Broadband prices: how low can they go? - TechCentral

Broadband prices: how low can they go?

[By Duncan McLeod]

The great broadband price wars of 2011 are hotting up. Barely a week goes by without a mobile operator or Internet service provider announcing lower tariffs or a new special offer on bandwidth. Arguably, though, they’re just getting started.

Arguably, the latest downward pressure on bandwidth prices, especially in mobile, had its beginnings at Cell C in the third quarter of last year. The operator had just switched on its new, multibillion-rand mobile broadband network and was keen to take the fight to, and grab market share from, its bigger rivals, MTN and Vodacom.

Cell C slashed the price of mobile data to levels unheard of in SA’s mobile industry up to that point. Whereas previously the lowest cost-per-megabyte of mobile data had been in the region of 20c, Cell C introduced prepaid broadband specials — which are still running — that took prices down to as little as 3,3c.

Vodacom and MTN didn’t react immediately, but have since introduced special offers of their own, especially in the 2GB/month consumer sweet spot. Last week, MTN ratcheted things up further, slashing the cost of its 3 GB and 10 GB “uncapped” products by about 60% — these options, available on 24-month contracts, offer unlimited data, though users are throttled to narrowband speeds of 128 kbit/s once they reach their bandwidth “soft caps”.

However, it is the newest mobile entrant, Telkom’s 8ta, that has been the real price disrupter this year. It’s taken the cost of mobile data below 2c/MB for the first time with a new, though time-limited, special offer of 10GB of data a month for R199, again on a 24-month contract.

If one considers that a decade ago the cost of mobile data was around R50/MB, the extent of deflation in the mobile data market is evident. Despite intense price competition between Internet service providers in fixed-line broadband, it’s now cheaper in many cases, if one factors in the cost of broadband line rental from Telkom, to subscribe to a mobile data plan than to a fixed-line service.

The fall in broadband prices was inevitable. For years, Telkom has had a chokehold over key communications infrastructure, including national backhaul — the fibre-optic lines that link the country’s town and cities — and over undersea cables. When the Seacom cable landed on the east coast in 2009, it forced down the cost of international bandwidth dramatically. New cables on the west coast are promising to deliver further big cuts in prices.

In national backhaul, prices are also falling, thanks in large part to a belated decision by the late Ivy Matsepe-Casaburri, the former communications minister, to allow mobile operators and other telecommunications network licensees to provide their own backhaul infrastructure.

Until a few years ago, the mobiles were required by law to buy telecoms facilities from Telkom. Freed of that constraint, operators and other investors are pouring billions of rand into new fibre networks.

The operators are hooking up their base stations to their own high-speed backhaul lines as fast as they can. However, it’s a slow process — it takes considerable time to plan such networks and to obtain the necessary environmental and other approvals from local authorities. Government must come to the party by helping to make it easier to build this infrastructure.

Ultimately, operators can make the business case for cheaper mobile broadband work — by providing their own backhaul infrastructure and managing their costs carefully.

In a country where fixed-line broadband into homes is relatively poorly developed, this could represent SA’s best shot at reaping the clear economic benefits of cheap, fast and reliable Internet access.

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