Fibre customers in South Africa are acutely aware of a notable pricing difference between ISP packages running on Openserve’s infrastructure compared to packages through other fibre operators.
Local ISPs set higher prices for Openserve packages, a choice which Cybersmart founder and CTO Laurie Fialkov said they are forced to make due to the much higher cost of purchasing bandwidth on the Openserve network.
“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,” Fialkov said.
This pricing difference, in conjunction with Openserve’s burst rate pricing model, results in more expensive, shaped packages being implemented by ISPs on Openserve’s network.
Openserve responded to these statements by stating that its NNI pricing cannot be compared to other operators without accounting for its national footprint.
“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 said.
Talks between ISPs and FNOs
A well-placed industry source who wished to remain anonymous told MyBroadband that fibre network operators (FNOs) and ISPs are working together to alleviate these high costs by poaching Openserve’s customers.
“Discussions between FNOs and ISPs around flipping customers from Openserve to competing FNOs where there is a fibre overlap are already underway,” the source said.
The overlap between Openserve and other fibre operators is reportedly quite significant, although there are other obstacles to consider when trying to flip customers from Openserve’s infrastructure.
“To flip customers requires the installation of a new ONT in the customer’s home, so to overcome this pain, Openserve’s competitors are flirting with the idea of big ISP incentives to encourage the change,” the source stated.
These incentives could reportedly include free months of connectivity, free fibre installations, and various financial offerings.
Customers are always free to switch fibre providers and there is a healthy amount of churn in the fibre industry, but the information above portrays an active plan spanning multiple network operators and service providers to actively poach Openserve customers and migrate them to cheaper FNOs.
Capitalism wins out
Laurie Fialkov told MyBroadband that the implication that FNOs and ISPs were engaged in a concerted effort was inaccurate. He said that the motivation for ISPs to shift customers from Openserve was born of capitalism, not conspiracy.
“It goes without saying that all ISPs and FNOs are capitalists; they are not doing this for the greater good, so to speak,” Fialkov said. “Obviously, ISPs look to see where their existing clients are on all networks and are trying to maximise their margins by reducing their cost.”
“The chances of an FNO having a service where there is some other Openserve service is almost 100%, given that ADSL is pretty much everywhere.”
“If there is a cost advantage to the ISP to move the customer to an FNO and convert the customer from an Openserve service, then simple capitalism is going to incentivise the ISP to do so,” he said.
If the ISP doesn’t pass the full savings onto the consumer, they can make more on their margin per month, and the high price of Openserve IPC previously cited points to a possibly significant saving through migrating customers to another FNO.
Fialkov said that if an ISP has a cluster of clients in a certain area and works with an FNO to reduce their cost, it can be good for both parties.
“That is hardly ‘targeting’ Openserve, it is trying to maximise profit.”
“Obviously the company with the biggest footprint is going to be impacted the most unless they offer commercial incentives to prevent this from happening,” Fialkov said.
MyBroadband asked Openserve for feedback on the discussions between ISPs and FNOs to flip its fibre customers.
“Customer churn is not a new concept in business. It is the norm, especially in a highly competitive environment,” an Openserve spokesperson told MyBroadband.
“With around 30-40% of our fibre-footprint being overlaid with fibre from other operators, there has been no noticeable indication of higher than normal churn in these areas even when compared to churn in other areas.”
The company said it does not engage directly with the customers of ISPs on why they opt to leave its network and therefore has limited insight into why customers could be migrating to other FNOs.
“Apart from the occasions where installation or repairs are required, as instructed by our ISP partners, Openserve does not engage the customers of ISPs directly and, as such, cannot conclude definitively if the churn is due to reasons of affordability, relocations, etc. or indeed for the purpose of migration to other FNOs or Mobile/LTE service providers.”