Openserve has mounted a defence of its decision to launch its own internet service provider, telling TechCentral that the Telkom-owned wholesale fibre operator is “well below the threshold for dominance” in competition law – and that the bundled deals ISPs warn they cannot match are available to every provider on its network on the same terms.

The launch of Openserve ISP, which sells uncapped fibre directly to consumers from R345/month with a free Wi-Fi modem, free installation and no fixed-term contract, has rattled some of the company’s wholesale partners, with the Internet Service Providers’ Association saying it may raise members’ concerns with the competition authorities.

In a detailed written response to questions from TechCentral, Openserve said the new channel exists to connect homes its network already reaches. Openserve fibre passes roughly 1.5 million homes, it said, yet about half remain unconnected – “a figure that has proven persistent over time”. The ISP’s purpose is “to bring the benefits of fibre connectivity to homes and communities that have remained unconnected, in support of broader digital inclusion in South Africa”.

Asked whether an equally efficient ISP buying Openserve’s wholesale inputs at rate-card prices could match the direct offer and still make a positive margin, the company said yes – and disputed the premise that the free modem and installation are retail subsidies.

“Free installation and free Wi-Fi-enabled ONTs (optical network terminals) are standard wholesale constructs available to every ISP on the Openserve network through the Webstream product, on the same published terms,” it said. “Openserve ISP acquires these inputs in exactly the same way, and at the same published rate card, as any third-party ISP … [and] a number of ISPs already run comparable offers in the market today.”

‘Below the threshold’

Openserve also said its ISP “acquires lines, provisioning slots and repair services on the same published prices, terms, systems and timescales as every third-party ISP”, and that it is subject to the same code of conduct governing the protection of ISPs’ confidential information. It did not, however, commit to the written equivalence and transfer-pricing undertakings, independently audited, that TechCentral asked about and that wholesale partners have demanded.

On the structural question – why a retail channel was launched inside the wholesale entity rather than through a separate group company – Openserve said its market share is about 21% of homes passed and 20% of homes connected, with Telkom’s share of the ISP market “even less”.

Read: Openserve launches its own ISP, rattling wholesale partners

“The Telkom group is well below the threshold for dominance, which is set at a minimum threshold of 35% in terms of the Competition Act,” it said.

That is the company’s legal shield against margin squeeze claims, which the Competition Act lists among the exclusionary acts of a dominant firm. But the act’s dominance test is more nuanced than a simple 35% floor: section 7 provides that a firm with less than 35% of a market is nonetheless dominant if it has market power. Critics are also likely to contest the market definition – for an ISP whose customers sit on Openserve infrastructure, there is only one wholesale supplier of those lines.

Openserve further noted that its 2023 legal separation from Telkom came “some time after the agreement with the Competition Commission had expired” – a reference to the 2013 settlement, which included a R200-million penalty and functional separation commitments over margin squeeze and exclusionary conduct, and which industry players regard as the origin of Openserve’s separation logic.

Industry veterans remain unconvinced by assurances alone. “Openserve may promise that every customer will be treated equally. In a market with this history, a promise is not enough. Equality must be auditable,” said Mark Gray, CEO of Easttel, one of South Africa’s oldest independent internet providers. “What we fear is the referee deciding to play striker while keeping the whistle.”