News on Friday that the cost of IP Connect, the product Internet service providers have to buy from Telkom to access the fixed-line operator’s last-mile broadband network, was to fall by 30% from 1 April should lead to lower retail prices as early as this week.
However, service providers polled by TechCentral on Monday still want to understand the mechanics of the price reduction before committing to new products and services.
Internet Solutions MD Derek Wilcocks says Telkom has yet to publish its updated pricing schedule and it remains unclear whether the 30% figure will be reached via “a glide path” or if Internet service providers, and consumers in turn, will see the full benefit passed on.
Wilcocks says regardless of how the reduction happens, it should mean greater broadband penetration as the price of connectivity falls.
Although the wholesale price cuts are good news for consumers and service providers alike, they could also prove a boon for Telkom in the long run, Wilcocks believes. “It will be interesting to see what happens with Telkom’s demand for lines,” he says. He suggests that over time the lower rates could push up fixed-line broadband penetration rates.
Sean Nourse, executive for connectivity at Internet Solutions, says those who will feel the effects of the reduction first will be capped rather than uncapped Internet users. He says it’s unclear at this stage whether uncapped users will benefit through price reductions, added capacity or through improved service levels, but that there will definitely be benefits for all consumers.
“Hopefully it’s good for everyone,” says Nourse. “We’ve long thought [IP Connect] is the crippler to getting the whole of SA connected. If you look at the Telkom user base, it hasn’t grown dramatically like those of the GSM providers and we’ve always felt it was because of the price. Now we can create competitive pricing, which should also help [Telkom] grow its subscriber base.”
Nourse warns, however, that Telkom is still going to take a hit in the process as its subscriber base “isn’t suddenly going to increase”.
MWeb ISP CEO Derek Hershaw saysMWeb is “pleased” with the reduction and believes Icasa deserves “some credit” for delivering on the commitments it made to the industry in November 2011 to reduce the rates.
“There’s undoubtedly room for Telkom to cut prices further, but at the same time the company needs to do a lot of work on its network and you need to leave some money on the table for it to do that,” Hershaw says. “A reduction in line rental costs or a bump in line speeds would certainly be well received – our entry level product in this market should at least be 1Mbit/s.”
Hershaw says MWeb has traditionally used the savings from price reductions to buy more capacity and that although it will look to do that in this instance it will also consider passing “something” back to its customers on some of its products.
Vox Telecom’s chief commercial officer, Murray Steyn, says the reductions should help make Internet service providers more competitive. “You’ll see all sorts of specials coming out of the service providers now,” he says. “We’re going to announce revised pricing as well. It should be finalised by the end of the week.”
Steyn echoes Dempers’ sentiments by saying Vox hopes this proves to be only the first in a number of price reductions from Telkom.
The business services arm of mobile operator MTN has weighed in on the reduction, too, with Edwin Thompson, GM of technology and infrastructure at MTN Business, saying it is “long overdue” and “needed in the market”.
He says the move “will go a long way in achieving more capacity, more accessibility and more cost effectiveness – essentially improving overall broadband solution offerings for the local consumer.”