Internet service providers (ISPs) and their customers can look forward to reduced broadband data prices in coming months because Telkom is set to reduce its IP Connect (IPC) fees by 8% next month, the first of three reductions that form part of the terms of the settlement reached between the operator and the Competition Commission in July.
Telkom has agreed to settle the case, in which it stood accused of anticompetitive abuses between 2005 and 2007. The settlement includes payment of a R200m penalty over three years and, more importantly, “functional separation” of its retail and wholesale divisions. Telkom has also agreed to pricing commitments for the next five years.
The commission said at the time that the price reductions Telkom had agreed to would be weighted 70% to wholesale and 30% to retail. Focusing on wholesale pricing puts pressure on third-party ISPs to pass on cost reductions.
Telkom MD of wholesale and networks Bashier Sallie says the mid-October cut in IPC — the fee Telkom charges ISPs for carrying broadband data across its digital subscriber line (DSL) network — follows a 30% cut made last August, and a further 5% effective reduction the company implemented last month.
Telkom will need to make cuts to IPC fees in 2014 and 2015 and may not reverse these reductions for three years thereafter.
The number of fixed lines in service has fallen in recent years and DSL connections have stagnated at around 900 000. Sallie says the company’s own research shows the size of the market for fixed-line broadband is closer to 2,2m and that one of the reasons for limited uptake is the “design limitation in terms of how the network was set up”.
“There’s a real opportunity to double the [user] base,” he says, adding that Telkom has given itself a timeline of two-and-a half to three years to meet this target.
“Since the launch of uncapped [broadband] almost three years ago, we’ve seen fixed broadband traffic on our network grow by 800 to 900%,” Sallie says, dismissing the suggestion that the market for fixed-line broadband is limited. He says there remains room for growth using existing technologies, not merely the higher-speed infrastructure Telkom has been rolling out in select areas this year. — (c) 2013 NewsCentral Media
