Bandwidth still the issue

Many local companies agree there is a desperate need for greater bandwidth in SA and for broadband to be made more affordable. They see this as being crucial for the development of Internet business and so the economy.

However, others suggest that a lack of low-cost broadband is not the only obstacle and the government should not be the sole target of business lobbies.

One of the givens in the ICT industry is that more often than not, cost is a greater business consideration than technology. Nowhere is cost a greater consideration than when it comes to creating a Web presence or enabling e-commerce facilities, especially for smaller companies.

It follows that the relatively high charges for Web hosting services could be construed as an obstacle to e-commerce development. Some say local companies should hit back at local Internet service providers (ISPs) by taking their hosting business offshore.

Some say local companies should hit back at local ISPs by taking their hosting business offshore.

Warwick Ashford, Senior technology journalist, ITWeb

On the surface, this makes sense. Who in their right mind will pay over R100 a month for Web hosting from a local ISP, when an offshore company will provide hosting services for around R70 a month?

Readers have challenged the bigger local ISPs to provide Web hosting for around R80 a month, including 50MB storage, unlimited e-mail addresses, 5GB monthly download, and free access to reporting packages. They say this is no pipedream, but the reality of the services provided by offshore ISPs.

Given the quality of offshore services, what is preventing the larger local ISPs from coming to the party to promote e-business in SA?

Surprisingly, Gary Hart, marketing and products manger at M-Web Business, agrees that the situation appears to be anomalous, but explains it is out of the ISPs` control.

There are apparently four main reasons local ISPs are unable to match the pricing of offshore companies. First, says Hart, these companies have thousands upon thousands of Web hosting customers, all using the same resources. In SA there is simply nowhere near the necessary demand to achieve the required economy of scale.

Another factor is infrastructure and software licensing costs. Hart explains that providing reliable Web services means building in redundancy at every level, which incurs a huge amount of expense for the ISP.

In addition, ISPs that provide a premium service foot the bill for live 24-hour support services. Hart points out that this is a service that many offshore ISPs do not provide.

However, the single most important factor preventing local ISPs from competing with offshore offerings, explains Hart, is the cost of bandwidth, which constitutes up to 70% of the price of Web hosting services. Local ISPs have to buy bandwidth at a fixed rate before they can allocate that bandwidth to subscribers to their Web hosting services. Overseas ISPs are able to buy bandwidth at much more preferential rates than local companies.

So we are back where we started. It all seems to come down to the need for government to change legislation to make more bandwidth available at lower cost. It appears the ISPs are not solely to blame at all.

Ultimately we are stuck with the bandwidth problem because the overseas ISPs are remote from the target audiences in SA. Hosting a Web site closer to the target audience guarantees a better quality of service and delivery, so making a hosting decision based on cost alone may not be the best approach in the long run.

But should the ISPs be let off so lightly? If we accept the arguments advanced by Hart, the ISPs really cannot be taken to task individually, but perhaps the time has come for them to act collectively.

Hart points out that local ISPs have been in dialogue with government for some time. He says the ISPs are lobbying strongly for the advent of a second national telecoms operator in the hope that competition will drive down the cost of bandwidth, and are calling for a more competitive environment, which should see the roll-out of more broadband technologies.

The ISPs appear to be doing their bit as far as pushing the government towards making cheaper bandwidth a reality in SA, but what about making a contribution to lowering the barriers to entry in the meantime?

If ISPs were to reduce prices, surely the long-term economy of scale benefits would be worth the interim economic pain? By reducing the barrier to entry, ISPs could attract enough Web hosting business to make it a viable business proposition in the long-term.

Assuming subsidisation is a viable solution, perhaps it would be unfair to expect a single ISP to stick out its neck for the good of the whole industry. So the way forward is clearly for all the big ISPs to work together to subsidise services in a concerted effort to drive up the numbers.

In the final analysis, the negative effects of the cost barriers and the relatively inferior service available from offshore companies dictates that local ISPs need to get real and collectively bear the cost of bringing SA into the 21^st century.