Cutting ADSL prices: ISPs say what needs to be done

ADSL service providers said that naked ADSL, a pre-paid ADSL solution, and lower ADSL access costs can significantly boost ADSL take-up in South Africa.

Web Africa COO Rupert Bryant said that the biggest thing holding back ADSL growth is the high cost which largely comes from Telkom’s “exorbitant last-mile, phone and line access fees”.

“A basic home setup for ADSL costs around R500 per month. It should cost half of that,” said Bryant.

Cybersmart CEO Laurie Fialkov said that the biggest problem with ADSL in SA is Telkom’s insistence to force consumers to pay for an analogue voice service with their ADSL line. “This line rental fee is making ADSL much more expensive than wireless alternatives,” explained Fialkov.

Fialkov added that another stumbling block to boosting ADSL in SA is the inability for the ISPs to offer a true prepaid ADSL service.

The reason for this, said Fialkov, is because a telephone line is bundled with an ADSL line, and ISPs can also not activate and de-activate ADSL on demand.

The Cybersmart CEO highlighted that the poor activation time of an ADSL line further hampers growth.

Greg Payne
Greg Payne

Afrihost director Greg Payne said that for ADSL to compete effectively against mobile data offerings Telkom should:

  • Reduce IPC by another 30% in November;
  • Reduce 1Mbps and 4Mbps ADSL line rentals by 31% and 51% respectively, so they are both R199 per month incl. VAT; and
  • Introduce naked ADSL.

“This would obviously reduce Telkom’s current revenue, but we believe it would grow the ADSL base from the current 800,000 odd subscribers to over 2,000,000 subscribers in a relatively short period of time and in so doing replace the revenue that Telkom lost,” said Payne.

“I am positive ISPs would then also come to the party to offer an uncapped broadband offering that is less than R400 per month in terms of total cost to the end user.”

Murray Steyn
Murray Steyn

Murray Steyn, Chief Commercial Officer at Vox Telecom, said that it is important is for the Department of Communications to stick to its timelines and ensure that Bitstream is a reality by the end of 2012.

“Bitstream itself is only one step in the local loop unbundling process, and whilst it doesn’t allow ISPs the ability to offer last mile services on the existing copper infrastructure directly (which is when we will have true competition), it is an important part of the Local Loop Unbundling process,” said Steyn.

“Recent ICASA imposed reductions in the IPC cost saw aggressive price cuts from ISPs that directly benefited the consumer. Any further price drops that the ISPs received would have similar effects and encourage further growth of fixed broadband,” said Steyn.

Sean Nourse
Sean Nourse

Sean Nourse, executive of connectivity at Internet Solutions, said that the first and most important step is to encourage Telkom to provide Naked DSL.

“The DSL market competes directly against other Broadband technologies like 3G where there is little or no price barrier to entry. There are four things that ICASA can influence with DSL to increase penetration – Affordability, Coverage, Service and Speed,” said Nourse.

“DSL generally answers the last three, or it is at least making slow improvements in those areas, but as long as Telkom insists on charging for its traditional line rental, affordability will be its biggest challenge”.

Rupert Bryant
Rupert Bryant

Bryant and Steyn urged the DoC and ICASA to address Telkom’s apparent access line deficit. “Until that issue is resolved, Telkom is not incentivised to roll out any further last mile infrastructure which is also critical to the expansion of the footprint of fixed broadband services,” said Steyn.

“Telkom cites their ‘access line deficit’ as the reason for the high cost of ADSL access and analogue line rental, but quite honestly this is just a symptom of an inefficient organisation,” argued Bryant.

Bryant said that partial or full local loop unbundling may be the best way to ensure a brighter future for ADSL in South Africa.

“If Telkom fails to embrace the future, or evolve into a more efficient organisation, they risk not only holding back SA, but also becoming irrelevant from alternate last-mile networks, and/or wireless technologies such as 3G,” said Bryant.

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Cutting ADSL prices: ISPs say what needs to be done