Uncapped ADSL price war…bring on round two

When Telkom drops ADSL prices and changes the way it caps users, the whole market reacts. Telkom Internet (the internet service provider business) is still the largest in the country, so everyone else has to respond, including the leaders of the uncapped ADSL charge, MWEB (the second-biggest).

Telkom has surprised the market twice in less than three weeks.

First, as half of Gauteng was still heading back from the coast, it announced that from February 1, there would no longer be a hard cap on its capped ADSL accounts. Users will still have internet access, even after reaching their monthly allocated data.

This is a big deal. It means that customers who are accustomed to their 5GB data limit (and the bizarre local and international traffic split which used to exist) can suddenly start using their bundles in a more liberal way. Almost uncapped. Not quite. But good enough.

The move last week, which saw Telkom cut the price of its uncapped products has really stirred up the market. The moves were aggressive.

On the 4Mbps service (which is one most customers will probably try to have installed), the new bundle price for uncapped internet and the ADSL line rental is R699 – the same as just the uncapped portion before the price cuts.

Telkom’s decision has forced MWEB to introduce new uncapped packages which will see customers throttled with high usage (its existing uncapped products remain in place as ‘premium uncapped’ packages and will not be throttled). Expect other ISPs to follow (some already have).

However, the lingering compulsory voice line rental remains. This adds another R150 to your monthly internet bill, whether you want a landline or not.

It’s here where Telkom is trying to shore up its annuity revenue, despite pressure to unbundle the services completely and to not require the rental of an analogue voice line.

I’d be surprised if this requirement (and the current pricing structure) remains in place 18 months down the line.

The first uncapped ADSL price war was a relatively easy one. MWEB, under then CEO Rudi Jansen, deserves the credit for launching affordable uncapped broadband in South Africa and for stimulating the market. Telkom was late to the party.

Yet, this time, it’s made the move.

But can uncapped ADSL get much cheaper from here? The truth is there’s not that much more room to cut prices.

On the horizon, though: faster ADSL. Telkom’s 20Mbps and 40Mbps VDSL services will be launched in March, and pricing for these is aggressive. But, these are only available in very selected metro areas (where Telkom has upgraded its network).

Cybersmart has priced 5GB of data a month plus the access for the (up to) 20Mbps at R479 per month. Add the R150 for voice line rental, and you’re looking at roughly R600 a month for seriously fast internet. It’s in the uncapped space where we’re going to see the next price war.

Expect the rollout of these services to accelerate.

An uncapped 40Mbps broadband service that’s affordable? Sign me up.

Original article from Moneyweb: Uncapped ADSL price war… bring on round two

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