ADSL pricing benchmarks: is SA competitive?

To the surprise of many consumers and businesses Telkom recently told the media that Telkom’s voice and data prices are very competitive when compareds to international norms.

Dr. Brian Armstrong, Senior Managing Executive for Enterprise Markets at Telkom, showed slides relating to Q4 2009 telecoms pricing research conducted by Tarifica, which indicated that Telkom was indeed far cheaper than most countries on some products.

The data Armstrong displayed however only applied to Business Voice Combos, 2Mbps ATM services and 64Kbps Diginet lines. 

While it is instructional to take note of Telkom’s pricing on these services, it would have been more beneficial to look at pricing for high end data services like multi-Mbps fibre leased lines and high end ADSL connections aimed at the SME market.

The stats from Armstrong do indeed show a more affordable Telkom Business on some products than the market perception would suggest, but for many smaller businesses ADSL is the main, and often only, connectivity method.  It is therefore of more value to compare ADSL prices than Diginet or ATM costs.

Entry level ADSL conundrum

In a 2007 presentation, Telkom’s former Chief Sales and Marketing Officer, Godfrey Ntoele, claimed that Telkom’s Do Broadband Level 1 offering is one of the most affordable in the world.

Ntoele cited research by Africa Analysis where the price of entry level broadband services from a group of countries were compared, but such a comparison is a good example of how very important aspects of a broadband service can be ignored.

Broadband services are typically priced based on two components – speed and monthly usage limit (aka cap). Unless price somehow relates to all the components the research can be seriously skewed.

At the time Lulu Letlape, Telkom’s then Group Executive for Corporate Communication, confirmed that “the comparison was done to benchmark entry level broadband products, and not necessarily products similar in speed and volume capping.”

The table below provides an overview of entry level broadband pricing in a few countries, which clearly indicates Telkom is indeed not badly priced.

Considering that the entry level product from HKBN is an uncapped 100Mbps service and Telkom’s offering is a 384Kbps service with a 1GB cap, let’s compare these offerings based on speed and usage limit – a measure which Telkom uses to price their services as well.

The figures should speak for themselves.

Current ADSL prices: How does Telkom compare?

To see how Telkom compares with international incumbent operators such as BT in the UK and Australia’s Telstra/BigPond, we did a basic pricing comparison of their ADSL offerings.

This comparison is done excluding line rental, and the following should be taken into account when considering the information in the table:

1. No installation fees or modem costs were included in the pricing.
2. For Australia’s BigPond ADSL prices the offering aimed at ‘customers with a Telstra full service fixed phone’ was selected.
3. BT’s Broadband packages typically offer the service free for the first 3 months, and include free landline calls. This was not taken into account.

The following table gives an overview of the cost of broadband from incumbent operators in the UK, Australia and South Africa (currency conversion: 1 ZAR = 0.092 GBP and 1 ZAR = 0.14 AUD).

It is clear from the table above that South Africa is significantly more expensive than Australia and the UK when looking at the cost per Mbps per GB – hence taking into account all factors which determine the actual cost of a broadband connection.

ADSL pricing benchmarks: is SA competitive? << Give your views