Telkom’s wholesale and networks division, Openserve, has replaced its widely vilified IP Connect wholesale product with a much cheaper service that it has dubbed Openserve Broad Connect.
Openserve Broad Connect, and previously IP Connect, is how Internet service providers (ISPs) buy capacity on Telkom’s copper and fibre networks.
The launch of Broad Connect came after a Competition Commission inquiry into the South African data services market, which resulted in the Competition Commission instructing Openserve to substantially reduce the price of IP Connect.
Submissions from Internet providers revealed that Openserve charged 2,000% more for IP Connect than Vumatel charged for its comparable Automation Exchange product.
Prior to the launch of Broad Connect, Openserve’s pricing for IP Connect was R135 per Mbps, or R135,000 per Gbps.
Vumatel’s Automation Exchange, in comparison, was R6.50 per Mbps or R6,500 per Gbps.
In February 2020, Openserve defended its high IP Connect prices. By 25 March, Openserve announced a settlement with the Competition Commission that would see a drastic reduction in the cost of IP Connect through the launch of a new product.
When details of this new product — Broad Connect — started to emerge, Internet service providers were quick to warn that even though the wholesale cost of data had come down, Telkom had also hiked the wholesale prices of its line access fees.
Many ISPs also said that they had been selling Openserve products at a loss in anticipation of a substantial price cut on IP Connect (now Broad Connect).
For these reasons, there were little to no savings on a home user’s monthly DSL or fibre Internet bill.
At least one ISP was positive about the change, saying that with the introduction of Broad Connect, Openserve’s business model is now “more-or-less” aligned with other major fibre network operators.
It also stated that Openserve’s installation costs are the cheapest in the industry.
Broad Connect not just renamed IP Connect – Openserve
Responding to questions from MyBroadband, Openserve said that it did not simply rename IP Connect to Broad Connect and reduce the price.
“Openserve has, for some time now, been considering introducing a new wholesale Broadband Access Product suite into the market,” the company said.
This new broadband access product suite is called Openserve Broadband Connect, not to be confused with Openserve Broad Connect.
Where Broad Connect is essentially how ISPs buy capacity on the Telkom network, Openserve Broadband Connect is how they pay for the physical line from Openserve.
The Broadband Connect product suite is subdivided into Openserve Fibre Connect, Copper Connect, and Pure Connect. Openserve Pure Connect is a relatively new “naked DSL” product which excludes analogue phone line rental from the package.
New Openserve prices to reduce costs for ISPs
Openserve confirmed the information MyBroadband received from ISPs that it increased its line access fees while cutting the price of Broad Connect compared to IP Connect.
“There is a larger fixed access component, reflective of the fact that the new access services include backhaul to the Openserve points of presence (POPs), and a much smaller variable pricing component for the handover product, reflective of the fact it only covers handover at the POP,” Openserve stated.
“This generally results in larger savings to our clients as the speed of the relevant services taken up increases.”
Asked what kind of savings its new product portfolio offers ISPs, Openserve said that it would vary from network to network.
“Each ISP has its own unique network and product design, including issues such as oversell ratios and the way broadband and Internet services are provided,” Openserve stated.
“For this reason, it’s difficult to determine the exact net decrease per ISP, but Openserve’s conservative estimates indicate that the net decrease nationally should, on average, amount to approximately 20% across the portfolio.”
Openserve said that its redesigned product offering has been viewed favourably by the Competition Commission.
“The Commission is satisfied that it addresses the concerns raised in the inquiry in connection with the IP Connect product,” Openserve said.