Telkom recently announced wholesale price reductions of up to 63% across its product range, including Wholesale Fibre Broadband Access, IP Connect, Resell DSL, Metro Ethernet, and SAIX dedicated access offerings.
Internet service providers buy bandwidth on Telkom’s last-mile access networks for DSL and fibre services through a product called Telkom IP Connect (IPC).
The size of the price reduction is determined by the volume of bandwidth purchased by ISPs, with smaller providers set to benefit more than larger competitors.
Telkom has also launched a promotion which allows ISPs to double the amount of IPC bandwidth they have “for an incremental cost”.
Companies with large volumes of IPC could lower their cost by 80%, after all reductions are taken into account, according to Telkom.
Internet service providers welcomed the wholesale price cuts, and indicated that these savings will results in lower ADSL and VDSL prices and better service levels.
Crystal Web CEO Shaun Kaplan said price reductions result in either the same or similar service offered at a lower price, or an overall better quality of service.
Kaplan said Crystal Web is currently revisiting its pricing following Telkom’s announcement.
Afrihost director Greg Payne said Telkom has passed on a “small real discount”, but if ISPs are willing to increase their spend, they will get a lot more capacity.
“This means that the per-GB rate of DSL data should come down, and ISPs should give uncapped users much more bandwidth,” said Payne.
He added that while they are waiting for final details from Telkom, Afrihost will definitely pass on the benefits to its clients.
Cybersmart CEO Laurie Fialkov said the manner in which Telkom introduced the price cuts can pose challenges.
“To get a significant price cut we have to pay up to 15% more per month. While this gives us far more bandwidth, using this bandwidth effectively can be a challenge,” said Fialkov.
He explained that it is like paying 15% more in a restaurant to get two steaks instead of one. Great if you are very hungry, but if you cannot eat two steaks it may be a waste.
Fialkov also warned that Telkom’s decision to give massive price cuts to small clients, and very small cuts to large clients, will disrupt the market.
Openweb CEO Keoma Wright said they will be using the majority of the reduction to increase the quality of their network.
“We will be ordering a large amount of bandwidth into the network on our Durban, Johannesburg, and Cape Town IPC nodes,” he said. “Once live, clients will experience a much improved quality of service.”
Web Africa CEO Tim Wyatt-Gunning and MWEB CEO Derek Hershaw said they would only be able to comment after they have seen the full details of Telkom’s planned price cuts.