How to make wireless broadband more affordable
Over the last six months a slew of more affordable ADSL data offerings were launched, with some Internet Service Providers (ISPs) cutting prices by as much as 70%. This was partly fuelled by lower international and national bandwidth prices, but this is not the main reason for the price drop.
Despite significant price moves in the ADSL market, wireless broadband prices have basically remained unchanged (except for price reduction from iBurst towards the end of 2009). This begs the question – what is different in the between the ADSL and wireless broadband markets in South Africa? The answer is simple: Competition.
ADSL service provider competition
Telkom has long offered local ISPs a wholesale product called IPConnect which allows service providers (SPs) to develop their own ADSL offerings and hence using Telkom’s broadband access network to offer their own data services. All of the recent low cost ADSL offerings come from providers or resellers using Telkom’s IPConnect service.
This is only a first step towards full Local Loop Unbundling, but it has created a more competitive environment in the ADSL data market. Telkom is further planning to launch its IPStream service – a step closer towards full bitstream access.
Telkom is currently the only large telecoms provider to offer SPs cost effective wholesale access to its network. Steve Lewis, Telkom’s Group Executive of Strategy, recently said that their wholesale ADSL services are sold at very close to cost, and rumour has it that ISPs can look forward to lower IPC prices in 2010.
The wireless providers on the other hand either don’t have a wholesale access product, or they charge exorbitant rates. According to one industry player – who asked to remain anonymous – the wholesale rate to use one of the mobile provider’s access network is 54c/MB (around R540/GB), well above the current retail rates. This effectively disqualifies any company that wants to compete with them on price.
The absence of a usable wholesale model which will give smaller providers affordable access to the wireless providers’ access networks means that there is no real competition to the retail arms of the mobile operators. This lack of competition means that pricing has effectively stagnated over the last few years.
Change is coming
Things are however starting to change. There is a growing feeling that it’s not only Telkom who should be subjected to local loop unbundling (LLU), but that the wireless providers should also be forced to give smaller players access to their networks.
LLU is however a complex process, and it is widely acknowledged that incumbent operators are resistant to full unbundling. While Telkom is fairly proactive regarding intermediate steps towards full LLU, Vodacom, MTN and Cell C may prove to be far more resistant to exposing their own Service Provider arms to competition.
One wireless provider is however bucking this trend is has pro-actively made its network available to service providers. iBurst CEO Jannie van Zyl said that he is in favour of Wireless Network Providers making their networks available at wholesale level, allowing other service providers to build innovative products to reach more consumers.
iBurst has put their money where their mouth is and built a model where service providers can access iBurst’s network allowing them to pay an access fee to the company. The iBurst model is very similar to Telkom’s current IPConnect service, and according to Van Zyl their current resellers are very keen to take advantage of this service.
This move from iBurst may encourage competitors like Neotel to also investigate such a model, especially if iBurst’s partners start to provide consumers with innovative and competitively priced offerings. The cellular providers are however less likely to follow suit.
How to make wireless broadband more affordable << Discussion
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