Some more ‘Chinese Maths’
While it is not entirely clear what Telkom meant by this term , the monopoly did say that ‘at this stage it was difficult to benchmark South Africa against other international country examples given that it had not yet reached significant economies of scale.’
This argument is dubious at best, and it is always valuable to determine how justified a statement like this may be. It was not too tough to find examples of countries with similar numbers of ADSL subscribers as South Africa. The two most suitable examples are Morocco and New Zealand.
Morocco currently have around 250 000 ADSL users while New Zealand had just over 330 000 as of December 2005. Morocco is particularly suitable as it also has a lower GDP per capita than South Africa, a smaller population and a similar broadband penetration rate. It is further valuable to note that Morocco launched ADSL after South Africa.
So how do these two countries fare in terms of ADSL pricing?
Morocco’s most affordable broadband offering is an uncapped 128 kbps service priced at R 116-00 per month. Their unlimited 512 kbps service costs R 233-00 per month while their 1 Mbps service is priced at R 311-00 per month. Our African counterpart also has an uncapped 4 Mbps service for those who desire more speed which retails for R 622-00 per month.
It is interesting to note that Morocco’s uncapped 512 kbps ADSL service costs less than the current access portion of Telkom’s 192 DSL service which is to be bumped up to 384 Kbps come 1 August.
New Zealand has a 3.5 Mbps with a 20 GB usage allowance of R 423-00 per month. The same service with a 40 GB allowance costs R 641-00 per month. These two fast, high-usage services therefore cost less in total than the current price for the access portion of Telkom’s 1 Mbps ADSL service.
Telkom’s comparable 1 Mbps offering is over 1000% more expensive than Morocco and over 600% more expensive than New Zealand despite the fact that their service is more than 3 times slower our tri-nations competitor.
Telkom’s Steven Hayward pointed to the fact that most content comes from the US which places SA at a significant disadvantage. For countries like the US, Canada or the UK, who do not have to use reams of expensive undersea cabling this is an advantage but not so for Morocco, New Zealand or Australia.
And then there is the related issue of the exorbitant local bandwidth costs forcing many South African content providers to move their hosting overseas. This not only means that money and business is moving out of South Africa, but also that the expensive SAT3 resource is wasted on traffic that should have been local only.
Hayward said that Telkom is competing in a ‘very competitive’ ISP space. Currently most of the ISP’s are simply Telkom resellers, while their only real competitor in the residential and SMME ADSL space, Internet Solutions, are finding it extremely difficult to create any margin by using Telkom’s exorbitantly prices IPConnect product. Basically all of the products in the ADSL space are Telkom products of some sort.
It is clear that Telkom is holding all the cards, and when one looks at the facts it is not surprising that both consumers and ISP’s have complaints pending at the competition commission and ICASA.
But then again maybe ISPA and the ISP arena are also just using ‘Chinese maths’ to show that there is margin squeeze when it comes to ADSL.
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