20 Mbps Uncapped for R 500 'just not feasible'

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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Global Verge recently announced that they are planning to launch an uncapped 20 Mbps wireless broadband service for around R 500 per month.  Their business case is based on agents investing in local wireless hubs, providing wireless services and then getting commission on the monthly charge of around $ 50.

It is understood that the Global Verge plans to pay their ‘hub agents’ $ 35 per month for each Internet customer they sign up, effectively leaving Global Verge with $ 15 per month to provide backend satellite connectivity and wholesale service support.

Local telecoms experts however raised serious doubts about the financial feasibility of such a service, especially since the business model is based on providing satellite backhaul connectivity.  

According to one industry source the standard cost of satellite bandwidth is in the region of $ 1 800 per Mbps per month, bringing the cost of 20 Mbps of bandwidth to $ 36 000 per month.  This translates into roughly R 320 000 per month for 20 Mbps of satellite bandwidth.

For a monthly cost of R 500 per month one will need 640 users just to cover the cost of backhaul bandwidth.  Since Global Verge will pay agents $ 35 per client, it leaves them with only $ 15 (R 134) per user to cover all costs, including satellite bandwidth.  This means that they will need over 2 000 users per 20 Mbps connection to cover the cost.

Contention ratios of between 20:1 and 50:1 have become commonplace in the broadband market, and a contention ratio of 2,000:1 is likely to result in a low average throughput per user.

Another issue which has been criticized is the claim that the wireless technology which will be deployed has a non-line of site range of up to 40 km.  This is highly unlikely with current wireless broadband access technologies like Wi-Fi, WiMax or WCDMA, once again casting a shadow of doubt over the claims made by Global Verge.

Well known networking specialist and Neology CTO Roelf Diedericks says that the product description – both on the technology and pricing side – appears unfeasible.  Diedericks pointed out that the wireless reach claim of 40 km is very suspect and that the cost of satellite bandwidth is simply too high to launch an uncapped 20 Mbps service for R 500 per month.

Diedericks said that he would like to trial the service which Global Verge is promising if it is in fact in the pipeline, but warned potential investors to be very careful about investing money  in potential services like these.

20 Mbps uncapped broadband discussion