ADSL tipping point

Up until now it’s been a battle to run a global online business in South Africa. Not really because of the speed of broadband – one can overcome that by bonding multiple ADSL lines together – but rather because of the cost of doing so.

Importantly though, it hasn’t been impossible. There are examples of solid online businesses which is further proof of South Africans’ entrepreneurial talents.

Four 4mbps ADSL lines through a solid internet service provider will give a smallish company as good an internet experience as you’d have overseas. But these come at a price. And while the “small fortune” has been a lot smaller than the “small fortune” you would’ve paid four years ago, it’s still been expensive.

The arrival of uncapped ADSL now means businesses that do spend a lot of time online, especially those with fairly data intensive requirements, can now do so at a far more affordable rate.

An arguably as important announcement: the arrival of PayPal in South Africa (through FNB) means we’ve finally caught up with the rest of the world. Sure, snide commentators will point out that we’re where Korea was five years ago and they’ve moved on, but at least we’re now only four or five years behind (as opposed to eight or nine).

South Africans have been able to use PayPal to pay for goods and services overseas via their credit cards, but up until last Thursday have simply not been able to receive funds. Thanks to exchange controls and the Reserve Bank, the process to send and receive funds with PayPal (through a linked FNB account) is clunkier than it should be. But it’s a massive step forward, and clunkiness that a lot of people will be happy to live with.

Before last Thursday, South African businesses could not receive funds via PayPal. I’ll say that again: to sell our goods to the world online, buyers were forced to pay by credit card. And then it all changed.

Bed and breakfasts, tour operators or even companies who want to sell crafts to the world can now accept PayPal. There’s no complicated credit card payment gateway to set up. No complicated bank accounts to set up. You need to sign up for a PayPal account. And link that to an FNB one. Obviously FNB are hoping to snare more than a few small businesses while its exclusivity lasts. And anyone who doesn’t want to go through the hassle of moving their account could open a secondary account at FNB and link it to PayPal.

The setting up of actual payment buttons is a breeze. You don’t need to be a computer genius. This is real point and click stuff.

A number of opportunities suddenly becoming blindingly obvious…

Within a few weeks you could be selling crafts, tours, accommodation, shirts or even wines to the world. And with affordable uncapped ADSL, you’d be able to literally spend your entire month online, growing your business.

A professionally skilled friend of mine is now planning to return after (like thousands of other graduates) spending a few years in the UK. As a graphic designer, he’s now able to take on work here that would be unprofitable in the UK. He will use a lot of data during the month, and the traditional per GB model would have required some very sharp pencils to make his idea work. Affordable uncapped ADSL means his business is now viable. There is no way he could’ve returned to SA and run a profitable enterprise a year ago.

Initiatives like Silicon Cape – which aims to bring together investors, talent and entrepreneurs to build a start-up industry and culture in Cape Town – are now a lot more realistic than they might’ve been 18 months ago.

Last week I postured briefly about the viability of an internet café in a township or semi-urban area. There are hundreds if not thousands of these kinds of enterprises dotted around the country. Previously, the internet cafe’s prices were pretty much determined by the cost of a gigabyte of access. Now owners will be able to have a fixed monthly cost of R599 for a 512kbps shaped line (access plus line rental). Now the economics make serious sense. It’s a volume game for ISPs. And it becomes a volume game for the internet café. If business does well, move to a faster line and your customers will be even happier.

Think about the thousands of South Africans who’ll begin to join the rest of the world online. This is real socio-economic upliftment.

And as a bonus, some high end users will be able to buy content using PayPal. For example, BlackBerry users will no doubt soon be able to buy apps through the company’s App World store in SA. Up until now, we’ve been restricted to free apps only as the payment mechanism for paid-for applications is PayPal.

Welcome to the rest of the world.

Uncapped ADSL and Paypal in SA << discussion

* Hilton Tarrant contributes to “Broadband”, a column on Moneyweb covering the ICT sector in South Africa. The cynics will sneer, but let’s talk in a year’s time. We are living through real, profound change.

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ADSL tipping point