Over-hyped expectations around the 90% drop in prices we were suddenly going to see with the arrival of the Seacom undersea cable are now somewhat more “grounded”<\/p>\n
If we’re not going to wake up on Thursday (when the $600m cable officially lights up) suddenly paying 50c or even R1 per MB (from the current R2) for mobile data (this we know, Seacom will not mean a massive drop in prices), when might we?<\/p>\n
Wayne de Nobrega, CEO of Altech’s recently acquired ISP business Technology Concepts, believes that real and meaningful decreases in prices will be some way off.<\/p>\n
That said, De Nobrega says “In the next two years, we’re probably going to see more change than we’ve seen in the last ten years.” This is from a capacity, pricing, and even user-experience\/satisfaction point of view.<\/p>\n
“Everybody talks about convergence between voice and data – I think the reality of that convergence is much more real today than it was a year ago,” he says.<\/p>\n
The beauty of what’s happening, by the driving down of prices we have seen and will continue to see is that the internet “is going to become more accessible to a bigger audience”.<\/p>\n
He admits that there are some limits on a national level, specifically on the Johannesburg to Cape Town link. Price, too, is an issue.<\/p>\n
With international pricing having come down, “we’re already very close to the price of national bandwidth,” he says.<\/p>\n
But, there are a number of projects which will improve capacity (and pricing) on a national level. He lists Infraco’s plans, as well as the Neotel\/MTN\/Vodacom national backbone.<\/p>\n
With this capacity, adds De Nobrega, we’ll see the prices differences between international and national charges “balancing out again”.<\/p>\n
However, the arrival of Seacom will not suddenly herald cheap or affordable internet access, he says.<\/p>\n
De Nobrega uses ADSL access as an example: “Your DSL connects into a Telkom exchange, and that goes through a Telkom backbone.”<\/p>\n
“Now, as a service provider, let’s say I’ve got a Seacom connection coming into my data centre and I need to take you and bring you into my data centre… I’ve got to have an IP Connect between Telkom and myself,” he says.<\/p>\n
“That IP Connect will cost me R390 000 for a 140Mbps line.”<\/p>\n
“That cost is probably more than what I’m paying for that capacity on the Seacom cable,” he says matter-of-factly.<\/p>\n
De Nobrega stresses the importance of these other components when considering bandwidth pricing.<\/p>\n
“If I’m on a contract on the SAT-3 cable and let’s say the price (for argument’s sake) is R100, and the price on Seacom is R10. I might have 70% of my bandwidth going through on the SAT-3 because I’m contractually bound to it still and I’ve got 30% going through at R10,” he describes.<\/p>\n
“Well, the average price is going to be closer to, say, about R70.”<\/p>\n
But (and this is a big “but”), over time, we are “going to see that pricing [on SAT-3] coming down as the contracts change,” says De Nobrega.<\/p>\n
“Telkom will address this pricing issue, they have to. Otherwise, when the contracts come up for renewal, they’re going to end up with a cable doing nothing,” he laughs.<\/p>\n
The contracts signed between internet service provides and Telkom for connectivity on SAT-3 typically last for five to ten years, according to De Nobrega.<\/p>\n
“Now it’s not five or ten years we signed last year,” he adds quickly, “From an ISP perspective, a lot of those contracts will be closing off over the next two to three years.”<\/p>\n
De Nobrega explains that that whenever there is a need to increase capacity, he can dilute his investment by bringing more and more Seacom capacity online.<\/p>\n
“Its not that on July 23, we turn the switch and suddenly everybody’s got a price point that’s acceptable,” he says.<\/p>\n
“But it is the catalyst, the start of this entire process of driving down the price points.”<\/p>\n
“The big price change will be when Eassy comes on as well,” says De Nobrega, “so you’re talking a year from now”.<\/p>\n
He adds, however, that we will see a steady, curved drop in pricing over the next 12 months until we hit a “price point where we say \u2018wow, this is acceptable’.”<\/p>\n