ISP industry became far too compliant

[Prometheus]

Do you think ISPs are non profit organizations? Would you not be preserving margins is you had to buy from SAIX and compete with them as well?
I am sure you are still at school. This is business.

There's no reason to insult him for that statement. He was only stating the first rule of economics 101 which the isps and networks still have to learn. If you reduce your price to an affordable level when you are making an insane profit you will get the business your competitors are getting. No one wants to do that however. You'll also be surprised at the business genius of some people while still at school.

 

[Prometheus]

Just remember, higher volumes don't just come overnight, it's based on a gradual growth. Virgin didn't get as big as they are overnight, they grew gradually and through good business decisions were able to over time reduce rates, thereby growing even further.

I don't see where Virgin enters as an example. They are new to the market and provided data cheaper than the other networks instead of reducing it over time. Don't confuse them with Virgin Mobile in the UK and elsewhere. This is a completely new turf for them, but they are not afraid to take some risk. There's a lot the other player can learn from them.

Broadband in SA is incredibly restricted at the moment, the growth is not sufficient enough to warrant large-scale reductions in price as that would result in it becoming an unprofitable service, it's okay to make only R1 on a service if you have a million or two users, because then you make a million or 2 bucks a month (nice), it's absolutely ridiculous to have a R1 margin when you're only selling 1000 accounts, because then you're not even making a fraction of what is needed to pay ONE employee to support that service. That doesn't include other sundry costs such as advertising, building costs, rates and taxes, telephone costs, and expansion into other markets and services. ISP's such as IS and UUNet that pay for their own IPC links have to make that cost back somehow, they're not running a charity, those links are expensive, so is international transit, which they ALSO have to pay for.

There's no such thing as a free lunch.

It's the reductions that brings with it the growth and not the other way around. There has actually been large reductions with adsl isps. If you look at the pricing of packages most of them are barely above what Telkom charges for international bandwidth. IS and UUNet do make their cost back easily and considering they can provide 30GB local bandwidth with their accounts the links can not really be that expensive as everyone wants us to believe. Most isps selling these packages use IS or UUNet and they don't charge much extra over the usual cost for international bandwidth. The real stranglehold is the line rental and international bandwidth holding back growth.

It's the isps like IBurst, Sentech and the cell providers which are not doing anthing to capture the significant market share available to them. They are ten times more expensive than adsl isps if you take into account the fact that you don't need to rent any line, but they somehow still want to charge you for that part of the price simply because it is what adsl customers pay.

 

[bwana]

I don't see where Virgin enters as an example. They are new to the market and provided data cheaper than the other networks instead of reducing it over time. Don't confuse them with Virgin Mobile in the UK and elsewhere. This is a completely new turf for them, but they are not afraid to take some risk. There's a lot the other player can learn from them.

I introduced Virgin as an example in this thread http://mybroadband.co.za/vb/showpost.php?p=664727&postcount=15 as an example of a highly profitable company that is willing to accept lower margins.

 

[Prometheus]

I introduced Virgin as an example in this thread http://mybroadband.co.za/vb/showpost.php?p=664727&postcount=15 as an example of a highly profitable company that is willing to accept lower margins.

Ok, I see now where they came from. Was a bit confused by Warichard saying they reduced rates over time when they actually just arrived and charged the low rates from the start.

Unfortunately there are still some people using Vodacom because of a little bit faster connection. Maybe if Virgin reduced their rates to 25c it will convince people to switch over.