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%|
|–Local 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.
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.