MWeb dropped a bombshell on the SA Internet industry on Thursday morning when it announced it was slashing the cost of fixed-line broadband and introducing uncapped offerings starting at just R219/month.
The move, which brings SA Internet pricing more in line with other markets, could spark a price war among Internet service providers in the next few months.
TechCentral editor Duncan McLeod spoke to MWeb CEO Rudi Jansen, and asked him what motivated the company to do it, and what its fair-use policy really means for heavy Internet users.
TechCentral: Why has MWeb done this? What’s the principal motivating factor behind it and was it driven by your parent company, Naspers?
Rudi Jansen: MWeb drove it but we’ve had tremendous support from Naspers in this initiative. It’s a privilege to work for a guy like [Naspers CEO] Koos Bekker. The motivation was two-fold. We had to put MWeb back on the map as a leading Internet service provider (ISP) and, secondly, our ADSL base was big enough to allow us to do it and still make some margin on it.
So, are these uncapped packages going to be profitable for MWeb?
Yes. The margin is a lot lower than some of our other products, but it really depends on how many people we get using the new products and how the ratios pan out. But we’ve done the research and we know it will work.
Does this mean Naspers is no longer going to sell MWeb?
MWeb’s been off the market for a while now. The strategy for the group has changed. Networks are important to media companies like Naspers. The decision to sell MWeb was taken about three years ago, and the world has changed significantly since then. Things have come full circle and networks are now part of the strategy.
Where are you getting the cheap bandwidth from to do this?
We have a very good and strong relationship with Seacom, which is supplying us.
You’re also buying bandwidth on Sat-3. Has Telkom reduced its prices on this undersea cable?
Telkom has reduced these prices quite a bit in the past year. The Sat-3 pricing from Telkom is quite attractive now. What’s nice about it is it gives us redundancy [to Seacom].
Will this move by MWeb result in a broadband price war? How do you expect your competitors to react?
I don’t know what they’ll do, but I wouldn’t mind if they follow us. Ubiquitous broadband is what this country needs to grow. We want to do our part in getting SA there. I hope that they follow us because I think as a country we desperately need it.
Does MWeb have the pockets to survive a price war if it comes to it?
This is not a price war. This is a good offer we put in the market. We won’t get ourselves into a position where we can’t make money.
Do you have a fair-use policy for these new, uncapped offerings? If so, what does it entail?
I knew you were going to ask this [laughs]. Yes, we do, like any other ISP or telco in the world. We’ve looked at all of them and made sure we weren’t any different from the big ones like France Telecom, BT, Sky and Virgin. So, yes, we have a fair-use policy, but the idea of it is to ensure the abusers don’t spoil it for everyone. We have no intention of shaping bandwidth more than is necessary in peak network conditions. It’s not dramatic shaping at all, and it’s only in peak hours. This is not a big issue. Everyone makes it out to be a big issue, but it’s not.
What will you do with users who use peer-to-peer services like BitTorrent, and people who stream audio and video online?
What [the fair-use policy is] there for is to stop, say, someone who hosts a website with 80 000 movies on it, and invites other people to download from their server. We won’t go after people who are using [the service] for their own personal use.
So if I want to listen to streaming music or watch streaming video all day, that’s not an issue for MWeb?
No, it’s not.
Are broadband prices going to fall even further than this or has a new base been set for a while?
This isn’t actually the issue. The issue is the line rental [from Telkom]. You pay for voice and ADSL line rental. That needs to be split. It should be either one or the other you pay for, not both. Also, line rental is such a big component of the cost of a broadband connection now that it has to come down significantly. We need to get government and the regulator to change that.