The cap that chokes
Though the cost of broadband has been falling steadily over the past few years, telecommunications service providers in SA continue to impose severe restrictions on how much bandwidth consumers can use. It’s harming innovation and development.
Wireless data operator iBurst recently introduced a subscription package enticing consumers into “broadband” for the low price of only R49/month. If the offer seems too good to be true, that’s because it is. The package includes only 40MB/month of data usage. That’s not enough data for even the lightest of Internet users. It’s certainly not broadband. What it is, is a cynical marketing trick designed to allow iBurst to brag that it has the cheapest broadband in SA.
iBurst is an extreme example, but it is not the only company guilty of imposing restrictive bandwidth caps on its customers. Whereas telecom providers in many other countries impose no restrictions on how much their customers can download, SA operators, led by Telkom, are Scrooge-like in the way they divvy out bandwidth.
Telkom’s broadband packages offer monthly data bundles of between 1GB and 3GB. Though much more than iBurst’s entry-level 40MB/month, this is still grossly insufficient. New online business models are emerging in other countries precisely because bandwidth is available cheaply and without restriction. Social networking website Facebook, Internet telephony service Skype and online television pioneer Joost simply could not have emerged in SA, because of the country’s expensive and limited broadband.
The problems can ultimately be traced back to government’s telecom policy failures. The story is well known by now: Telkom was protected from competition in order to entice foreign operators to invest in the company. Those self-same investors — SBC (now AT&T) of the US and Telekom Malaysia — took full advantage of the state-sanctioned monopoly to maximise their returns at the expense of consumers and of the economy. The country is still counting the costs.
Though Telkom’s monopoly is technically over, it still controls much of the country’s telecom infrastructure. Prices for access to the Telkom-controlled undersea cable Sat-3 have fallen sharply in recent years, but the company continues to charge well above the international norm for bandwidth. It also still applies monopoly rents on its national fibre network. So independent service providers, still reliant on Telkom, are forced to impose harsh bandwidth caps to ensure profitability.
Consumers wanting fixed-line broadband still have to lease a line from Telkom. And, despite price cuts, the company continues to overcharge consumers for broadband line rental. Then there’s the cost of Internet data, which is inflated because of Telkom’s continued monopoly over national and international networks.
It’s likely that prices will stay high until Telkom has real competition in these areas. Fortunately, it is coming. Cellular operators Vodacom and MTN and state-owned InfraCo all plan to build extensive national fibre networks. MTN, for example, has announced plans to deploy a national fibre system at a cost of about R1,3bn. These initiatives should help bring down the price of bandwidth.
Then there are plans, by both government and the private sector, to construct new international submarine cable systems to link SA with the rest of the world. Despite the feckless department of communications, which has threatened to block majority foreign-owned cable systems from landing in the country, it’s unlikely that the projects will be barred. After all, one has to believe that government ultimately has the interests of its citizens at heart and won’t chase away hundreds of millions of dollars in foreign investment in an area where investment is so critically needed. Right?
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