After years of having their wallets drained by telecommunications operators, consumers can expect prices to fall off a cliff in the next 12 months as the big telecom providers jostle for market share in what is being seen as the next big growth area in SA telecoms.

Vodacom wants to lead the price-cutting charge. Wally Beelders, who heads Vodacom Business, says a confluence of events — in particular the construction of high-capacity undersea cables and provision of national and intra-city fibre networks — will force down prices substantially for both corporate customers and individuals. “We want to drive down broadband prices,” Beelders declares. “Someone has to take that leap.”

Vodacom blames Telkom for high broadband prices in SA. It’s a refrain echoed by other industry players. Internet service providers and other operators were until recently required to buy their national and international bandwidth on infrastructure owned and controlled by Telkom. But they’re now free to build their own networks, which should force down prices.

In a market with little competition, Telkom has had little incentive to cut prices. That’s changing — and rapidly. Vodacom announced this month that it was joining an initiative by MTN and Neotel to build a national backbone, consisting of thousands of kilometres of fibre-optic cable to connect the big cities and towns. The system will also provide access to the new undersea cables, including the East Africa Submarine System, Seacom and the West African Cable System.

The key question is whether one of the operators, keen to exploit first-mover advantage, will cut prices before the new cables are in place. Vodacom is understood to be ready to move at any time and has drawn up details of how slashing its prices will affect revenue and profit margins.

Ironically, price cuts could push up average revenue per user. This happened the last time the mobile operators cut their tariffs dramatically.

Vodacom CEO Pieter Uys cautions that it “doesn’t make financial sense” to slash prices immediately because “we have to pay someone else for the [back-haul] link”. He adds that competition isn’t just about cutting prices, but also about offering better value, reliability and connection speeds.

However, prices look set to drop soon. The event that could trigger the first round of cuts is the Seacom cable, which goes live in three months. “We’ll then see to what extent Telkom follows with significant reductions [on its cables], because it will have to follow,” says Beelders.

Smaller operators could also drive down prices. Neotel has already introduced lower-priced fixed-wireless Internet services, though its coverage is limited for now.

What’s certain is that when one of the big three operators, Telkom, MTN or Vodacom, cuts its prices, the others will quickly follow. They will have to. Until then, the best advice for consumers is to avoid signing long-term contracts with any of the providers, no matter how attractive the upfront inducements they offer might seem.

Broadband price war looming? – give your view