Internet service providers (ISPs) may be in for welcome news from Telkom, as the company considers cutting IP Connect (IPC) costs again soon, for the fourth time in three years.
Telkom says its wholesale unit is looking at ways to reduce ISP costs - and ultimately consumer prices - including the price of IPC. The company did not provide specific timelines, but says it will "communicate price reductions to the market in due course".
This comes as part of what Telkom - SA's telecoms backbone with a monopoly in the fixed-line arena - says is a mission to make broadband access more affordable.
IPC is one of the biggest cost drivers for ISPs and has previously been cited as a major inhibitor to growing broadband in SA, with ISPs arguing the cost of the product is inflated and limits competition.
The Independent Communications Authority of SA (ICASA) has indicated the cost of IPC is the single largest cost component faced by competing ISPs in providing choice to the end-user for fixed-line ADSL services.
Telkom last cut IPC prices in February last year, when it announced an "effective" 15% price reduction on its wholesale IPC offering. This cost-cutting exercise was in line with a 2013 settlement between Telkom and the Competition Commission - a move taken to resolve a series of complaints lodged against the fixed-line incumbent from 2005 to 2007 by ISPs.
Prior to that, in April 2012, IPC prices plummeted by 30% after ICASA stepped in to lower costs and increase ISPs' margins, in a move the regulator said at the time should "stimulate innovation and investment". This was followed by a much smaller price cut (8%) in October 2013.
"Taken cumulatively, and considering this latest price reduction, Telkom has given effective price reductions of approximately 53% over the last two years," it says.
Telkom says the IPC price reduction SA has seen since October 2013 is higher than what was required in terms of the Competition Commission settlement agreement.
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