ADSL battle: Telkom Internet vs ISPs

Telkom Internet recently introduced its Do Movies promotion and Do Gaming add-on, offering unmetered access to media and gaming content from certain sources.

Together, the two offerings provide unmetered access to the PlayStation Network, Xbox Live, Battle.net, Steam, Origin, the Do Gaming servers, DStv CatchUp online, DStv BoxOffice online, iTunes, and the Samsung Video Hub.

This has raised a big question:

How?

Is Telkom Internet afforded special treatment by Telkom’s wholesale division to be able to offer deals like this?

ADSL service providers and other industry stakeholders have long held that Telkom Internet does not have to deal with the same challenges as other Internet service providers (ISPs).

However, according to Telkom Internet boss Erna Korff, they are in the same boat as their competitors.

“Our input costs are exactly the same as all the other ISPs and retailers,” Korff told MyBroadband.

Erna Korff

Same input costs as other ISPs

Korff said that this includes the cost of IP Connect (IPC), Telkom’s wholesale ADSL product, and other costs associated with the resale of DSL.

“We get scrutinised quite often to make sure we do not do margin squeeze, that we do not cross-subsidise, and all of those kinds of things,” Korff said.

Interestingly, unlike the feedback from other ISPs, Korff said that the biggest input component for them is international bandwidth.

She said local bandwidth is also a big portion of their input costs, but added that fortunately the costs of both international and local bandwidth are coming down.

When asked about the compulsory voice line rental and the ADSL rental component of the service, Korff explained that the same principles apply.

“We as an ISP don’t get a discounted price from the wholesale division,” Korff said.

She said that there are different margins and volumes involved, and similar to other players they buy in bulk from Telkom wholesale.

Building products

“It’s how we manage it [services bought in bulk] – how we ‘slice-and-dice’ it – that makes us different from the others,” Korff said.

IPC capacity, for example, also becomes more cost-effective depending on its utilisation by any given ISP.

“The bigger your customer base, the higher the usage on that, the more affordable the IPC becomes,” Korff said.

In turn, Korff said, this affords an ISP greater flexibility in terms of the propositions it can take to market.

According to Korff, the Do Movies promotion and Do Gaming add-on were enabled, in part, because they switched to using IPC.

That, along with new technologies that gave them greater control over their bandwidth and some clever design from the team let them build a service targeted at a specific market, Korff said.

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