71% ADSL Price Decrease Reasonable
Sarah Truen, an Associate at Genesis, said that R 193-00 for a 512 Kbps ADSL connection is a reasonable price in the local telecoms environment. Truen, speaking at the TCI Broadband conference in Johannesburg, pointed out that massive price decreases are possible in both the broadband and dial-up markets.
Apart from the 71% decrease in the price for broadband Truen also suggests a 54% decrease in dial-up costs. These price reductions will results in a significant increase in the number of households that will be able to afford Internet connections.
With over 80% of local households earning less that R 50 000 per year these drastic reductions are needed to improve Internet and broadband penetration rates in South Africa. Affordability remains the main consideration for many prospective broadband customers and by lowering prices a far larger group of consumers will be able to join the broadband revolution.
Truen predicts that a 71% drop in ADSL prices will lift the current demand for broadband by around 600%. An even more drastic price drop where ADSL prices fall below R 100-00, something witnessed in various other countries, will make ADSL affordable to 2.6 million households.
South Africa’s current broadband penetration rate of 0.5% puts us in last place in the OECD survey on penetration rates. With the suggested price reductions South Africa may start to fall in line with international penetration averages and from these figures it is clear that we need to do something to catch up.
Truen pointed to the exorbitant costs of international bandwidth in South Africa, something many experts believe is key to bringing affordable broadband to consumers. She questioned why South Africans pay over 500% more for a 1 Mbps SAT3 circuit than their Reunion counterparts who are governed by French authorities.
While Truen is optimistic that the SNO will bring much needed competition to the market, she still believes that there is room for regulatory intervention in a number of areas.
It is refreshing to see well researched suggestions as to where local ADSL prices should sit. It is now up to Government and ICASA to ensure that these price targets are met in a timely fashion as it is unlikely that Telkom will follow such guidelines of their own accord.
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