Broadband pricing and SEACOM
SEACOM was recently switched on and with it came promises of price reductions and the ability to experience ‘true broadband’ in South Africa.
Setting the scene
SEACOM partner FeverTreeConsulting said that the “cable has an enormous capacity of 1.28 terabytes, sufficient to enable high-definition TV, IPTV, and peer-to-peer networks. As importantly, pricing will be significantly lower than present pricing, which will allow greater access to the technology in Southern and East Africa.”
Brian Herlihy, SEACOM CEO, added that SEACOM is proud to be the “the first to provide affordable, high quality broadband capacity and experience to east African economies. Turning the switch ‘on’ creates a huge anticipation but ultimately, SEACOM will be judged on the changes that take place on the continent over the coming years.”
SEACOM may well have a design capacity of 1.28 Tbps (not terabytes), but to date only 80 Gbps have been lit. Questions have also been raised about SEACOM’s ability to lower pricing and when consumers will start to see tangible benefits.
As Herlihy rightly pointed out the project’s success will be measured on the changes which take place in the telecoms market, and in South Africa consumers are already looking for answers from the major telecommunications players.
What the big operators say
At the recent Internetix event organized by Internet Solutions, the question about SEACOM lowering broadband prices was put to a panel which included Internet Solutions CEO Angus MacRobert and Telkom SA MD Pinky Moholi.
According to MacRobert international bandwidth – the only area where SEACOM has a direct impact – constitutes between 20% to 25% of the cost of providing a broadband service. This means that a reduction in international bandwidth tariffs will influence the total cost of a broadband service by a small percentage.
MacRobert highlighted that Telkom still has a stranglehold on the local loop – and hence a monopoly on ADSL access – and noted that SEACOM provides no failover in the event of a system break. SAT-3 provides redundancy in the form of the SAFE cable, something which MacRobert said comes justifiably at a premium.
MacRobert predicted that there will be significant price reductions in 2011 when the WACS cable becomes operational and hence provides redundancy to the SEACOM system.
When Moholi was asked about broadband price reductions, she said that pricing is coming down, but that the biggest issue is not tariffs but rather how much bandwidth is available at what cost. Moholi said that it should be remembered that Telkom is not the only broadband provider, and that the local broadband market can be seen as very competitive.
Telkom’s monopoly to blame?
Ex-Vodacom CEO Alan Knott-Craig said that Telkom’s previous monopoly was to blame for the poor national broadband infrastructure and subsequent high costs and poor service levels. He added that it will take years for South Africa to catch up with the rest of the world. Knott-Craig noted that SA has a legacy of a fixed line monopoly which lasted over a decade, and that it will most likely take another decade to overcome the effects of this monopoly.
Knott-Craig further said that he does not believe that Infraco will lower telecoms costs and provide better broadband services. His advice was for Government to avoid becoming an industry player within the telecoms market and rather focus their energies on facilitating a more competitive market.
According to Knott-Craig a more competitive telecoms market can be created by handing out the available spectrum to operators who have the money and manpower to utilize it best, lowering interconnect rates and avoiding Government initiatives like Infraco.
The consensus at this year’s Internetix appears to be that there is no quick-fix for lowering broadband prices. Whatever measures are put in place now will take a fair amount of time to filter down to a consumer level where ordinary South Africans see the benefits.
SEACOM & broadband pricing – is this what you expected?
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