Caps, ISPs, ADSL pricing - pondering in the future

** This is a resurrection of a thread accidentally deleted by the mods
I have restored the posts made from my browser cache **

OK, maybe this will prove to be a futile exercise, but I need to voice my thoughts here...

This week has seen massively discounted offerings on the ISP side of ADSL.
For what I used to pay for 3GB in April, I can now get 30GB for less...thats means prices/GB have dropped by more than 10x in the past 4 months...

This is really cool, and I'm frankly stunned at the pricing drop - it still has some way to go before we can claim to be in line with international trends, but I didn't expect so much so soon...

My problem is I simply cannot trust anything involving Telkom...since everything they do has the a$$ ripped out of it for profit. Call me the consipiracy theorist, but I cant understand what would cause SAIX/Telkom to lower prices so much.
There isn't a SNO - and won't be for at least another 6 months.
There is some talk of lowering prices from various "high places", but thats about it.
The international bandwidth price descreases were of the order of 28%, 1000%.

I cannot believe that the fat cats at SAIX and Telkom simply woke up and decided to get some modicum of social responsibility - especially since they own the market from end to end.

I also cannot understand the logic behind releasing other ISPs with much higher caps for less income, especially when in fact an increase is being planned.
Why hasn't TelkomInternet gotten in on the high cap/lower price act?
Surely with their clear unfair advantage as a Telkom-owned ISP they could outdo everyone else?

I'm worried that after the euphoria of lower prices in the next few months, we will see SAIX's retribution through a new billing structure that in fact increases prices.
All indications from ISPs like WebAfrica and Axxess is that they are expecting an increase.

So why bother to drop it even for a few months - I mean the profits are there for Telkom to take, and no measure of patriotism has stopped them before.

The motto for now seems "enjoy it while u can".
This is all well and good, but I cannot shake the feeling that all is not well in ADSL's future...

Personally I think the ISPs all have an idea of what is next, but cant say (NDA) or wont say (Telkom/SAIX will cut them off if they do) or don't want to say (competitive advantage and all that).
Judging by the lengths ISPs have gone to in order to gain accounts, I cannot believe they dont have at least an inkling of the future.
No one just puts their profits at risk - the way WebAfrica have - without an idea of what is to come.

Everytime someone has tried to extract info about the future billing structures, they have become very cagey about it.

I challenge the ISPs to share their knowledge with this community.

TMoose's response:

When it comes to this particular conspiracy my theory goes as follows: The ICASA document pertaining to the ADSL hearings was very unflattering of Telkom and had strongly worded statements telling Telkom to abolish their ADSL line rental. Telkom received an advanced copy of this document, which was supposed to have been gazetted today (but wasn't). In an attempt to sway ICASA's opinion, which could have resulted in even bigger loss of profit, they drastically and temporarily cut the price of bandwith. This caused ICASA to not publish the gazette today as planned, but to release a modified version with softer wording, in which they don't call for the abolishment of line rental, at a later stage.

Once the new document has been released Telkom will change it's pricing structure and we'll see a moderate increase in the price of bandwidth again. Since ICASA's opinion will then already be out, they won't be able to do much about it until a much later stage, giving Telkom a large window of opportunity to squeeze as much profit as they can out of their ADSL product.

My theory. I am teh paranoid!

dj_sam_antha's response:
I challenge the ISP's to do the same, it would be highly...unethical of them to literally trick people into... upgrading accounts... or going over to adsl..

When in fact there are plans to have a pay rise... more than the original cost of a 3GB account,

Daveogg's response
My 2 cents worth.

I think one of the major reasons for keeping ADSL prices so inflated was to protect their profits from the dial up market.

Telkom did not want you on adsl, would rather you paid per minute dial up. Now along come GPRS/3G/Edge and anyone with grade two maths can work out that it is much cheaper to bolt a 100mb package onto their existing cell phone and drop their isp and telkom charge. Sure it will take awhile to filter through to joe average but within a year i would guess the networks and the public would be ready to make the switch.

So prehaps a paradigm shift has occured within telkom from not really wanting to expand the adsl network to suddenly needing to protect their market and sign up as many people as possible. Well i hope so forever the optomist.

WiseCrack's response
Fact is that there is going to be a pay per usage option in the future. The Isp's know something we do not.

Pedantic's response
There is no conspiracy theory really.

Simply put, certain ISP's were offered their own authentication of ADSL users - some of them saw an oppurtunity to offer high caps (or even uncapped in certain cases) due to a shortcoming in Telkom's billing structure. Telkom had to step in and ensure that all authenticating ISP's had equal opportunities and as such offered a short term solution which allows ISP's to offer 30 Gbit caps.

As for the future, ADSL will supposedly move to a "per Gig" billing system once Telkom have their systems in place - this could be within the next few months. So the only question really, is how much are they going to charge us per gig ? If it's R10 / Gig or less then we can all still have 30 Gig @ R300, but I doubt R10 / Gig is a realistic figure. If it's R20 / Gig - R600 per 30 Gig, R30 / Gig - R900 for 30 Gig etc.

So, what will the price be per gig ? That is the only concern. If you think it will be more than R10 / gig, do your downloading now

bb_matt's response
Pedantic - that sounds like a reasonable theory - except "buying in bulk" should apply, so the more GIGs you buy, the cheaper it should be.

As for challenging the ISP's, well, they have said they don't know what is going to happen either - at least the guys we chatted to on IRC don't know.

I think the figure is going to be more like R25 per gig if your theory is true, but with a catch - you have to start with a base of 3gig for R200 and work upward from there.

Who knows.

last restored post
Pedantic, thanks for replying - at now its a little clearer - pay per gig was what I figured would be the new system...

However this raises BIG concerns for me in the context of local becoming capped.

-> If Telkom caps local and then charges a flat rate regardless of local or international usage, then the whole "international bandwidth is expensive" lie they've been selling all the years will be proven as false.
Despite that proof, obviously no one can stop Telkom from doing as they please, so that means essentially we may end up paying international bandwidth prices for local usage.
We already kind of do with the 3GB cap, but at least afterwards local is still there.

-> If the shaping continues as is, then that means local may be shaped as well.

-> Basically pay per usage will become just like cellular per second billing - additional charges for the same service, just cloaked in a new label...

I'm all for per gig billing if the price is reasonable, hopefully max R20 per gig or a sliding scale system where you pay less per gig the more you use (like MTN and Vodacom's data billing structure). This way if you have a slow month you don't pay for 10 gigs you're not using. There is obviously a market for people needing more than 3 gigs given the popularity of current high cap ISP's, I just hope Telkom doesn't screw the pooch

Being charged the same for local traffic as international traffic, should be fought to the death!!

Im sticking with the theory that these 30gig accounts at insane low prices will be the cause of ADSL account price increases as everyone mentioned so far with knowledge about this kind of stuff.

Has anyone wondered why none of the larger ISPs (e.g. IS, Mweb, UUnet or TelkomInternet themselves) are offering large cap (Telkom not IPC) ADSL accounts? Anyone question why only small obscure, never before heard of, companies are the only ones selling these large cap accounts?

To my knowledge Telkom currently only bills ADSL account resellers a flat fee per account, no bandwidth usage is taken into account. Also resellers with their own realm (stuff after the @ in the login name) control when their accounts are capped, that is, it is their responsibility to cap not Telkoms.

So then how did this large cap market evolve? Two scenarios come to mind ...

Telkom clandestinely instigated this by telling a few small (well controlled) companies that they would turn a blind eye to late capping (e.g > 3Gb)

or more likely one of these small companies took a flyer to see if Telkom would complain. They didn't so the carried on doing it & others cottoned on.

What supports this is current price wars/reductions by the companies selling large cap account. My guess is their input costs for a 3GB or 30GB account are the same, they're just pocketing the difference people are paying for the larger caps.

So why would Telkom allow this to happen? Again two things come to mind ...

The SNO is coming some time. Telkom has a window of opportunity now to grab as much of the broadband market as possible. The phenominal uptake figures for ADSL lines at the moment support this.

Every customer going to one of these small companies is a customer not going to one of the major ISPs. I'm sure many of the larger ISP would be eager to move to the SNO once operational. A huge threat for Telkom I would think.

Back to the original question, why arent the larger ISPs also offering large caps. Well either they think it too risky cause the see it is a temporary loophole with no guarentee that it will continue in the future, or more likely they approached Telkom and were told to duck.

Also why does TelkomInternet not do the large caps as well? Now that would be too obvious wouldnt it.

Any comments or corrections on my ramblings?

Well firstly these are not "obscure" ISP's. Imaginet & WA have been around for a long time and haven't just sprung up. I also believe Axxess has been around for a few years - although I admit I've never heard of them before they offered the 10GB,20GB & 30GB accounts.

And yes it is currently a "loophole". I think WA_Matt or WA_Richard admitted that this whole 10GB: 20GB: 30GB thing is a loophole - WA tried their hands at an unshaped 30GB account but Telkom objected to that so Telkom, I'm sure are aware of these higher-cap accounts but I'm not sure why they arn't closing them....

I was not being derogetory to these companies, in fact I commend them for bringing cheap/usable broadband to the market. However lets face it they are not in the same league as the big ISPs I mention.

My main point is why are the major S.A. ISPs not participating in the current large cap bonanza? My suspicion is that there is a "grand puppet master" behind the scenes orchestrating the whole thing to their favour.

Roman, you raise very valid points.

I'm especially suspicious of why TelkomInternet has not launched new packages. They are after all the ISP with a clearly anti-competitive edge on everyone else.

Here is my take on why:
The bulk of the ADSL "noise" - I mean real negative publicity and bad press - about the ripoff pricing and poor ADSL offerings is actually from a relatively small crowd of the well-informed ADSL users.
Many are here , and others are from the big ADSL players - IS, UUNET etc.

I'm convinced at least half the current ADSL subscriber base is with TelkomInternet - mainly because their crooked salespeople con everyday people into believing they HAVE to use TelkomInternet as a provider.
That and also because they offer bundled contract "specials".

Essentially TelkomInternet has a massive competitive advantage, because their crap is sold as part of the line portion, and is also sold into Telkom's ADSL special offers.
And remember, every contract subscriber is at the mercy of whatever pricing and caps TelkomInternet wishes to promote - or in this case does NOT promote...essentially I believe the contract guys are a large captive portion of the ADSL subscriber base.

I think Telkom has realised they can effectively "mute" a lot of the noise about the low caps we are subjected to by simply satisfying that part of the market. Who is the market?
Its us - the noisy minority!

Their crappy, under-invested network can probably support a minority with high caps because the 50+% of TelkomInternet users remain happily oblivious forking out R250 pm for 3GB - which they probably dont use anyway

I think it may be likely that any ISP with a big ADSL subscriber base may well be given the cold shoulder for a similar reason.
I would be very surprised if Axxess, Imaginet, WebAfrica and SAOL had more than 5000 higher cap ADSL users combined.
Out of 80000+ ADSL users thats a very small piece of the pie, and probably sustainable in the short term.

Just in time for the "new billing model" - which I am convinced will simply be a price hike under the disguise of a more flexible (pay per gig) model. The cell networks pulled that one, and we all know Telkom never misses out on any new way to exploit their customers!

The answer is simple Roman - let me explain.

Take this scenario into account:

Telkom ISP has 50,000 (assuming) 3 Gig users @ R279 / month, if they join the ADSL price war and offer 30 Gig @ R299, they would have to offer the current 3 Gig users a saving too (possibly offer a 3 gig @ R199 / month).

If Telkom ISP did that - they would have a monthly loss of (50,000 * R80) on their current clientbase - that amounts to a monthly revenue loss of over 4 Million rand - what would you do in that situation ?

It would also explain why Webafrica have only offered their R199 special to myadsl.co.za users - because they simply cannot afford to drop the rates on their current clientbase and take the monthly loss.

Hope all that made sense

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Pedantic
www.saol.com

But what would happen if the "50 000" Telkom ISP users suddenly woke up and realised they could get 30GB for R299 and there was a mass exodus away from Telkom. They would be sitting with a bigger problem than earning R80 less per customer.

I think they are gambling on the fact that the majority of those users are oblivious to the "big cap" providers.

By the time those users become aware, Telkom will have their new billing system in place and once again be competitive.

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Pedantic
www.saol.com

Pedantic, as a large cap provider, dont you worry that this opportunity (that Telkom has allowed) will come to an end soon. How do you possibly do any future business/revenue planning?

Does this mean that the days of 30GB caps are coming to an end, or will be still have access to them, but pay differently / more?