the day, this is a commercial transaction and it depends on how Telkom decides to cost in their backbone. It’s going to be very complex for ICASA to determine exactly what these costs are, but the reality is that these IPC costs are anti-competitive due to Telkom’s market dominance,” said Vox Telecom CEO, Douglas Reed.

Web Africa has also not heard from ICASA. “It would be nice to see involvement from ICASA, the more everyone works together the better,” says Web Africa COO, Rupert Bryant.

Bryant added that there have been hints that the IPC pricing will be reduced in March, but he explained that the details remain sketchy.

“If we want to make real progress and actually work towards making ADSL affordable to the millions without it, we should be looking at about 50% off the current costing structure, as a start,” says Bryant.

Khetan Gajjar, Internet Solutions’ new business development manager, says that he thinks ICASA will only start to engage with the industry on 31 Match 2012.

“Any price reduction in IPC will be strongly contested by Telkom, and therefore one can only assume that engagement will start at the end of March,” said Gajjar.

Gajjar suggested that ICASA should unbundle the IPC price components.”I think rather than a blanket price reduction in IPC, ICASA should rather request that the IPC price components be unbundled, so that component costs can be substituted by providers (e.g. We would terminate using our own fibre rather than leasing a circuit from Telkom),” said Gajjar.

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