Telkom’s wholesale price cuts of up to 63% announced last month have so far failed to translate into lower prices for those with broadband digital subscriber lines.
Internet service providers (ISPs) that were prepared to comment were not expecting to announce any price cuts soon as the fine print associated with Telkom’s price reductions left them little room to move.
In late April, Telkom’s wholesale services division announced cuts of up to 63% across its product range, including IP Connect and metro Ethernet.
“The IP Connect price cuts were not price cuts as claimed. We have to pay 15% more in order to get double the bandwidth,” says Cybersmart CEO Laurie Fialkov. ISPs pay IP Connect fees in order to get access to Telkom’s last-mile network infrastructure.
“If you go to a restaurant and order a ‘buy one get one free’ special, it is only useful if you can eat the other steak, otherwise it has no value whatsoever,” says Fialkov. “This is the situation we find ourselves in. We have to pay 15% extra to get more bandwidth than we could ever use.”
He says it is unlikely Cybersmart will reduce prices for ADSL data, especially since previous IP Connect price cuts are already fully factored into its fees.
Crystal Web, another ISP, meanwhile says it is in negotiations with various parties, saying, too, that Telkom’s price cuts are not as simple as made out.
“In order to take advantage of this once-off offer, one has to spend a lot more money to obtain a benefit that may not necessarily be needed or required by the ISP,” says Crystal Web CEO Shaun Kaplan.
“While it’s an effective rate reduction, it’s not without its cost implications to ISPs,” he adds.
WebAfrica CEO Tim Wyatt-Gunning says that his company is also in discussion “to fully understand the terms around the finer details of Telkom’s offer”.
“We hope we will have that soon,” he says. WebAfrica buys its bandwidth from Internet Solutions.
In an interview at the end of April, just days after Telkom announced its wholesale pricing strategy, Internet Solutions MD Saki Missaikos predicted that the price cuts — effective on 1 May — should lead to big savings for consumers on their broadband bills.
He said at the time that it was still too early to say what sort of discounts Internet Solutions would be able to pass on to ISPs, which will ultimately affect what end users pay.
Internet Solutions carries a significant percentage of all DSL traffic in South Africa, and provides facilities to large Internet service providers such as MWeb and WebAfrica.
Missaikos said then that it was not clear what conditions service providers would have to agree to in order to secure the maximum 63% discount proposed by Telkom. He said Telkom was attempting to protect its copper network as far into the future as possible.
An Internet Solutions spokesman could not be reached for comment this week.
The Internet Service Providers’ Association previously welcomed the price cuts, with spokesman Ivan Booth saying it “looks forward to further details regarding the reductions”. — © 2015 NewsCentral Media
