The truth about ADSL costs in SA

Web Africa COO Rupert Bryant has provided details about the cost breakdown of ADSL. Unsurprisingly, most of your money ends up in Telkom’s pocket.

Bryant explained that it is challenging for local Internet Service Providers (ISPs) to make money on ADSL with the current cost structure.

“75% of ADSL revenue goes towards the wholesale network costs (and most of this is to Telkom). We’ve had to learn to be fairly lean and efficient. As a comparison, many international ISP’s typically spend only about 60% on network costs – a massive difference,” explained Bryant.

Like most other South African ISP owners, Bryant is calling for lower IP Connect (IPC) and ADSL access prices.

“‘The meat and potatoes of providing ADSL to the consumer, is IPC and the ADSL line portion. If we want real improvement, this is where we need to focus. The rest is rats and mice,” said Bryant.

“If we count the ridiculous ‘telephone line’ cost of R140 a subscriber has to pay, Telkom accounts for around 90% of the total ADSL cost.”

Bryant provided a breakdown of the cost of a 1Mbps ADSL service with a 10GB ISP account.

Portion Details Breakdown Price % of cost Paid to Telkom
10GB Data Cost R200 31.8%
–Intl Portion of Data International R48 7.6%
–LocalĀ  Portion of Data Local R18 2.9%
–Telkom IPC Portion of Data IPC R133 21.3% 21.3%
Telkom ADSL Line R289 45.9% 45.9%
Telkom Phone Rental R140 22.3% 22.3%
Total Cost to Consumer R629 100% 89.5%

The following graph clearly shows how little of the total revenue goes to the ADSL ISP.

ADSL cost breakdown
ADSL cost breakdown

To solve the problem of high ADSL costs Bryant suggests better regulation or breaking Telkom into separate companies.

“The Telkom monopoly needs to be broken, the regulators and government need to get it together and either put some legislation down, or break up Telkom into separate wholesale and retail companies,” said Bryant.

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The truth about ADSL costs in SA