The one thing which keeps capped ADSL prices low

Many South African Internet service providers sell their capped ADSL products at cost, or below cost, and trust on breakage  – when users do not use all their data – to make a profit.

This is according to some of South Africa’s largest ISPs, which shared information about breakage on ADSL, VDSL, and fibre-to-the-home products with MyBroadband.

One ISP owner told MyBroadband that “breakage is generally your margin on a capped product, so if you can’t get breakage, you are unprofitable”.

Another service provider said that without breakage, they would be forced to increase their pricing by 30% to break even.

Breakage on ADSL and VDSL products

Breakage differs significantly based on the data package size and the speed of the broadband connection.

One ISP owner told MyBroadband they work on between 25% to 30% breakage on their ADSL and VDSL packages. On FTTH, this percentage drops to 15%.

The ISPs said they see more breakage on high-speed connections. This is linked to larger data caps on high-speed packages.

“A client on a lower-speed line generally takes a smaller cap compared to the client on the high-speed line,” said an ISP owner.

Breakage is also a function of product granularity, another ISP CEO told MyBroadband.

“If you have a million products with a 5GB difference in cap size, you will have very little breakage,” he said.

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The one thing which keeps capped ADSL prices low