New ADSL Pricing Structure will Hit SMME’s Hard

Telkom’s new ‘pay-per-gig’ and hard capping locally is going to have a negative impact on many small and medium size enterprises (SMME’s) in South Africa.

Telkom announced that the 1st of November will see the introduction of a per-Gig billing system.

This should effectively eliminate most of the high cap services offered by various ISP’s over the past few months.

Users will now have to fork out somewhere north of R 2000-00 for a 30 Gig account. Currently this price ranges between R 200-00 and R 600-00.

While this new billing system will benefit low-end users, many SMME’s and home users will find the new changes a hardship.

Many ISP’s are also unhappy with this new system and even started a petition to try and fight the proposed new billing scheme. The complaints ranged from the more frequent ADSL reset times to concerns regarding losses due to over usage when close to the cap.

These are not the only problems. SMME’s that are reliant on local Virtual Private Networks (VPN) as well as the companies offering these services will suffer the most. Numerous companies are currently using ADSL VPN services to connect their branches.

Up to now this was a cost effective solution as local traffic was not capped. This will all change when we move into November.

Most of these companies transfer a large amount of data between the separate branches, and with hard capping locally it will become a very costly affair.

Other services, like VoIP over ADSL and 24-7 remote monitoring over broadband, will also suffer the same fate.

A security and network engineer at a local IT company who would like to remain anonymous, makes it clear that this can spell disaster for many smaller businesses.

“Local capping would absolute wreck havoc to SMME’s,” he said.

He further states that “[Local] Hard capping will force a great number of companies to revert back to extremely expensive and slow Frame Relay or Diginet technologies to maintain critical business.”

But businesses using VPN’s and related services are not the only ones that will suffer. Many companies and individuals are currently using local services to host their websites to accommodate capped ADSL users. MyADSL is an example of such a website.

With hard capping there is no real need for local hosting. Many companies will move their websites to international hosts where the cost can be up to 20 times cheaper than in South Africa (due to the high bandwidth costs in South Africa).

Many IT professionals feel that Telkom is deliberately crippling their ADSL service to ensure the profitability of their other legacy technologies like Diginet and ISDN.

It is difficult to see Telkom’s justification of this harsh move. Local bandwidth is relatively cheap in comparison with International access and a 30 Gig soft cap locally will most likely suffice to stop what they call ‘abuse’.

Telkom’s group executive of corporate communications, Lulu Letlape, said that this move is “directly in line with wishes from the industry and ICASA”. This is however not very accurate.

In the recent ADSL findings report ICASA was very clear on the issues of both cap size and local traffic.

“The Authority has concluded that it is imperative to increase the cap in line with international trends” (page 39) and “The Authority is of the opinion that the count of local use towards the cap should be removed” (page 28) is quite explicit regarding ICASA’s views on this issue.

It is difficult to see how introducing a hard cap locally is in line with the above findings from ICASA.

The more frequent resets (dynamic IP addresses) is a further slap in the face of these findings as ICASA suggested the exclusion of these resets and in fact suggested a static IP.

While all of these issues will be battled out in front of an ICASA panel, local businesses and consumers are pushed back another step.

In an already very restrictive telecoms environment it is truly saddening that Telkom has decided to cripple its ADSL service even more rather than improve it in accordance with worldwide trends.

International telecoms companies are now offering free upgrades and even larger caps for less.

It is time for the Department of Communication to open its eyes and realize just how far behind South Africa is falling and to make attempts to bridge this gap with aggressive policies that benefit the country as a whole and not just a select few.

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New ADSL Pricing Structure will Hit SMME’s Hard