These fibre networks punish ISPs when customers downgrade to cheaper packages
At least two of South Africa’s major fibre network operators (FNOs) penalise Internet service providers (ISPs) when their fibre-to-the-home (FTTH) customers downgrade to slower packages.
The issue of fibre downgrade fees recently came to the fore after Frogfoot announced and Vumatel started implementing such penalties.
Frogfoot communicated a R750 downgrade fee to its partner ISPs in early 2023.
However, following complaints from the ISPs and customers, it took the fee on review and scrapped it.
Vumatel’s R500 downgrade fee formed part of an optional Double Up promotion offered to its partner ISPs from September 2022.
Although it also gave a R500 upsell incentive for every customer that ISPs upgraded to a higher-end package, Vumatel upgraded customers automatically a month after announcing the promo.
Customers could not choose to remain on a cheaper, slower service.
This made it much more difficult for ISPs who signed up for the incentive programme to get customers to take up high-end packages, while penalising them for customers who didn’t want the forced upgrade and preferred something cheaper.
Frogfoot also announced its downgrade fee after a package rework that forced many customers to take up higher speeds.
On both Vumatel and Frogfoot, customers would not have to pay much more than before and were getting much better value on a per-Mbps basis.
However, Internet service providers say that not all customers want or need a faster service — they would much prefer a lower monthly price.
Another FNO that charges a downgrade fee is Telkom’s Openserve, the country’s second-largest network by homes passed and connected.
The operator told MyBroadband it has a “nominal” administration fee for downgrades because an adjustment carried administration costs.
It would not say how much its penalty was, however.
The Internet Service Providers Association of South Africa (Ispa) has heavily criticised the forced upgrades, arguing that some customers would rather pay less for a slower package than get a higher speed.
“In today’s challenging economic climate, not all consumers want (or need) a faster service,” Ispa said.
Ispa also warned that the approach eroded ISP competition and profit margins, disproportionately affecting smaller ISPs.
“This is due to their often limited budget and capacity in provisioning their network for the increased capacity, support and operations for such upgrades,” it said.
In addition, many of these providers cannot afford to absorb downgrade fees and have to pass the cost onto customers, unlike larger ISPs.
Afrihost, for example, was able to absorb the cost of downgrades by its customers on the Frogfoot network before the FNO decided to scrap the downgrade fee.
Ispa encouraged FNOs to consider the impact of forced upgrades on all their fibre consumers, not only on those consumers who could afford an upgrade.
“If an upgrade is going to be made automatically to any customer’s service, then there must be no charge levied if that customer does not want to take advantage of the forced upgrade and does not want to upgrade.”
We asked South Africa’s other major fibre network operators if they charged downgrade fees.
Evotel, Herotel and MetroFibre confirmed they did not charge any fees when customers downgrade. Octotel did not provide feedback by the time of publication.
Below are more details regarding each FNO’s stance on charging downgrade penalties to ISPs.
Evotel
Evotel general manager Bradley Bekker said it has never charged fees to downgrade a package. If the ISPs followed Evotel’s downgrade processes correctly, there would not be a situation in which fees could be accidentally charged.
“Our pricing structure does not include downgrade costs to any ISPs. We found that it creates a stickiness with them as well as between them and their customers, and we want the Internet to be available to everyone,”
Bekker said Evotel decided to avoid the additional complexities of applying downgrade costs to serve the ultimate end-user better.
“As much as the Internet has become a utility and a must-have, we also understand that we must be flexible to ensure our customers receive what they are paying for and what they require,” said Bekker.
“Downgrading has a financial impact, however, we believe that to be a successful FNO, it is more important to be very flexible to build and retain a happy client base for the long run.”
Frogfoot
In its initial justification of the fee, Frogfoot said that changes to services — including speeds — required a change to the terminal equipment setup deployed at the premises and some administration on Frogfoot’s portals to enable.
The FNO told MyBroadband that the fee was never implemented.
This is curious as it initially confirmed that it was levying an additional service charge for downgrades after ISPs informed customers that the fee was coming into effect.
Herotel
Unlike the rest of the FNOs on this list, Herotel operates a closed-access network, which means it does not resell to secondary ISPs.
Instead, it has its own ISP division, which handles customers directly.
Herotel brand manager CP Esterhuyse told MyBroadband that the company does not levy any penalties on FTTH customers who downgrade.
MetroFibre
MetroFibre said all changes to package speeds carried an administrative cost.
In some cases, there could also be costs associated with swapping out the higher bandwidth device and equipment for lower bandwidth kit.
However, it did not pass this cost on to ISPs or customers.
“We try to offer our ISPs and direct customers the flexibility to downgrade or cancel based on their needs without charges,” MetroFibre said.
Openserve
While Openserve confirmed it charged a “nominal” administration fee for downgrades, it would not confirm further details about the exact cost.
“Openserve wholesale prices are confidential and only shared directly with the ISP partners,” the operator stated.
Vumatel
Vumatel has defended its penalties by emphasising they only apply to ISPs that signed up for its optional Double Up promotion.
“ISPs were not forced to participate in this incentive package, and some ISPs chose not to,” Vumatel said.
It said the promotion included a “comprehensive” package with a vast number of benefits, including material financial rebates that some ISPs passed on to their customers.
“The vast majority of participating ISPs have significantly benefited from it,” Vumatel said.
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