SA bandwidth pricing buffoonery

While landing more submarine cables for international connectivity is a good thing for South Africa's international bandwidth, Communications Users Association of South Africa's (CUASA) Chairman Edwin Thompson warns that unless local network pricing anomalies are addressed, the liberalisation and introduction of new international landing points will prove pointless.

"Government, investors and telecommunications stakeholders are laudably spending a lot of time, energy and money focusing on the introduction of new undersea cables to help solve South Africa's bandwidth problems," says Thompson.

"The sad fact is that while a Telkom STM-1 (155Mbps) line from Johannesburg to London is ludicrously expensive to rent at R1.7-million per month, a much shorter connection offering the same bandwidth to Cape Town costs a full R100 000 more – at R1.8-million per month. This pricing anomaly effectively nullifies any landing point liberalisation or new, ocean-based connectivity services, regardless of how fast or cost-effective they may be," he continues.

"Despite the fact that we now have a competitor to Telkom in the form of Neotel, the incumbent still has a de facto monopoly on the supply of South African bandwidth. Telkom is controlling how the network is structured – so no surprise then when one notes that all South African bandwidth is routed through Telkom's international bandwidth hub in Johannesburg. Even internet connections from Cape Town-based ISP's are routed to Gauteng first, before being rerouted back to the Mother City," says Thompson.

"The situation is ridiculous," agrees South African Value Added Network Association (SAVA) chairman Paulo Froes.

"While everyone is concentrating on the liberalisation of the SAT-3 landing point and the laying of new undersea cables, they seem to have forgotten about a key piece of the connectivity puzzle – Telkom throwing a spanner in the bandwidth works again," he says.

"It is simply not possible for connectivity from Johannesburg to Cape Town to cost more than the same-speed connection to London. Telkom's pricing seems to indicate that the connectivity leg from Cape Town to London is not only free, it's R100 000 less than free," he says.

"Clearly, Telkom has introduced local pricing structures which will negate any benefits which may come from the liberalisation of the SAT-3 landing point, or any other landing point connecting the country to international and fairly-priced bandwidth," says Froes.

"Furthermore, this pricing would seem to indicate that Telkom has cross subsidised what is essentially a monopolised service. That is something which is not supposed to happen in terms of South African telecommunications regulation," he continues.

"While you would expect the second network operator in the form of Neotel to have launched some kind of price-competitive local bandwidth service by now, the sad reality is that they have not," says CUASA's Thompson.

"Furthermore, while a telecommunications license may have been granted to Neotel based on the principles of increased competition, it would appear that commercial imperatives seem to have overtaken competitive responsibilities. It would further appear that it's simply not in Neotel's business interests to launch a competitive local bandwidth solution which competes with Telkom on price," he says.

"It's been proved time and again in countries such as South Korea, Japan and even in less developed countries such as India, that the only way to radically improve connectivity and decrease its cost for citizens is to open the market and allow competition to flourish," says Thompson.

"The fear of looming bandwidth insufficiencies for the 2010 World Cup seems to have lit a fire under government's proverbial pants. While all South Africans would want the country to succeed in hosting a successful event, the reality is that the introduction of effective and affordable South African bandwidth will prove to be a far more important investment long after the soccer fans have left the country.

"The cost of Telkom's Johannesburg to Cape Town link is a national embarrassment which will increasingly have serious consequences for the economic health and growth of the country. The simplest, most effective solution would be for the country to open the market and let supply and demand deliver effective bandwidth long before the first 2010 kick-off whistle is blown," Thompson continues.

"Once again we urge government to open the South African telecommunications market so that effective competition ensures a fast and efficient network based on international pricing," he concludes.




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SA bandwidth pricing buffoonery