Telkom announced on 13 August 2013 that it will provide 5% additional IP connect capacity to all existing IP Connect wholesale customers at no additional cost, with effect from 1 October 2013. The response from consumers and ISPs may not be what Telkom expected.
IP Connect (IPC) is the wholesale product Telkom sells to large ADSL service providers which enable them to offer their own ADSL services.
The 5% increase in capacity at the same price was widely seen as far too little to have a real impact.
“As if 5% increase is worth mentioning even. They should rather drastically reduce the IPC connect wholesale prices instead,” one consumer said on the MyBroadband forums.
The biggest criticism about Telkom’s free, but small IPC capacity increase came from Internet Service Providers.
MWEB – hoping for a lot better
MWEB ISP CEO Derek Hershaw said that Telkom’s announcement is a bit like getting a pair of beige socks for Christmas. “You say ‘thank you’ but you were really hoping for something a lot better,” said Hershaw.
Hershaw said that he does not expect Telkom’s free IPC capacity to lead to any price reductions.
“It may result in a marginal improvement in product performance providing that Telkom’s network can handle the additional traffic,” he said.
Hershaw said that a fair IPC price reduction will be at least 20%.
Web Africa – a poor apology rather than an enticing gift
“There should be a restaurant which hands out Telkom fortune cookies with the bill to give us a clue as to what might lie ahead,” Wyatt-Gunning joked.
He explained that Telkom slashed their retail consumer uncapped prices a few months ago, which meant that ISPs responded in the expectation of a wholesale IPC reduction which never came.
“They slashed their business uncapped prices a couple of weeks ago, again we waited for a drop in IPC and, if this is it, it appears to have arrived as a poor apology rather than an enticing gift,” said Wyatt-Gunning.
“To compound the problem, when our customers look at the total cost of ADSL as an option versus alternatives, the line rental cost is still way too high and makes the purchasing decision too expensive for many.”
The Web Africa CEO said that if Telkom had reduced the line rental costs, ISPs might have forgiven them for such an impotent IPC reduction.
“But they haven’t, and the combined effect will mean that ADSL will continue to stagnate in the number of people prepared to pay for it,” said Wyatt-Gunning.
Openweb – we know the beast by now
“5% is simply a joke. I cannot believe that Telkom is getting away with such a silly reduction, again,” said Wright.
“We need a minimum of a 40 to 50% IPC price reduction immediately, with a further reduction of 10% per annum until they charge only 10% of the amount they are charging us now,” said Wright.
Wright said that Telkom’s free 5% IPC capacity is likely to result in slightly lower contention ratios, but not any significant price moves.
Vox Telecom – already priced in
“The benefit will not be immediate though and only filter in as demand increases,” said Reed.
Some good news
While Telkom’s 5% free IPC capacity may not be well received by ISPs, there is some good news.
Telkom made it clear that the decision to provide additional IPC capacity to its existing customers is independent of its recent settlement with the Competition Commission.
The company is expected to reduce IPC prices by around 8% in the near future, with another two price cuts to follow for the next two years.
This made consumers much happier, with comments like “Not too shabby” and “Very Nice” popping up in discussions.