The reduction in IP Connect (IPC) and other rates recently announced by Telkom are not nearly enough, and are also not the only ADSL costs that need attention, Internet service providers (ISPs) have told MyBroadband.
This comes after Telkom announced price cuts to a number of its wholesale services:
- IP Connect by 8%;
- Diginet by 4%;
- CHIPAC by 4%;
- Ethernet Express by 6%;
- Metro Clear by 6%;
- International private leased circuits (IPLCs) by 25%; and
- SAIX Dedicated Access products by 10%
These effective tariff reductions would kick in on 17 October 2013, Telkom said.
“Having said that, the only wholesale service cut that will apply to MTN’s ADSL cost is the IPC cut of 8%,” Visser said.
He said that for a wholesale rate cut to have a significant effect on the ADSL industry, Telkom needs to cut IPC costs by at least another 40%, remove the need to pay a monthly rental for voice lines to get ADSL, and dramatically reduce the ADSL monthly line rental fees.
“To be honest these cuts by Telkom are disappointing,” Visser said.
He said that the simple fact is the biggest cost by far to consumers is the ADSL and voice line rental costs which go directly to Telkom.
“And sadly most of the remainder [consumers] pay also goes to Telkom through their IPC costs that they charge wholesale ISPs,” Visser said.
“Bottom line: Telkom needs to pass through bigger reductions in all areas if they ever hope that ADSL will grow in the same way that mobile is,” Visser said.
The boss of Mweb ISP, Derek Hershaw, agreed with Visser.
“If Telkom doesn’t start doing something urgently about the costs of ADSL line rentals and the compulsory voice line rentals, then ADSL will become less and less relevant in the SA broadband market,” Hershaw said.
Hershaw said that in all likelihood Mweb will use the savings on IPC costs to buy additional IPC capacity. There is a smaller possibility that they might adjust pricing on some of their high-end products, Hershaw said.
Following the announcement of the IPC rate cuts, Telkom also revealed plans to begin upgrading ADSL customers to higher speeds for free.
When asked about this, Visser said they have not yet received specifics from Telkom.
As with Afrihost and Mweb, Web Africa CEO Tim Wyatt-Gunning said that only the IPC rate cut affects their ADSL products.
“Since we have known about these meagre reductions for several months we have already built them into our pricing models, some of which we are still to implement,” Wyatt-Gunning said.
OpenWeb chief Keoma Wright also said that the IPC price cut is very small.
“We do believe consumers will see some benefit from this in performance if not on price,” Wright said. “Naturally, we would like to have seen a price drop of at least 50% so that we can pass a proper saving onto our clients.”
Cybersmart CEO Laurie Fialkov explained that the IPC rate cut is the biggest winner for them in terms of its impact on their customers.
However, as with the other ISPs, he indicated that a much larger reduction is needed to be able to reduce prices to end-users.
Instead, Fialkov said he will launch a new business-oriented product that Cybersmart has been planning in anticipation of an IPC cut.
Regarding the other wholesale pricing reductions, Fialkov said that Telkom’s IPLC tariffs are now in line with other large carriers.
According to Fialkov, Cybersmart was offered these new tariffs 2 months ago two try and get them to renew their contract with Telkom.
Despite being offered these lower rates earlier, Cybersmart will not be using Telkom’s IPLC services because they compromised quality for price even before the latest round of cuts, Fialkov said.
Vox Telecom declined to comment on which of the wholesale price cuts affect their ADSL products, and the significance of the cuts.