ISP’s need more power in the ADSL arena
In a recent presentation made at the MyADSL/BIT Broadband Conference, speaker Douglas Reed, MD of Datapro, provided some interesting facts and figures about the difficulties of competing in this environment.
One of the major stumbling blocks is how little negotiation power ISP’s in South Africa have.
He tackled the issue of the difficulties involved in connecting to Telkom’s network using the IP Connect system currently in use.
Telkom have made it extremely difficult both from a technical and a financial perspective to become an ISP that is able to ‘self provide’ ADSL.
According to Reed, in the past Telkom made it impossible for ISP’s to offer a viable alternative ADSL package due to their pricing model.
Initially ISP’s were simply reselling Telkom accounts, they had no access to the IP cloud and the R27 000 per month for a 2Mbps line made it virtually impossible to make any money selling ADSL accounts.
Reed described the situation as an ‘absolute joke’. The threat of legal action from companies like MWeb Business and Internet Solutions (IS) served to bring about a more equitable wholesale model.
Prices have since been reduced to around R22 000 per month for a 2 Mbps line which is a bit of a cut but corporate and residential users will only see the true market value of ADSL once local companies have access to the local loop.
Local loop unbundling will provide smaller ISP’s with more freedom to tailor packages to suit the broadband markets’ needs.
Currently it is really only the ISP’s that are big enough to pay IP Connect charges, which are in the region of R250 000 per month, that can offer anything remotely different from Telkom’s standard ADSL service.
Internet Solution (IS), one of the biggest players in the ADSL arena with 9000 active users, have invested heavily in ADSL and bought a vast amount of international bandwidth which means they are able to offer a higher cap on local traffic for their customers.
According to Alan Bacher, Access Product Manager for IS, price is still the major inhibiting factor for broadband penetration.
He tracked the growth of broadband in South Africa and by the first quarter of 2005 there were around 50 000 ADSL users. When the price fell by 11% early in March this year, broadband growth spiked with 20 000 new users signing up in a period of only 4 months.
This is impressive considering that from 2002 to 2005 there was a growth of only 50 000.
These types of figures indicate that there is a much larger broadband market out there; they just need the service to be more affordable.
IS has provided a viable alternative to other ISP’s who would like to resell packages offering a higher cap on local traffic.
It is impressive that in this highly restrictive environment IS are able to offer their customers up to 30G of local traffic while the incumbent has imposed local capping.
With a few simple changes in the ISP arena many other smaller ISP’s will be able to offer competitively priced ADSL packages and also provide the impetus Telkom requires to become internationally competitive.
Local loop unbundling is one of the major keys to opening the field to competition by providing ISP’s with more control over the ADSL network.
Only when this happens will we see true competition in the ADSL arena and enjoy the innovation that accompanies bundled services.
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