Shot across the bow
For a long time, Neotel maintained it had no intention of starting a price war with Telkom. It now appears that was little more than a ruse to lull the incumbent into a false sense of security. Its new tariffs signal a willingness to compete vigorously on price.
It’s not a full-scale price war yet but Neotel’s latest salvo across Telkom’s bow is the surest sign yet that consumers will benefit from the new national operator’s entry into the market.
Neotel’s new consumer-focused voice products come five months after it launched its first consumer offering. Unlike Telkom’s products, Neotel’s offerings are all wireless. For now, its network is available only in parts of Gauteng, Cape Town and Durban.
The company’s new product suite, known as NeoConnect Lite, is aimed primarily at voice users rather than those needing broadband Internet access, and comes in four flavours.
Two of the four products under the NeoConnect Lite brand are new, while the other two were previously available under another brand, launched in May. A new entry-level option costs R99/month while the top-end package, which includes the handset in the subscription fee, costs R469/month and offers uncapped Internet access. However, download speed is limited to 156Kbit/s, or about three times the speed of a dial-up connection.
Call rates for all four products appear to be highly competitive: the tariff for local calls to Telkom lines is 34c/minute vs Telkom’s 39c for on-net (Telkom to Telkom) and a minimum charge of 65c. Telkom charges its customers 65c/minute to call Neotel numbers, nearly twice the cost of a call made in the opposite direction.
Local on-net Neotel calls cost just 17c/minute and national on-net calls are 57c. Neotel’s rates for calling the mobile operators are R1,74/minute at peak times (Telkom is R1,89) and R1,09 off-peak (here, Telkom’s 94c is cheaper).
There is no minimum charge per call — unlike Telkom, Neotel offers true per-second billing from the first second — and there are no peak or off-peak rates for on-net calls.
The NeoConnect Lite packages are all restricted to data speeds of 156Kbit/s, which is reasonable for those used to dial-up; those already spoilt by broadband will find it slow. Data tariffs are comparatively cheap at just 8c/MB (R81,92/GB) and there’s no need to purchase a data bundle. That rate is just 4% of the out-of-bundle tariff of R2/MB charged by MTN and Vodacom and shows there is still plenty of scope for the mobile operators to cut their fees for Internet access.
The NeoConnect Prime product, introduced in May and aimed at people who need both telephony and Internet access, will continue to be available, Neotel says. Prices for the Prime product remain unchanged.
People who need broadband connectivity with no voice will be catered for with a new product to be launched by the end of the year. It will offer a Wi-Fi router with four Ethernet ports and will connect at high speed to Neotel’s wireless network — for technical readers, the network is built using a technology called CMDA2000 1 x EV-DO Rev A and is capable of theoretical downloads of 3,1 Mbit/s, though the company, being admirably honest, says real-world speeds will average between 450 Kbit/s and 900 Kbit/s.
The new product will suit home users who have multiple machines. It should also prove popular for small businesses, especially if Neotel is able to offer uncapped bandwidth at a reasonable price.
Uncapped and high-usage broadband solutions should become commonplace in the next few years. Cheap international bandwidth will become more readily available once Seacom, a new undersea cable to be landed in SA by Neotel, comes on stream in mid-2009.
Neotel is off to a promising start. You can bet that it’s the subject of attention at Telkom Towers in Pretoria.
Neotel versus Telkom discussion
First published as the column Technology & You in the Financial Mail of October 31 2008
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