Telkom informed Internet Service Providers last week that it plans to increase the price of its entry-level “Fast DSL” service. This came at the same time as Telkom’s announcement that it will boost ADSL speeds.
While the ADSL speed increases were expected, many Internet Service Providers (ISPs) were surprised by Telkom’s plans to increase the price of its DSL384 service.
ISPs now have to decide whether they will absorb the entry level DSL price increase or pass this cost on to their subscribers.
Many ISPs indicated that they are still discussing the planned entry level ADSL price increase with Telkom.
“We will be absorbing this for the customer, and keeping our entry level lines at R150 per month. With the thin margins it’s a tough pill to swallow, but we believe the line prices are expensive as-is and would hate to have to charge our customers even more,” said Bryant.
Cybersmart CEO Laurie Fialkov argues that Telkom dropped the IPC price by 30% because they knew that they were going to recover almost all of this lost revenue from the increased IPC requirements to support the new higher line speeds.
“You can’t go from 384kbps to 1Mbps – an increase of more than 200% – without upgrading your IPC connection; not to mention that the telephone line rental that we are forced to bundle with this service goes up every single year,” said Fialkov.
“To increase our wholesale price and not increase the retail is unplayable. Telkom will argue that their DoBroadband retail division just absorbed the difference, which is pretty easy to do when you can just report the loss and recover it from wholesale,” said Fialkov.
“Telkom look like the heroes here. A 30% IPC reduction and faster speeds to the consumer at no extra cost. They are able to keep the price the same which forces us either to raise our prices and risk churn or have a further margin squeeze,” said Fialkov.
Fialkov said that Cybersmart will do its very best to absorb Telkom’s price increase “because the consumer does not deserve to have their prices increased”.
“Needless to say we are unhappy about any increase. If the increase is at R8 per month it will wipe out 13% of the savings we received from the 30% IPC,” said Fialkov.
Telkom mum on the planned price increase
Telkom was asked about their planned wholesale ADSL price increase, but the company did not respond to questions about their ADSL price hike plans.
The company would also not say whether they will increase the retail cost of their entry-level ADSL service.