Telkom ADSL pricing unpacked
Breaking tradition from previous years Telkom did not announce any ADSL price cuts at its annual results presentation. Instead the company indicated that its pricing was competitive and that its speed and quality was unrivaled.
Even though ADSL price cuts may be in store when Telkom files its new pricing with ICASA later this month, some of the company’s comments need a closer look.
Broadband Speed
Telkom CEO Reuben September said that Telkom was unrivaled in speed and quality. September joked that one should think of a phrase like “best broadband for half your rand”.
This statement is however only partly true. Vodacom recently launched their HSUPA service, providing real-world uplink speeds in excess of 1Mbps. This is three times faster that the 384Kbps uplink speeds associated with Telkom’s 4Mbps ADSL service.
Telkom is planning to bump up its uplink speeds to 512Kbps after a successful 640Kbps uplink trial, but this will only lift their speeds to around half that of Vodacom’s speeds.
Vodacom and MTN are also already upgrading their HSDPA networks to support downlink speeds of 7.2Mbps, significantly higher than Telkom’s fastest ADSL service.
Telkom, however, said that it was reducing the local loop length to the customer with initiatives such as fibre-to-the-node, something which places speeds of 10Mbps “in sight”.
Telkom’s chief of operations Motlatsi Nzeku also pointed out that in areas where Telkom will be rolling out W-CDMA they would be able to match or even exceed Vodacom’s HSDPA speeds.
Pricing
When Telkom was quizzed on whether it will respond to Neotel’s recently released consumer packages, which on the whole is far more aggressively priced that Telkom’s offerings, Telkom indicated that they feel that their ADSL services are already competitively priced.
Nzeku said that “…if you look over the whole weighted basket they do not seem to be way out of line with our provisioning on a cost perspective.” September added that the company’s price points are always under review but that he believes that the company’s ADSL prices are competitive.
It is however not entirely clear how Nzeko and September equate Telkom’s ADSL pricing to Neotel’s pricing.
Neotel’s flagship product, NeoConnect Prime, provides users with 5GB of monthly Internet usage with speeds of up to 2.4Mbps, 1 000 Neotel-to-Neotel voice minutes, 15 free local and regional off-net Telkom calls, 50 Neotel-to-Neotel SMSes and a CDMA device for R499 a month.
Telkom’s Do Broadband Level 3 Closer offering, offering 3GB of monthly usage at peak speeds of 4Mbps, free callmore calls and 1 000 free on-net minutes is priced at R 854 a month.
Telkom Do Broadband Closer service therefore offers less value-adds and monthly Internet usage than Neotel’s NeoConnect Prime service for nearly double the price. The situation looks even worse for Telkom for higher usage packages.
The truth is that Telkom is now significantly more expensive when compared to Neotel when it comes to bundled offerings and even more expensive than the mobile providers when it comes to low usage packages.
The South African market is somewhat unique in that it is not uncommon for mobile Internet providers to surpass fixed line broadband in speed at a more affordable rate for low usage.
In developed countries fixed line broadband speeds are typically multiple times the speed of mobile service – even though the gap is closing due to wireless technology enhancements – at a rate at which mobile providers can not compete.
The result is clear to see: there are already significantly more wireless broadband subscribers in South Africa than ADSL subscribers, and the gap is widening.
Compare this with the OECD norm where 98% of all broadband subscribers have fixed line connections and the result of lagging speeds and high prices associated with ADSL services, coupled the relatively low prices and high speeds of mobile broadband services, are not difficult to see.
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