All-in-one ADSL price here within weeks
Telkom recently made information available to ISPs informing them that they will be able to resell the ADSL access portion to their customers.
With the new ‘Resell ADSL’, prospective ADSL subscribers can contact their ISP directly and activate their access by using a self-install tool from their ISP. The ISP will handle most of the installation and subsequent support.
Telkom’s involvement in installations will effectively be isolated to the allocation of the DSLAM port. What this means in practice is that Telkom technicians are not despatched to a customer to do ADSL-related installations or first-level ADSL support.
This new wholesale ADSL access service should mean that an ISP will become a prospective ADSL subscriber’s single point of contact when ordering a new service. It will further enable ISPs to provide customers with a single price service which may allow for higher margins or better value propositions.
According to correspondence received by MyADSL this new ‘Resell ADSL’ will be available from 10 April 2007 which means that it may hit the market through Telkom’s reseller channels soon.
Price
The wholesale pricing for ADSL access is slightly lower than the current retail rates which provide a slightly larger margin for ISPs.
The Vat exclusive price for DSL 384 ranges between R 182-67 and R 167-63, depending on the volume of lines. The highest price will apply to ISPs with less than 50 000 lines while the lowest price is for ISPs with more than 400 000 customers.
The same pricing scales apply to DSL 512, priced between R 269-91 and R 247-68 (VAT Exclusive) and DSL 4 Mbps raging from R 384-74 to R 353-05, also VAT exclusive.
This means that the VAT inclusive wholesale price for a DSL 384 access portion to ISPs is R 208-24, 15 % lower than the current R 245-00 retail price from Telkom.
The VAT inclusive wholesale price for DSL 512 is R 307-70 and for DSL 4 Mbps it is R 438.60. Both the DSL 512 saving of R 54.30 and the DSL 4 Mbps saving of R 77.40 also translates into a 15 % saving.
Some concerns for ISPs
While this is a welcome wholesale addition to Telkom’s current ADSL offerings to ISPs, some have expressed valid criticisms of the new system.
The first critique that ISPs have lodged revolves around the current volume discounts which only kick in for 50 000 ADSL customers or more. The volume discounts are then calculated for 50 000 – 99 999 customers, 100 000 – 199 999 customers, 200 000 – 399 999 customers with the largest saving only available to ISPs with 400 000 or more subscribers.
These volume discounts are of little value as there is currently not a single ISP with more than 200 000 subscribers. With Telkom aiming to have around 700 000 ADSL lines by 2011, the most significant discounts may not be reached by even the biggest ISPs within the next few years.
Another concern is the relatively small profit margin which can prove to be problematic if there is non-payment from a customer. The new system will further require additional resources from reseller ISPs which increases the total ADSL product cost to ISPs.
Still good news
Despite the challenges faced by ISPs it is still encouraging that Telkom has expanded their ADSL wholesale range which may give ISPs more control over their clients.
With Local Loop Unbundling still years away and with the cost involved likely to be very high many smaller ISPs may see this as a step in the right direction from Telkom.
The new system provides ISPs with more freedom regarding pricing and the ability to launch better packaged offerings.
The effects of this new wholesale product and pricing will however only be seen when the service hits the market and competitive forces in the ISP space start to dictate service offerings and new prices.
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