Uncapped ADSL customers are using more and more data, and unless wholesale ADSL prices decrease and Naked ADSL is introduced the business model is under threat.
ADSL remains the broadband connection of choice for many businesses and residential users, and until fibre services become widely available this is unlikely to change.
One of the benefits of ADSL over mobile broadband connections – another connectivity option – is the availability and cost of uncapped data products.
However, Internet service providers are starting to feel the pinch as the average data use increases without significant wholesale price reductions.
Higher average data use
The increased popularity of online video and other bandwidth-intensive services is resulting in a higher average data consumption per user.
According to feedback from SA’s top ISPs, average data use on uncapped accounts increases between 9% and 50% per year.
While high-end uncapped subscribers still consume a disproportionate amount of bandwidth, it is less pronounced now through better fair-use policies.
The main reason for higher data use is no longer peer-to-peer services, but rather video. Most ISPs predict this will only grow.
Wholesale ADSL prices must come down
To accommodate the growth in the average data use without increasing the price or lowering service levels, wholesale price cuts are needed.
Vox Telecom’s head of network and operations Shane Chorley said the biggest cost to deliver broadband is the cost to connect to the Telkom network – IPC.
Afrihost director Greg Payne said IPC bandwidth is charged at four times the cost of international bandwidth, which is an absurd situation.
“Telkom should have to justify to the regulator why these charges are so high, when other providers who have real competition are charging a fraction of their price,” said Payne.
Payne said that the main thing they would like to see is an immediate drop in IPC pricing from Telkom.
“A minimum price reduction of 30% per year for 4 years is needed to bring about competitive pricing,” said Payne.
Naked ADSL needed
MWEB ISP CEO Derek Hershaw said that broadband is a volumes game, which means the more users you have on the ADSL network the better it is in terms of efficiencies and economies of scale.
“The ADSL market growth has been pedestrian for a few years now – the ADSL penetration rate versus the number of homes that have Telkom lines is way too low,” said Hershaw.
Hershaw said it is high time for Telkom to seriously consider naked ADSL to stimulate real growth.
Cybersmart CEO Laurie Fialkov agreed, saying that users and ISPs should not be forced to purchase a phone line with their ADSL service.
“Having said that, Telkom’s fibre offering – which also works over the IPC bandwidth – does not require you to take the phone line,” he said.