What is the wholesale price per gig? How much do the ISP's pay whoever they buy it from? Telkom??
I can give a general idea on this as I really do think that it's important people understand the differences on things and how the turn of events have happened. People on these forums are very keen to throw stones at ISPs but I hope this will explain there can be so many differnces between ISPs.
NOTE: I do have to be careful as am under a basic non-disclosure and also do not have any proof on some of the things that I believe to be true regarding the underbelly of this market... like a recent article said... this is the Wild West right now.
In a very basic format there are only two ways an ISP can buy ADSL internet access:
1. Build your own network (IPC, local & international bandwidth, server administration)
- Expensive, requires significant knowledge to manage but what you can do with it when you have an economy of scale is significant.
This is a VERY hard market to get in to unless you have either a lot of money or a lot of clients, ADSL and/or others who require bandwidth and/or IPC. Also, most people don't think it makes great business sense to concentrate on building a network whn you can just resell another person's product... and they are very right in the case of certain companies.
There are a lot of benefits that come out of this for companies, such as Imagine, who also provide other services with there network infrastrucure. For example we sell a large number of GSM and VoIP minutes and also have great wholesale leased line pricing and are in the process of building software to sell double play... ADSL, 3G, Wifi & Telephone as one account.
Now the problem with this comes with the economy of scale. Infrastructure companies have to buy from each other and also maintain a large machine (staffing, building, direct costs etc) that cost money. You have to constantly negotiate wholesale pricing to make things more cost effective and the more you buy the better prices you get from your suppliers.
All of this before you have even considered a consumer facing model, billing system, sales & marketing, fraud percentages and how many GBs can you sell in 1Mbps of IPC, local & international... and what redundancy do you need to build in to ensure that your international never fails.
2. Resell someone else's network products.
- Buy at a set price and resell at a profit.
You concentrate on sales, marketing and getting as many people through the door as you possibly can... You do need software knowledge and can make some great billing, user management systems but in comparison you could buy it off the shelf and have a working business.
The economy of scale here is vast. To give you an idea, the price that you buy 'per GB' is usually separated in to 3 categories - local, on peak and off peak.
If you only sell 500GB of ADSL traffic per month you buy at one price.
.... lots of pay scales in between....
If you sell xxx,000GB of ADSL traffic per month you buy at another.
The difference in price from the highest to the lowest bracket can be as much as 80%. It also seems that the prices are dropping and we receive new pricing on this every 4-6 months.
Imagine the market you get if you knew what this pricing was going to be in 6-12 months!
Also, Imagine if you don't even have to worry about this pricing, if you are already so big you can bully the reseller as you're a significant part of their business... also if the reseller doesn't really care about this business sector.
Now again, I am not accusing any business of knowing future pricing, or even getting better pricing than other businesses get. However, I feel that you guys should know this sort of information.
Over the course of the next 2-5 years you will see a lot of companies entering the ADSL market from one or both of these options. As consumers, we will need to work out who to use. Ultimately, and rightly so, alot of us will base our decisions on price and service. So, a lot of companies will come and go but at some point there will be several victors and 3-10 larger ISPs, supplying consumers, will emerge.
Hopefully Telkom will have the last mile and pricing issues better dealt with over this time frame. However, there is still a massive space here for spectrum based products (3G & WiFi) and we have seen that most other countries are also now selling telephone and/or TV with ADSL/broadband. Which makes complete sense.
So in short, who you buy per GB from and in what quantity depends on your resale price. Otherwise, you are buying network access on a model that is very high cost but could offer you more options and flexibility.
Unless you know the usage figures of the ISP and which model they use, you can't hope to know what their buy price is.
Clear as mud?
As an intenet specialist from the UK I'm finding this difficult myself... there are so many things that need to improve and change and it seems there are a lot of people just trying to make a LOT of money. 'Who you know' currently seems more important than your business ability as it's hard to access simple sales prices and quality no matter what size you are... again, this is all my thoughts and hearsay as I am very sure that all my ISP colleagues are all very capable businessmen.
Cheers
P.
I'll finish my quota with Web Africa this month and move over to Afrihost.
