New Telkom DoBroadband offerings met with mixed feelings

Telkom’s new one-price Do Broadband offerings bring welcome savings to consumers, but it has not received the same warm welcome from ISPs.

Telkom recently launched three Do Broadband and three Do Broadband Closer offerings, bringing a bit of pricing relief and making a single bill ADSL account possible.

These offerings will however make it very difficult for ISPs to compete with Telkom, both because of their small margin and the fact that other ISPs do not have the same privileges as in house ISP – TelkomInternet.

Pricing

Telkom’s Do Broadband pricing brings a long awaited single-bill to ADSL customers. This will make it far easier to establish what the full ADSL service will cost and enable consumers to compare these offerings with those from wireless broadband providers.

The new Do Broadband services combine the ADSL Access and ADSL ISP components, and Telkom’s new pricing is very close to the wholesale price paid by ISPs for these components.

The Do Broadband 1 product, for example, combines the DSL 384 Access portion of the service with a 1 GB usage limit for a price of R 279-00. This is a VAT exclusive price of R 244.74.

The current wholesale rate for the access portion of the ADSL service to smaller ISPs is R 182.67, while the price for 1 GB of data from SAIX comes in at R 49.40. The combined total is R 232.07. The difference is R 12.67, not a significant margin for smaller ISPs trying to compete with their wholesale partner in the retail space.

Bundled Options

Telkom’s Do Broadband Closer packages further introduce a true one-price all inclusive voice and data offering. This makes life far easier for customers, with only one account to pay and a single point of sale.

ISPs other that TelkomInternet however seem to be excluded from offering such a single price voice, line rental, ADSL access and data allowance offering. While ISPs can offer a single rate ADSL access and ISP account service and advise them to purchase a Closer package from Telkom, they can not structure an all-in-one product.

These new offerings from Telkom may make it more difficult for Internet Service Providers to compete. Unsurprisingly ISPs are not happy.

ISP feedback

“Telkom are walking a fine line between blatant anticompetitive behaviour (bundling, marketing, undercutting etc) versus the risk that they squeeze ISPs too hard that they go back to the competition commission. I think they have repeatedly stepped over the mark and this may be the last straw. The numbers are looking very tight even when one includes the small markup made on line rentals I think many ISPs will not be able to compete on price alone,” said Matthew Tagg, MD at WebAfrica .

“Telkom always has had an unfair advantage over competing ISPs, and with the decision not to allow us to sell the ADSL access as a stand-alone product without the analogue line rental once again shows us that the decision to introduce this product was to boost their unsavory advantage,” said Keoma Wright, MD at Openweb .

Laurie Fialkov, Founder of Cybersmart , does not think that Telkom’s new products will put them at much more of a disadvantage. “In light of all the other advantages that Telkom has over ISPs, I doubt this one will have much of an impact,” said Fialkov.

Fialkov points out that there is definitely a better way in which Telkom can structure their wholesale product offerings.

“The unfairness arises in the fact that every ISP is growing Telkom’s revenue by the cost of the telephone line rental on every new ADSL installation and Telkom are now using this revenue to subsidize bundled products. Telkom argue that they need the line rental to cover some of the costs of maintaining the copper (which is true), they could recover the cost by including this cost when calculating the cost per minute of voice calls (which is done elsewhere in the world), but are obviously reluctant to do this as it would increase the cost per minute of their voice calls which would make other ISPs VOIP even more attractive,” said Fialkov.

“Charging a line rental allows them a way to reduce per minute voice cost and effectively thwart VOIP providers. It also forces the customer to interact with Telkom at some point in the ADSL installation process so ISPs cannot provide a "one stop shop", but Telkom can. Very underhanded in my opinion,” Fialkov concluded.

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New Telkom DoBroadband offerings met with mixed feelings