At the recent ICASA hearings investigating the price of ADSL in South Africa the million dollar question was asked that has been dogging interested broadband consumers. What is so unique about local ADSL provisioning that makes it so much more expensive here than overseas?
John Joseph, the executive for marketing at Telkom, responded that there have been price reductions over the last 2 years due to the significant growth in the ADSL sector. He stated that as the network grows towards the quantities they need, the prices will go down. He stated that current uptake of the service was reaching the critical demand stage.
Mike Lawrie, a member of the public, asked Telkom why their access portion alone was far more expensive than the whole service offered in many other countries. Mr. Lawrie highlighted the fact that these international offerings have far superior speeds than local offerings and are completely uncapped.
Telkom’s reply was that the contention ratios used between the DSLAM and the Edge Service Router (ESR) could make it cheaper for overseas telco’s enabling them to offer a cheaper service.
This can however be seen as an inadequate excuse as the service speeds internationally are indeed superior to local ones. International providers have to allocate far more bandwidth for this portion as the required speeds are simply much higher.
The Telkom representative added that these international providers only guarantee maximum speeds, and not actual speeds. It remains difficult to understand how this differs from Telkom’s current offerings and advertised speeds.
The Regulator continued to probe Telkom for a basic outline of their long-term broadband strategy, focussing on possible price reductions.
Here Josephs urged the panel to look at time frames within international countries when comparing Telkom’s service to overseas offerings.
"When you start comparing South Africa to other countries you need to look at the time when these countries started offering broadband. We are now at the phase when we are rolling this service out. We need to look at it from a timing perspective," said Josephs.
The Authority requested that the incumbent provide some sort of time frame for when South Africa could be compared to international pricing considering the service has been around since 2002.
Vincent Maleka, a lawyer representing Telkom, responded that if the Authority wanted a response from the corporate entity they would provide it in writing within 7 days since only the board of the company are able to provide timelines regarding the strategic future of the company.
In an earlier presentation Internet Solutions (IS) provided information indicating that Telkom is overcharging, by a very large factor, for the access portion of ADSL.
IS presented an outline of the cost as coming to a total of R38.96 per month (excl overheads). The price breakdown was as follows: DSLAM costs R8.56 per month, the ESR’s R2.69 per month and the bandwidth (from the DSLAM to ESR) is R26.79 per month. Telkom is currently charging costumers R 477-00 for this portion.
The ICASA panel focussed on this issue, but the Telkom lawyers were quick to try to nip this in the bud. The legal debate raged for a few minutes, resulting in Telkom’s failure to supply adequate reasons for this exorbitant pricing.
The access portion is paramount to the high pricing of ADSL in South Africa, and it is not surprising that Telkom wanted to stop this questioning as quickly as possible. How exactly does one justify pricing structures that are many times more expensive than international standards?