MWeb’s uncapped broadband products have hammered the margins of many local Internet service providers, says BMI-TechKnowledge director of research Brian Neilson. And some might not survive.

Speaking at a BMI-T telecommunications briefing in Johannesburg on Tuesday morning, Neilson said the uncapped model, and the price war it sparked had turned broadband provision into a volumes game.

Naspers-owned MWeb surprised the market in March when it released SA’s first relatively affordable uncapped Internet offering at R219/month. The offering sparked a flood of uncapped products and criticism of the model. “You were looking at price cuts of about R1/day until we reached about R190,” according to Neilson.

He says that since then, margins for broadband provision over fixed lines have continued to shrink. Some companies have been stretched so far that they are not able to provide services at a profit.

“MWeb knocked the wind out of the margins for a number of serve providers and we have already started to see the fallout,” he says.

BMI-T telecoms analyst Tim Parle agrees, saying that over the next 12 months the market should expect to see many Internet providers becoming “roadkill”.

However, Parle says uncapped broadband is not all bad news for providers. He says it has spurred some competitive growth in the network infrastructure market.

“We will see the emergence of new wholesale layer, which could be a profitable niche. But there will be a lot of fallout from the data market,” Parle says. — Candice Jones, TechCentral