[By Duncan McLeod]

A full-blown price war has erupted in fixed-line broadband in SA. Internet service providers are racing to outdo each other to provide unmetered bandwidth cheaper. This is great for consumers and the economy, but it should have happened 10 years ago.

You could almost hear the cries of elation from Internet users last week when Naspers-owned MWeb did what no-one was expecting: it announced it was slashing the cost of fixed-line bandwidth and introducing the country’s first (relatively) affordable uncapped Internet packages.

Now consumers can watch YouTube all day, or stream online radio stations, without having to worry they’ll be cut off for using too much bandwidth.

Uncapped broadband is the norm in competitive telecommunications markets in Asia, Europe and North America. SA has long been a laggard, with telecoms operators, especially Telkom, forcing consumers to get by on piffling amounts of data.

The arrival of (relatively) affordable uncapped broadband will change the way South Africans use the Web. It will also foster innovation, act as a catalyst to new start-up online businesses, accelerate the adoption of e-commerce, and generally give the economy a much-needed boost.

The price war in fixed-line broadband began in 2009, with smaller ISPs like Afrihost fighting a guerilla war for customers. MWeb, though, is the first of the big boys to step up to the plate. You can be sure its rivals will follow suit — some already have.

This price war has been a long time coming. For the past decade, the cost of bandwidth has been excessive. The inept former communications minister did her level best to protect Telkom from the perfect storm it was always going to face. She allowed Telkom shareholders to milk the situation to the detriment of ordinary South Africans.

But in the past two years, the competitive dynamics of the sector have begun to change. For the first time, Telkom has competition in international submarine connectivity from Seacom, with new cables still to come on stream. And it’s quickly losing its monopoly over national fibre.

Big challenges remain, though, especially at the level of the “local loop”, the “last mile” of copper cables connecting Telkom customers to its telephone exchanges. ISPs are calling for the local loop to be unbundled. This would give them “unbundled access” to Telkom’s copper infrastructure, potentially bringing down the cost of broadband line rental substantially.

Service providers also want Telkom to do away with charging two line rentals: one for basic telephony, the other for broadband access. They argue that Telkom cannot justify charging separate fees. It’s an area telecoms regulator Icasa needs to investigate.

The previous administration called on the local loop to be unbundled fully by November 2011. Given that Icasa has barely begun work on the process, it’s unlikely that this deadline will be met. But, with bandwidth costs plummeting, it’s time Icasa got stuck into it.

The other challenge for policy makers is that fixed-line broadband doesn’t reach the majority of South Africans. Most people will connect to the Web for the first time over mobile networks, where 3G data prices have stayed relatively unchanged in recent years. The R2/MB — that’s R2 000/GB — Vodacom and MTN charge their prepaid customers for ad hoc data usage must come down dramatically.

As in the fixed-line space, it’s not the big, incumbent operators that’ll start the price war. It ’s the smaller, hungrier players. Icasa and the policy mandarins in the department of communications must find ways of encouraging new mobile entrants.

So, yes, SA’s telecoms industry has finally begun to normalise after years of abuse by the incumbent operators. But we still have a long way to go.