Telkom ADSL IPC price cut - the details

km2

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Trying to work out where the savings are happening here. Initially it looked like they're adjusting the bulk discount to make buying smaller chunks of IPC have a price per Mbps more in line with the larger players.

Internet service providers buy bandwidth on Telkom’s last-mile copper network for DSL services through a product called IP Connect (IPC), which is set to see a reduction of between 1.4% and 63%.

The size of the reduction is determined by the volume of bandwidth a service provider buys from Telkom, with smaller ISPs set to benefit more than larger competitors from the next round of price cuts.

I'm not sure what the curve is there, but it sure sounds like major ISPs with large connections are going to see a smaller reduction.

But then it says

Telkom said the promotion will allow ISPs to double the amount of IPC bandwidth they have “for an incremental cost.” Asked what the effect of this promotion might be for larger players in the market, Telkom said companies with large volumes of IPC could effectively lower their cost per Megabit per second by 80%, after all reductions were taken into account.

Now how do you get to an effective cost per Megabit reduction of 80% after applying an incremental cost. That would need it to be very very small cost, and then give the big boys that 63% reduction and then a further 50% reduction. Or are they saying that just the "doubled IPC" will work out to be effectively 80% less than buying more at current rates.
 

furpile

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Trying to work out where the savings are happening here. Initially it looked like they're adjusting the bulk discount to make buying smaller chunks of IPC have a price per Mbps more in line with the larger players.



I'm not sure what the curve is there, but it sure sounds like major ISPs with large connections are going to see a smaller reduction.

But then it says



Now how do you get to an effective cost per Megabit reduction of 80% after applying an incremental cost. That would need it to be very very small cost, and then give the big boys that 63% reduction and then a further 50% reduction. Or are they saying that just the "doubled IPC" will work out to be effectively 80% less than buying more at current rates.

I think that is the promotion that they have from May to July. After that it will benefit the smaller ISP's as stated.
 

Zyzzyva

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I think that is the promotion that they have from May to July. After that it will benefit the smaller ISP's as stated.

Yeah that's how I read it as well. But you have to wonder what the point of such a short promotion is, unless of course it magically continues in August.
 

twicode

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Any permanent reduction is good news. Will ISPs pass the cost saving onto consumers? I'm guessing No and they'll say they absorbed the saving over time.
 

HavocXphere

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Asked what the effect of this promotion might be for larger players in the market, Telkom said companies with large volumes of IPC could effectively lower their cost per Megabit per second by 80%, after all reductions were taken into account.
That sounds decidedly anti-competitive to me...

Favours the bigger players (like *cough* TelkomInternet) and puts the borderline small player at a disadvantage.

Or am I missing something here?
 

dominic

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is this not a direct consequence of their settlement with the competition commission
rather than a damascene commitment to the democritisation of data
 

Chris.Geerdts

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is this not a direct consequence of their settlement with the competition commission
rather than a damascene commitment to the democritisation of data

That's definitely one element. I also wonder: Is there a defensive strategy against the increasing appetite in the affluent suburbs for more fibre in their diet? Is there a desire to demonstrate relevance as the government's anointed agency? Is there suddenly a lot of new capacity as IPC is migrated off ATM?
 

Chris.Geerdts

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I'm trying to think through the discounting (by up to 80%) on the big players.

The upside is (from my own experience) that a short-term promo at lower prices increases data usage such that after the promo the usage still remains on a permanently higher trajectory.

However, an 80% discount to the high-traffic providers could really spike usage in the 3-month period. Telkom could only realistically risk such a surge if they had loads of spare capacity (possibly due to migrating off the obsolete ATM backbone) and were additionally planning to offset some of this risk against the benefits that could only accrue from a longer term increase in data usage than just 3 months.
 

MickeyD

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is this not a direct consequence of their settlement with the competition commission
rather than a damascene commitment to the democritisation of data

AFAIK it goes way beyond the settlement...
 

Forza

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That sounds decidedly anti-competitive to me...

Favours the bigger players (like *cough* TelkomInternet) and puts the borderline small player at a disadvantage.

Or am I missing something here?

I wouldn't say putting the smaller players at a disadvantage and being anti-competitive.

What they are probably doing is giving volume discounts based on what the various players have in the market. Is not anti-competitive but a means of having your larger players buy more and having your smaller players buy more, thereby increasing the volume, to receive bigger discounts.

Lots of companies in various industries do this eg. Buy for R1 000 get 5% discount, buy for R1 500 get 10% Discount, buy for R2 000 get 15% discount, etc.

But the whole article is quite confusing wrt who it will favour though
 

Crystal Web

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That sounds decidedly anti-competitive to me...

Favours the bigger players (like *cough* TelkomInternet) and puts the borderline small player at a disadvantage.

Or am I missing something here?

The article is incorrect.
 
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