Free ADSL data: can ISPs compete?

FNB Connect will be increasing the free monthly ADSL data offered to FNB customers to 5GB from Tuesday, 8 May 2012.

The fact that a financial institution offers free ADSL data to their clients as a value-add may be of concern to some Internet Service Providers (ISPs) which sell such products to make money. ADSL ISPs however do not seem too concerned about FNB’s offering.

Web Africa CEO Tim Wyatt-Gunning said that the qualification thresholds are relatively high for the 5GB free ADSL which limits the market (and hence the impact) of FNB’s free 5GB service. “I think there will always be a market for ‘affinity’ type sales but we do not see it is as a particular threat.

“Generally, past experience points to a rule that the more successful the non-core business, the more of a burden it becomes on the main brand, which usually ends up with the customer base being sold off, exactly the case when ABSA Internet was sold to Vox in 2007,” argued Wyatt-Gunning.

“Consumers should also remember that FNB is primarily a bank and not an ISP. Providing a quality network and quality support is a constant challenge for us and we caution whether a bank can provide the same.”

Tim Wyatt Gunning
Tim Wyatt Gunning

Vox Telecom CEO Douglas Reed said that he thinks banking customers really want a major reduction in banking charges. “Eventually the public will wise up to gimmicky value, provided by other services (points, gym memberships, etc.),” said Reed.

Reed does not expect FNB’s free data service to affect ISPs. “All of the leading players will adjust to the market as they have done in this extremely volatile period,” said Reed.

MWEB ISP CEO Derek Hershaw said that ISPs selling entry-level, small data-cap products may be concerned, but this is not their strategy. “MWEB’s strategy and focus is and will continue to be on uncapped ADSL,” said Hershaw.

“Some hardware retailers have been offering bundled ADSL for a while now but it’s not a strategy that appears to have been too successful. I believe that the bulk of South African internet users still want to buy their broadband products from a service provider that has this as its core focus, and not a value-added service,” said Hershaw.

Axxess marketing director Franco Barbalich said that there is still significant ADSL penetration to happen and that the market is big enough to support a variety of ADSL products and services. “Yes there is consolidation in our market, but we welcome new ideas and are happy to compete,” said Barbalich.

Keoma Wright
Keoma Wright - Openweb founder

Openweb MD Keoma Wright said that the free ADSL data products will not affect their core business which is uncapped Internet services.

Wright added that there is a future in ADSL data products, but service providers would have to bundle it with value added services. “We are already working on such products,” said Wright.

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Free ADSL data: can ISPs compete?