OK guys... there seems to be a lto of misunderstanding here and so this might help break things down more clearly... it's not comprehensive and can be improved upon, and I'm likely to be shot by the industry for doing it... although I don't know why.
IMPORTANT NOTE: I am not writing this on behalf of my company Imagine.co.za - This is my own personal work that was done as a consultant.
Very roughly with comments the SA internet works like this:
- Customer ->
Line to the exchange (only 11% of SA homes have an active phone line to the home) -> DSLAM -> ESR
(This is where the line speed is generally determined as the line to the house is gerneally copper here. Also, it's worth noting that this is also where Telkom remotely setup your line speed. There is zero cost for them running a 384k-24Mbit line as it's purely based on ports to the exchange and decent cabling to the IPC cloud (Fibre). Which isn't always the case unfortunately.)
Telkom are the only people allowed to do this although there are agreements with Neotel (I believe but not researched).
(in SA) IPC cloud (owned by Telkom) ->
Other countries use more advanced technology... this is really quite an old system. e.g. BitStreaming.
Telkom is the only company allowed to sell IPC or end-custoemr ADSL sevice.. therefore this is extrememly expensive as there is no competition. From R10k to R1.5k per 1Mbps dependant on how much you buy... e.g. R1.5k is for 2Gbps - R3m per month.
Local transit
SAIX or IS are the big guys here. SAIX for ADSL customer (although not so much now MWeb took away 150k) and IS for content (although Vodacom are trying to bribe the banks etc to move). They have a peering agreement which mean that they will allow other users to tranfer through each other's networks free of charge... everyone else they charge for the priviledge of accessing their networks. This strangle-hold is something that MWeb, Vodacom and WebAfrica etcetc... and us... are trying to get rid of.
Local bandwidth is now more expensive than international ebcause of it.
International Bandwidth.
Peering agreemenst internationally are already in place as SA is a very small player globally and so we can't use our over-charging for that. In fact, SEACOM and SAT-3 pay London landing fees, as you'd expect... like with most things, unless you have are similar sizes or have somethign to offer then teh largest charges you... but nowhere near as much as here in SA.
Currently, ignoring satelitte, you can do via SAT-3/SAFE (20Gbps) or SEACOM (1.3Tbps)... The next 2-3 years will see another 3 cables coming down giving SA over 20Tbps of bandwidth. (please correct me on these figures as I don't have them to hand and so this is from memory.)
- You can 'buy' bandwidth on SEACOM but only in STM-1 chunks of 155Mbps. For roughly R12m - but you own it for the life of the cable. You then need to spend another R3-5m on setup.
- Most people rent and price range from R10k to R3.5k per Mbps.
You then need the infrastructure in your office to manage the IPC and routing of the data requests and systems for interconnect/peering.
Pricing and understanding how to give someone great internet access.
- Most countries usage stats are a lot less than SA but that's based on the fact that you have very low caps (avg 2.6GB).
- Average usage of a capped account is between 60-70%
- We've yet to see what the average uncapped account uses as so few people previously had them. (in the UK it averaged 12GB per month from memory despite being uncapped and only R120 per month for all costs - but this is because well over 90% of people have a phone line and ~90% have ADSL/broadband and so you have a huge economy of scale)
- SA has 11% fixed phone line density and, again from memory 4% ADSL
An uncapped service is all about how many time can you sell the same line.
e.g. for a medium Tier 2 ISP renting 10-100Mbps of bandwidth from a Tier 1 in this country the average price of Telkom IPC, local and international traffic for 1Mpbs could be:
R 4k (IPC)
R 6k (local)
R 5k (international)
R negligable (set up and infrastructure)
R15k per 1Mbps
We are lucky on our economies of scale and can buy it for less.
Therefore a 1:1 contended 4Mbps ADSL line would cost R60k per month!
Obviously the Tier 1 providers can get better pricing and if you're SAIX or IS then you don't need to pay for local transit. So it's a huge amount cheaper.... if you buy international and not rent it then a loan payment over 20 years per 1Mbps is only R350 per month. But even they still ahve to pay the IPC costs.
Tier 1 rough costing per 1Mbps could be:
R 2k (IPC)
R 500 (local)
R 350 (international)
R 1k (set up and network infrastructure - they lay and manage cable etc - this is a very conservative value based on the inefficiencies i've modelling in SA)
R4k per 1Mpbs
Therefore a 1:1 4Mbps line is roughly R16k pm
And we're all selling them at R499pm
Points to take away
- So you can see that firstly you have to cram a lot of people down a 1Mbps hole to make it worth it. People who download 24/7 are essentially causing massive costs.
- For most people normal internet users, the faster the line the more people you can cram down the hole because everything downloads quicker and so they are 'using' the internet a lot less frequently.
- The reason there have been so many resellers 'over-branding' a service that they essentially just offer customer service on. These guys, like the company I am working with are just Tier 2 providers and 'rent' access from teh larger companies. MWeb's recent change is a result of changing from renting to buying.. eg. Tier 1.
South Africa's issue is that the vast majority of people have a 384k line and download speed is very slow so a LOT of people are always 'using' the internet. Therefore contension ratios have to be a LOT less for the least profitable line speed.... which doesn't make economic sense.
The more people we can get on 4M+ the more likely the 50:1+ contention ratios can be maintained and actually give every 100% line-speed service all the time.
The Telkom line installation cost, rental, bad service and IPC prices make it very hard to get more peopl online and so the economy of scale will not be here until there are over 20 million people with 4-24Mbps ADSL lines.
There's a bit more too it but the basics are there... and so you can see why people believe that the MWeb model is not sustainable. However they have opened a can of worms that the i don't think even they understood but is seeing a huge upscaling of the South African intenretn market... and one for the better that i think will be made sustainable by bulk and improved line speed.
It's also why, in the interim, there are Acceptable usage policies and shaping as most companies ony have 1-5GB of SEACOM bandwith.
Things will get better but slowly... all eyes are now on Telkom to lower their prices to get more people online. Unfortuantely, what's more likely is that they will use more of our TAX and government borrowed cash to release their own uncapped ADSL product in compeition. The biggest problem with this country is lack of fixed lines and infrstructure... Telkom have forgotten this in their desperation to keep shareholders happy... and the government and ICASA don't seem to be reminding them.
If they made ADSL 'ADSL' by not limiting line speed and creating low single charges 'across the board' then this would seriously allow things to improve. i.e. You get a 'best case' line speed which could be 10Mbps or 1Mbps, dependant on your exchange distance but you pay Telkom the same price. Doesn't sound fair but if the entire country can afford to get a phone line then it will work out quickly as Telkom can distribute costs, improve the service for the rural areas and concentrate on their network and not their 'sales'... a very nice though but I'm not sure how likely it will be.
Plus don't even start me on Bitstreaming , which I've heard will be launched here in August 2010 which should see base costs drop more (maybe!).... again owned and singularly provided by Telkom.
(sorry for the errors and 'rough' facts in this as it was rushed by me and off the top of my head. It should give everyone a good idea that this industry is run on good accounts and streamlining as much as it is on good bandwidth... I think that's the realisation that's happenin at the minute.)
