Below cost ADSL prices: hurting the industry?
Over the last few months consumers were treated to scores of low cost ADSL data offerings. Initially pricing dropped from the usual R70 per GB to around R50 per GB, but a few new players – notably Afrihost, Screamer Telecoms and G-Connect – launched services with per-GB prices of between R20 per GB and R30 per GB.
More recently prices started dipping below R20 per GB. G-Connect is offering ADSL data at R14.50 per GB while Sainet launched its split-billing ADSL data packages which are priced between R10 and R30 per GB depending on a subscriber’s usage patterns. Afrihost then launched its high-end 50 GB and 100 GB data bundles at R19.50 per GB, but doubled subscribers’ usage limits until May, bringing the price down to R9.50 per GB.
Hurting the ADSL industry?
While many ADSL users are literally feasting on this slew of low cost ADSL data, some industry players feel that these prices are not sustainable and may well create unrealistic expectations among consumers.
Web Africa bore the brunt of the pricing standards set by some of the new ADSL ISPs when it unveiled its latest prices recently. While Web Africa’s bundled ADSL prices were of the lowest in the market, their standard ADSL data bundle prices were well above R30 per GB which is currently seen as a measure of affordability.
Web Africa CEO Matthew Tagg explains that while many high end users felt let down by their new pricing, they ‘are dropping prices and leading the way with the larger ISPs’. “We have across all our products seen an average decrease of 20% price drop. Our Complete range is now the most competitive around overall,” said Tagg.
Tagg added that many of the low-cost ADSL data offerings are simply not sustainable: “Even if they get it for cost, less 10%, you can’t run an ISP on that GP. It doesn’t exist anywhere in the world.”
iBurst CEO Jannie van Zyl agrees with Tagg, saying that while these low cost ADSL data bundles are great for consumers now, it may well hurt the industry in the long run. Van Zyl said that many of the new ISPs may have a strategy of ‘sign them up now and hope for lower wholesale prices later’ – something which is simply not going to work out.
Van Zyl predicted that quality of service will become an issue with the cheap ADSL offerings in the near future, adding that consumers may approach ICASA in future not because of price, but because of poor service levels and slow speeds.
Consumers happy
It may be true that some of the newcomers in the ADSL market are dabbling with risky business models, but most consumers feel indifferent about the various ISPs business strategies – and justifiably so.
As long as the ADSL market remains competitive, some ADSL service providers will push the envelope when it comes to innovation and price. And while some providers may go belly-up because of mistakes, consumers can simply move on to the next provider which serves their needs the best.
Below cost ADSL services << Good or bad for the industry?
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