Openserve customers pay more for fibre in South Africa – Here is why

MyBroadband has run several fibre package comparisons across multiple ISPs, and the results have largely reflected a competitive and healthy ISP industry which benefits the consumer.

They also portrayed an interesting difference in prices between fibre network operators (FNOs). Specifically, Telkom’s wholesale infrastructure division, Openserve, seemed to be the most expensive option for South African fibre users.

Openserve packages across all ISPs were generally more expensive than equivalent packages on other networks, barring a few exceptions such as low-data capped products.

For example, a 100Mbps/50Mbps uncapped Openserve fibre package from Cool Ideas is priced at R1,499 per month, while a faster 100Mbps/100Mbps Vumatel package from the same ISP costs only R1,219 per month.

This is a common trend among major South African ISPs, along with the implementation of fair usage policies (FUPs) on Openserve packages while other networks remained unthrottled.

FUPs throttle the speed of an uncapped line once a certain amount of data has been consumed by the customer, reducing the customer’s load on the ISP’s network.

ISPs determine the price

Before digging deeper into the price of consumer fibre packages, it is crucial to note that ISPs dictate the price of Internet packages.

This means companies like Afrihost, RSAWEB, Cool Ideas, Cybersmart, and Telkom choose what packages they offer at what price, and they have control over any fair usage policies or throttling on their networks.

These ISPs provision a tranche of data on fibre networks like Openserve, Vumatel, and Frogfoot, the size of which depends on their customer base size and data usage. The cost of this data purchased from network operators can vary between networks.

ISPs purchase uncontested megabits (Mb) from wholesalers, each of which equates to 1 Mbps of throughput 24 hours per day.

One may assume from the price difference mentioned above that Openserve charges more for its IP Connect (IPC) product than other networks do for their wholesale products, but this is not necessarily the case purely based on ISP pricing.

For example, some companies such as Afrihost and Webafrica charge the same or less for Openserve fibre packages than for those on other networks, and Afrihost’s Openserve packages remain unthrottled and unshaped while still being around the same price as its Vumatel offerings.

These cases are usually outliers, however, with Openserve packages generally being more expensive than competing FNOs across multiple ISPs.

An industry source who wished to remain anonymous told MyBroadband that Openserve’s IPC costs are the biggest reason fibre packages are more expensive on the network.

The source said that it is seven-times more expensive to provision data on the Openserve network compared to Octotel or Frogfoot.

IP Connect

Cybersmart founder and CTO Laurie Fialkov also told MyBroadband that while ISPs did have the freedom to set their own prices for fibre packages on Openserve, it was Openserve’s expensive connection costs which forced ISPs to charge more for packages on the network.

Fialkov called Openserve’s pricing strategy “devious”, stating that it omits the cost of the network-to-network interface (NNI) from its pricing and quotes open-access circuit pricing to homeowners associations and body corporates.

“Telkom’s NNI is the cost of IPC, which costs around about R120 per Mb (no matter how many Mb you purchase), which equates to R120,000 per gig.”

“On every other open-access provider you can get 10 gigs for one-third of that or less,” Fialkov said. “So in the very best case, Telkom’s NNI is 300% more expensive when comparing it to Vumatel and up to 3,000% more expensive when compared to other operators.”

He said that this increased cost forces ISPs to implement various measures to prevent over-usage and comparatively high expenditure.

Weapon of mass destruction

“Telkom now has a model which allows you to burst over your committed rate, so if you have 2Gb you can burst to any amount up to 10Gb,” Fialkov added.

He called this a “weapon of mass destruction” for ISPs, stating that it could result in dangerously high premiums and leave them with just two options:

  • Buy IPC without burst, in which case they will be saturated at high-demand times and will have to throttle connections.
  • Allow bursts and pay a premium for that day only, but throttle heavy users during that time.

He said that in either of the situations above, as an ISP you need to have implemented a fair usage policy or you could be in serious trouble.

“So guess which provider is subject to fair usage?” Fialkov said. “The one where the IPC cost materially impacts the cost of sales.”

He stressed that Openserve quoted the open-access circuit cost to property owners and argued that this was problematic, as the network’s higher NNI costs resulted in more expensive packages from ISPs with fair usage policies.

Openserve responds

MyBroadband reached out to Openserve for feedback on Fialkov’s comments as well as the difference in the cost of its infrastructure.

Openserve said that its NNI pricing cannot be compared to other operators without accounting for its national footprint.

“It is important to note that Openserve’s network is designed to connect Internet Service Providers (ISPs) to a national copper-based and fibre-based footprint in rural, urban and metropolitan areas,” the network said.

“This is vastly different from the fibre infrastructure providers that only focus their rollout in specific vicinities – typically only within metropolitan or high-value areas – where the cost of deployment is low, the profit margins potentially high and the customer/business density is regarded as high.”

“The pricing of Openserve’s Network to Network Interface (NNI) cannot be equitably compared to others as ours is the only network that allows ISPs to connect their end-users across South Africa, where our broadband access footprint exists, by using a single Point of Presence (PoP) connection,” Openserve added.

The network said its NNI also provides support for both copper and fibre-based broadband, unlike other broadband access infrastructure providers which deploy and maintain fibre access only.

“Openserve, as is the case with other licensees, operates in a regulated environment and conducts business from a wholesale perspective on a contractual basis with ISPs and other clients and, as such, deems it inappropriate, and in fact unlawful, to discuss costs and pricing publicly,” the company said.

Now read: How Octotel built its impressive fibre network

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Openserve customers pay more for fibre in South Africa – Here is why