Here comes Neotel
I never thought the day would arrive. Last week I placed my first phone call using Neotel, the company licensed (after years of political and legal wrangling) to provide fixed-line services in competition with Telkom. Better late than never.
SA’s second fixed-line network operator was meant to begin operating in May 2002, when Telkom lost its statutory monopoly over fixed-line telecommunications. Six years later, the company — known now as Neotel — will finally launch its services to consumers.
All signs are that Neotel is finally gaining traction — and that it’s prepared to take the fight to Telkom. Despite warning initially that it wouldn’t start a price war with Telkom, indications are that it will compete aggressively on price. The company is still reluctant to talk prices, but some details are emerging.
Last week it disclosed the prices for NeoConnect Prime 10GB, one of its new, consumer-focused products – and they significantly undercut Telkom, iBurst and the cellular operators, in both voice and data.
For R599/month, Neotel customers can expect a generous 10GB monthly Internet data allowance, a maximum wireless 2,4Mbit/s data connection (average speed is between 300Kbit/s and 700Kbit/s), 1 000 free on-network calls and 50 free on-net SMSes. Data usage beyond 10GB costs 8c/MB, well below the mobile operators and iBurst.
Voice tariffs are also competitive: local calls from Neotel to Telkom cost 34c/minute (17c off-peak). Telkom charges its customers nearly double that for a call to Neotel — 65c/minute, during both peak and off-peak periods — though that rate is not distance dependent. Local on-net Neotel calls fetch 17c/minute (Telkom on-net local calls cost 38c, billed per second, and excluding an initial 59c connection fee). A call from Neotel to Telkom from Johannesburg to Cape Town will cost 57c/minute (33c off-peak) whereas a national on-net call using Telkom costs 65c/minute peak and 32,5c off-peak.
The R599 subscription price includes the cost of a handset that provides both Internet access and telephony. The handset is attractively designed and doubles as a telephone and wireless Internet modem.
The handset uses a fixed-wireless technology known as CDMA2000. Because it’s wireless, consumers won’t need a Neotel technician to install it. And it offers a degree of portability. CDMA2000 handsets, in a form factor resembling cellphones, are likely to follow, though Neotel won’t offer the full mobility provided by the cellular operators.
With voice tariffs well below those charged by the mobile operators, especially for calls to fixed lines, expect people to begin carrying two handsets. Dual-mode handsets, capable of handling cellular GSM/3G and CDMA2000 signals are also likely to become popular.
Neotel already has coverage in some parts of Gauteng, Cape Town and Durban and is expanding its network quickly. It uses the 800 MHz frequency band, which gives it good coverage around its base stations. This frequency also penetrates well into buildings.
Residential consumers wanting true wireline services — those delivered over a cable — will have to stick to Telkom for now. Providing new cable infrastructure into people’s homes is prohibitively expensive. Local-loop unbundling will allow Neotel — and others — to provide services over the “last mile” of copper cables that connect people to Telkom’s network. But this is a complex process and it will be many years before someone other than Telkom will be able to provide a cable-based fixed-line service.
Even without this access, Neotel has signalled its desire to compete and is set to ruffle a few feathers. Expect Telkom to cut its prices and improve its broadband offerings in the next few months.
First published as the column Technology & You in the Financial Mail of May 2 2008
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