Pr13St, I'm not a writer, not professionally anyway, but the kind complements from you all are always welcome. Thanks. [

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As for solving the bandwidth problem, it's actually a very simple matter, Telkom need to upgrade the infrastructure. Considering the huge profits about which they bragged, I can't imagine how it could be impossible for them to embark on a national infrastructure improvement program. Such a program would cost a large amount of money, but is certainly not out of reach of Telkom.
The problem is that even a sober upgrade program, scaled to best serve each specific area and stretched over a time period of say, three years, according to my worst case estimates, would eat up two thirds of their annual net profit for the three years. SBC and Telkom's larger local shareholders are much too greedy to allow them to persue such a plan, even if they wanted to.
An annual net profit of R50 million would not be bad for a para-statal private company, but it is a far cry from the estimated R200 million they will be making this year. SBC and the shareholders would see a noticeable change in their dividends and questions would start to be asked.
Of course, in time, improved infrastructure would allow them to offer broadband service at improved prices and with greatly increased service levels. This, in turn, would attract new customers to the service, who are currently scared away by the high price and poor service quality levels.
A large new customer take-up would generate growth in the market that will eventually lead to a large increase in revenue for Telkom. Sadly, Telkom's strategic management do not believe in good long term strategy.
As a good example of this, I might point to the case of the new SAT3 cable. The costs of building the cable were incredibly high, as with all submarine cables. The costs for construction of the cable were carried by the consortium of African telephone operators along the West coast who collaborated on the project.
Most of the other operators have seen the project as a long term investment. The operators have set pricing for access to their portions of the cable at very reasonable rates. Access is resold to local telephone operators, where there are competing operators, cellular operators, internet service providers and anyone who might have a need for international frame relay services.
These operators do not envisage making a profit on their portion of the line for the first 10 to 15 years of use. With a design lifetime of 35 years, this means, the cable will likely only make a profit for these operators for 25 years.
The operators have kept pricing reasonable to attract customers to their line. Thus, while the line will take some time to pay for itself, they will have a huge customer base by the time it becomes profitable and will be able to make large long term profits from these customers.
Telkom have not chosen this route. Instead, pricing for access to Telkom's portion of SAT3 is unusually high, even by the worst international standards. By all accounts, the pricing has been set such that Telkom will start to turn a profit on their portion of SAT3 after only three years of use.
This is bad long term strategy. While their portion of the cable will have payed for itself very soon, the high pricing is keeping many potential customers away. While Telkom will be making a profit relatively quickly and will be able to make a profit out of the line for at least 30 years, the profits will remain small in comparison to those generated by the other operators over the envisaged 25 year period during which the line will be profitable for them.
Had Telkom set pricing for SAT3 access at reasonable rates, the market for the use of the cable may have been much larger. Currently, only Telkom itself and a small number of top tier ISPs make use of the South African portion of the SAT3 cable. Even the large ISPs have only limited use, as buying bandwidth on the cable is so expensive. With better prices, many smaller ISPs might have been enticed into taking up usage on SAT3. Larger ISPs might also have purchased more bandwidth than they currently use.
In time, the line would become profitable anyway. After that point, with a large customer base, Telkom would be able to generate very handsome revenues from the cable. As it stands now, they will probably turn a profit from the project as early as the end of this year, but all future profits will be much less than what might have been.
When examining this situation, it would seem to be very good short term strategy, as Telkom are turning a handsome profit for their shareholders and their American masters, SBC. Short term strategy is not good strategy though. In the long term, as possible competitors find their feet in the South African market, the current high pricing and bad service will immediately drive customers away from Telkom.
A mass customer exodus would have a very dramatic effect on Telkom's profit margin. I dare say, the effect will be much more dramatic than that of an infrastructure upgrade program. While SBC and Telkom's shareholder enjoy huge dividends from the enormous profits now, they will, in time, see a sudden, shocking decline.
This will be a bitter pill to swallow for the greedy investors, but it is the path that they and Telkom management have chosen. This massive strategic blunder also leaves Telkom itself in a very precarious position. If a competitor should enter the market, catching Telkom unprepared, the ensueing mass customer exodus would also mean a mass shareholder exodus.
This will leave Telkom without the support of share holder capital and without adequite infrastructure to compete in the open market.
As for MaD's suggestion that the cap should not effect international web surfing, but only traffic from third party applications, I think this is not only an excellent idea, but entirely feasible.
To implement it, Telkom would only need to allow ADSL users access to SAIX's main network of proxy caches and set up the proxy caches that serve the DSLAMs to use the main caches as parent systems. In this way, third party traffic can still be routed via the slow international connection, but web surfing traffic can pass through the proxies and be routed via the regular, faster connections.
I very much doubt that Telkom would go for such a set-up though, as it still leaves a door open to abusive users who might inundate the network and the proxies with large HTTP transfers, such as ISO image downloads, large pirated software downloads, pornography and streaming protocols that can be routed over HTTP.
Nevertheless, it is worth atleast investigating the idea and bringing it to Telkom's attention. To whom do we address the letter?
Willie Viljoen
Web Developer
Adaptive Web Development