The Independent Communications Authority of South Africa (ICASA) announced last week (30 March 2012) that wholesale ADSL IPConnect (IPC) prices will be dropped by 30% on 1 April 2012.
The cost of IPConnect constitutes a large portion of the total cost of providing a consumer with an ADSL data package, and lower IPConnect prices will therefore allow Internet Service Providers (ISPs) to cut prices and increase the value proposition to their subscribers.
“There’s undoubtedly room for Telkom to cut prices further but at the same time they need to do a lot of work on their network and you need to leave some money on the table for them to do that,” said Hershaw.
“A reduction in line rental costs or a bump in line speeds would certainly be well received – our entry level product in this market should at least be 1Mbps,” Hershaw added.
MWEB customers can expect to benefit from the IPC price cuts. “With any previous price reductions we’ve usually ploughed the savings straight back into buying more capacity to ensure that MWEB customers continue to get the best ADSL experience in the country,” said Hershaw.
“We’ll look to do more of that this time around, but also pass something back to our customers on some of our products.”
De Nobrega said that although recent pricing in the market was already preempting the price drop, the price reduction of 30% will create some additional room for some adjustments.
“You will definitely see some additional products from ATC first for the business market and then later for the consumer market,” said de Nobrega.
“These will be a combination of larger usage limits and some new products. Our objective is to provide a high quality predictable experience as has been reported back by a number of users of our recently launched 75GB and 150GB business bundles.”
“Since IPC represents well over half of our entire network costs, it’s a meaningful drop, so, for once, thank you Telkom for helping us to get one step closer to our international peers,” said Wyatt-Gunning.
The lower IPC prices, said Wyatt-Gunning, will certainly allow ISPs to quickly pass on benefits to their customers. Web Africa on Monday boosted the value proposition of their Home Connect service, making it the first ISP to pass the benefits of lower IPC rates to their customers.
Wyatt-Gunning explained that it is not just about price: “The other equally important benefit to customers will be an improvement in network performance since the previous unaligned IPC pricing forced all of us to manage IPC traffic very diligently.”
The Web Africa CEO said that this price cut will provide ISPs with some breathing space and allow them to be more lenient in terms of traffic prioritization on the IPC bottleneck.
“This will definitely have a positive impact on ADSL prices for consumers and businesses in South Africa. It also is positive for local ISPs where they will be able to offer more exciting fixed line services to compete with the latest mobile offerings,” said Payne.
Payne said that the lower IPC rates make the uncapped offering a lot more attractive and now ISPs will be able to deliver better services and performance on their uncapped offerings.
“Afrihost will be coming out with a number of new exciting offerings in terms of bandwidth, what we need now is a similar bold approach from ICASA on the high ADSL line rental costs and the introduction of naked ADSL,” Payne concluded.