Telkom slams price critics

[RoosTa]

Good thing our admins cache pages;
Here it is:

Telkom slams price critics
13/06/2006 12:46 PM
By: Belinda Anderson
Johannesburg - Telkom on Tuesday denied misleading customers about the magnitude of the recent ADSL - high speed, fixed line broadband - price cuts.

This comes after broadband activist, myadsl.co.za founder Rudolph Muller said on Monday that the effective decrease in ADSL pricing was closer to 12% than the 24% that Telkom claims.

Muller reached this conclusion after factoring in the decline in the ADSL access portion, but including the increases in installation and line rental.

Managing executive for retail marketing at Telkom Steven Hayward said it was not accurate to bundle these together; this was a case of "Chinese maths".

It seemed that whatever Telkom did with its pricing, it would inevitably take a hiding depending on how one played around with the numbers, he said.

Hayward said the different offerings needed to be viewed separately given that most Telkom customers use their line primarily for voice calls. The decision to install an ADSL line was a separate consideration, and only 3% of its customers had ADSL, Hayward said.

Line rental more expensive

He conceded that the cost of line rental would go up more than any other tariff - when the recent tariff changes become effective from August 1 - by 8.3% or R7 a line.

But, he said this was all part of the ongoing tariff rebalancing that had seen Telkom place a lot of emphasis on reducing the cost of long distance and international calls, and increasing the cost of the line rental, the latter being a service which it runs at a loss.

Domestic long distance tariffs will come down by 10% and international long distance; by 9.9%, while local call tariffs will remain unchanged.

Hayward said the increase in line rental had to be seen in the context of the overall tariff rebalancing, the net effect of which was to decrease costs for voice usage.

In addition, if a customer elected to go onto a bundled package like one of the Closer packages launched earlier this year, then their line rental fee would not go up, he said.

With regard to the ADSL access portion, Hayward said prices had come down significantly in the past two years. He used the example of the most popular package, the DSL 512 offering, which has gone from R680 to R362 in the past 18 months.

Real options

Regarding the third cost element; the actual bandwidth that a customer must buy from a service provider (Telkom or any other), Hayward said there was a lot of competition in this space.

And Telkom had also introduced a wholesale pricing rate of R54 per Gig to the service provider to enable them to offer customers a more friendly, and flexible pricing package.

"We have provided the market with real options," he said, adding that it was unreasonable not to factor considerations like this into a review of overall pricing.

Regarding Telkom's international competitiveness on ADSL pricing, Hayward said it was getting closer to international norms and had come a long way towards achieving that.

He disputes Muller's allegation that SA would need to cut ADSL costs by up to 70% in order to be acceptable by international standards, but concedes there's probably room for further reductions, and says there will be additional efforts to increase the value to the customer.

Hayward used the example of the DSL 192 package, where Telkom had doubled the speed available to these customers, with a small price decrease. Customers would see more moves like this, as well as additional bundled packages, he said.

Can't compare SA with US

Bundling was very much a part of Telkom's business model going forward, he said.

At this stage it was difficult to benchmark South Africa against other international country examples given that it had not yet reached significant economies of scale, Hayward said.

Although with roughly 150 000 ADSL customers now, it was achieving some economies of scale, this would be much more so once it reached its target of more than a million customers in the next few years.

Another reason why it was not accurate to compare costs between South Africa and a developed country like the US - which was part of the basket of countries that Muller compared SA high usage ADSL pricing with - was that most internet content comes out of the US, placing SA at a huge cost disadvantage in terms of getting that into the country.

So, we would never achieve the same pricing structures as in the US, said Hayward, using the analogy of a burger. Because South Africa also has beef, the price of a burger in both countries can be compared, but this would not be possible if there were no cows.

On Telkom's ability to roll out ADSL at a faster pace than currently, Hayward said this was something that the operations people were doing a lot of work on solving.

 

[Franna]

Managing executive for retail marketing at Telkom Steven Hayward said it was not accurate to bundle these together; this was a case of "Chinese maths".

You have to bundle these together, because with only the access portion you don't have internet. Everything needed to connect to the internet must be bundled to work out the total price per month.

Hayward said the different offerings needed to be viewed separately given that most Telkom customers use their line primarily for voice calls. The decision to install an ADSL line was a separate consideration, and only 3% of its customers had ADSL, Hayward said.

Well, the average voice customer will be shocked to see that their line rental is going up, with no change in the price of a local call. Again, line rental must be bundled because without it there is no broadband internet. And please don't tell me you are proud that only 3% of your client base have ADSL.

But, he said this was all part of the ongoing tariff rebalancing that had seen Telkom place a lot of emphasis on reducing the cost of long distance and international calls, and increasing the cost of the line rental, the latter being a service which it runs at a loss.

Yeah right - charging R85 per month for a piece of copper is losing you money. The above statement must be read - all areas where Telkom do have a monopoly will see prices increases. You have to decrease international call charges otherwise people will flock to VOIP.

He used the example of the most popular package, the DSL 512 offering, which has gone from R680 to R362 in the past 18 months.

Again, nothing of importance as with only the access portion there is no internet.

Another reason why it was not accurate to compare costs between South Africa and a developed country like the US - which was part of the basket of countries that Muller compared SA high usage ADSL pricing with - was that most internet content comes out of the US, placing SA at a huge cost disadvantage in terms of getting that into the country.

Well, with exorbitant priced local bandwidth who in there right mind would host locally. At the moment the R54 per GB wholesale pricing means that local and international bandwidth cost EXACTLY the same.

And in conclusion : about the burger analogy.

You are right. The price of a burger in both countries can not be compared when the (cash) cows in South Africa are all long dead due to overmilking.

 

[neio]

@ IC, I was talking about the post re African races and math.
AFAIK a lot of the Bedouin AFRICAN tribes used quite a complex math system with strings with knots in them for stargazing.

 

[Toxin]

And Telkom had also introduced a wholesale pricing rate of R54 per Gig to the service provider to enable them to offer customers a more friendly, and flexible pricing package.

Has anyone heard of this? He says that this has been introduced. As in like from this moment? This price including or excluding VAT?

Can't compare SA with US

Anyone got the broadband prices in Kenya yet?

On Telkom's ability to roll out ADSL at a faster pace than currently, Hayward said this was something that the operations people were doing a lot of work on solving.

On this I honestly can't complain. It's taken me less than three weeks to get my ADSL installed. Not fantastic, but not the worse I've heard.

Regarding the third cost element; the actual bandwidth that a customer must buy from a service provider (Telkom or any other), Hayward said there was a lot of competition in this space.

Yip, either go with someone else and get Hardcapped or go with Telkom and get Softcapped. Great competition here.

Managing executive for retail marketing at Telkom Steven Hayward said it was not accurate to bundle these together; this was a case of "Chinese maths".

Chinese mathematics, was defined by Chinese in ancient times as the "art of calculation" (suan chu). This art was both a practical and spiritual one, and covered a wide range of subjects from religion and astronomy to water control and administration.

Take it as a compliment rpm.

Can someone give me a "OWNED!1!!1"?

 

[stix]

The prices of DSl would be fine if you didn't have to pay R400-00 odd line rental.......

Drop that and you might reach the economies you want

 

[Debbie]

Guys please jump on this and send wads of 'letters to the editor' regarding this issue. I sent off a few yesterday, and will send more today. Lets continue to expose Telkom in an ugly way, for all their lies.

 

[kingmonty]

Could everyone on the forum who only uses the ADSL line rental portion (Doesn't have a landline, doesn't pay ISP costs and doesn't download anything) please raise their hands...

Anyone?

Thought so.

When I look at something, I look at what it costs me in total...

Furthermore, he contradicts himself. He wants us to distinguish between the segments making up the "bundle", but yet they are looking to make more *bundles* available

 

[neio]

A bad case of foot in mouth is afoot.

 

[Skip]

Regarding the third cost element; the actual bandwidth that a customer must buy from a service provider (Telkom or any other), Hayward said there was a lot of competition in this space.

Puh-lease. There are very few actual ISP's in this country. There are plenty of SAIX resellers though.

 

[Moederloos]

@ IC, I was talking about the post re African races and math.
AFAIK a lot of the Bedouin AFRICAN tribes used quite a complex math system with strings with knots in them for stargazing.

I appreciate that - I was not going for a racist argument, more of a "tit-for-tat" comment. Anyways, Bedouins are of Arab descent.

 

[Sneeky]

Telkom Steven Hayward said it was not accurate to bundle these together

As a paying customer I beg to differ sir, as I cannot have one without the other. Must I draw you a picture of how it all works?

It seemed that whatever Telkom did with its pricing, it would inevitably take a hiding depending on how one played around with the numbers, he said.

Correct, no matter how I twist these numbers I get to the same conclusion, I am being comprehensively ripped off by your state protected company.

Hayward said the different offerings needed to be viewed separately given that most Telkom customers use their line primarily for voice calls. The decision to install an ADSL line was a separate consideration, and only 3% of its customers had ADSL, Hayward said.

That may or may not be so but the fact still remains that for ADSL line rental, bandwidth and telephone rental are your domain and I cannot separate that cost. In 5 months I have maybe made 10 calls on my Telkom line but hey that's just me, a customer of yours but don't let that arbitrary little fact trouble you.

He conceded that the cost of line rental would go up more than any other tariff - when the recent tariff changes become effective from August 1 - by 8.3% or R7 a line.
But, he said this was all part of the ongoing tariff re-balancing that had seen Telkom place

14 point how many Billion rand profit last year, on a year on year growth of how much, and you want to increase what by how much more than inflation?

In addition, if a customer elected to go onto a bundled package like one of the Closer packages launched earlier this year, then their line rental fee would not go up, he said.

Mighty generous of you, thanks.

With regard to the ADSL access portion, Hayward said prices had come down significantly in the past two years. He used the example of the most popular package, the DSL 512 offering, which has gone from R680 to R362 in the past 18 months.

Again, thanks but in the same breath mention the capped local traffic, the shaped international traffic and the infamous 1 Nov '05 move.

Hayward said there was a lot of competition in this space.

I think that Telkom charging what they do for bandwidth to everyone else negates any real competition don't you? I mean look at datapro's offer for local bandwidth that in real terms was free!

Telkom had also introduced a wholesale pricing rate of R54 per Gig to the service provider to enable them to offer customers a more friendly, and flexible pricing package

Sorry, there is buggerall friendly about shaped R54 per gig bandwidth.

Regarding Telkom's international competitiveness on ADSL pricing, Hayward said it was getting closer to international norms and had come a long way towards achieving that.

eh? How so.

He disputes Muller's allegation that SA would need to cut ADSL costs by up to 70% in order to be acceptable by international standards, but concedes there's probably room for further reductions, and says there will be additional efforts to increase the value to the customer.

Care to qualify that?

Hayward used the example of the DSL 192 package, where Telkom had doubled the speed available to these customers, with a small price decrease. Customers would see more moves like this, as well as additional bundled packages, he said.

Thank you, and I certainly look forward to any meaningful improvements that provide the public with good value for money products in the future.

Although with roughly 150 000 ADSL customers now, it was achieving some economies of scale, this would be much more so once it reached its target of more than a million customers in the next few years.

Honestly, if the DoC does what it says its going to do, I think you will be lucky to get a million adsl users anytime soon with your company's attitude towards its customers. Competition will eat you alive if it is allowed to compete on a level playing field.

placing SA at a huge cost disadvantage in terms of getting that into the country.

Most of the rest of the world seems to manage just fine, India?

So, we would never achieve the same pricing structures as in the US

Your prices are nowhere near the same solar system as the US and in real terms I don't expect you to match them, right now at least.
R54 per gig, on a linear scale offering NO relief for higher end users, please man. 30 gig minimum package with top up options that are not linear.

 

[neio]

If NZ and OZ can do it, placed as they are on the ar$ed side of the planet, why cant we, I mean we are closer to Europe and the states than those two countries, why do we pay more than them?

 

[mikef]

In addition, if a customer elected to go onto a bundled package like one of the Closer packages launched earlier this year, then their line rental fee would not go up, he said

Interesting, does that mean the ISDN bundled closer options do not go down in price? When I phoned 10219 to enquire I was told it would be going down in price from 1 August.

 

[BTTB]

Chinese Maths - OMG

Managing executive for retail marketing at Telkom Steven Hayward said it was not accurate to bundle these together; this was a case of "Chinese maths".

Let's not insult our Chinese brethren.
The Chinese can come and show us a thing or two about Broadband.

I must humbly state that I completed and passed Matric Mathematics and did a further 3 years in Industrial and Financial Accounting, including Economics, Business Economics, Statistics etc.
But who am I, as there are far more learned people around that can add up better than me, like Telkom for instance.
I had better return to school as I cannot add anymore.

I fail to see how Telkom can refute our simple maths.

At the end of the day, the customer who should be "right" will end up paying an arm and a leg for ADSL.
Why does Telkom challenge the consumer on this point when clearly we have explained our position very clearly more than once.
Telkom is wrong and we are right. Simple as that.

 

[stoke]

R54 a GIG ?

Take that MTN !

 

[playkiller no.2]

Don't piss off the chinese and the chinese South Africans.

 

[kifoth]

Chinese Maths

China is on track to surpass the United States in broadband subscribers by 2007, according to new market research data.

http://news.zdnet.com/2100-6005_22-5695591.html

Looking at South Africa's broadband growth rate vs China's, I'll take Chinese maths any day...

 

[Moederloos]

I was unable to dig up any reference on Google to "chinese maths" as an insult or compliment. It just does not seem to exist. Anyone have any luck in this regard?

 

[BTTB]

I was unable to dig up any reference on Google to "chinese maths" as an insult or compliment. It just does not seem to exist. Anyone have any luck in this regard?

Same here.
No Luck.
But I have heard the term before.

Perhaps it is to do with some or other chinese Theorem or even the fact that they write from the right to the left, unlike western countries?

 

[Ekhaatvensters]

With the Chineses maths thing.. was Steven refering to bundling access cost with the line rental and the install cost. Because that is what i gathered from the initial post..

People here seem to care about this R10 or so increase and R232 once off increase which doesnt even effect them.. are you guys thinking that he meant the ISP cost as well as the install and normal line rental fees?

Just curious.. it sounds to me like you are totally over reacting and he is in fact *almost* correct (that you shouldnt be bundling install fees with monthly decreases, not the line rental though, that is fair) or that he is talking about ISP fees in which case you are totally correct, and he is a moron.. which he probably is nayway.