Telkom`s pricing model is ludicrously expensive, anti-competitive and forces Internet Service Providers (ISPs) to endure poor quality service.
So says MWeb regulating director Richard Heath, who was addressing the Independent Communications Authority of SA (ICASA) council at a hearing into numerous complaints about Telkom`s ADSL offerings.
Heath says Telkom`s IP connect (IPC) pricing model makes it extremely difficult for ISPs to compete, and is prohibitive for ISPs looking to run a wholesale model.
"According to this model, we would have to pay over R27 000 for a 2MB ATM circuit. Let`s assume we can squeeze that circuit to get 64 users on that pipe - that still equates to over R400 per user. And on top of that, these users didn`t pay for a service that will probably be half the speed of ISDN, they want high speed access.
"Telkom does not have to incur these costs, and they are offering the same service, which puts anyone who wants to compete on the back foot from the offset."
MWeb technology operations GM Mervyn Goliath says there is also a significant disparity in terms or revenue garnered per ADSL users. "The total Telkom revenue per ADSL user is R983, or around 95%, while the ISP gets R43 - about 5%."
Telkom argues that much of its costs are invested directly into its ADSL infrastructure, but Goliath questions how high these costs could be. "All the ATM circuits are already in place. At worst they will have to provide fibre cards. Also, their bandwidth usage is nowhere near capacity, so they will be able to increase their client base without further investment there."
The resale model also inhibits ISP innovation, adds Heath. "Telkom has designed and packaged the offering that we sell. It is an absolute disincentive for ISPs to develop beneficial services for the user. This resale model cannot be allowed to persist."
In his presentation, Heath identified key areas where intervention was needed, such as the reduction and rebalancing of the ADSL pricing strategy, and the promotion of alternate broadband access.
"We also need mandatory co-location obligations to be imposed on Telkom. Mandatory imposition of wholesale rates in respect of all charges paid by value added network service providers (VANS) to Telkom for ADSL."
Heath concluded by calling for the removal of the duplication of access charges.
Telkom`s response
Telkom was given the opportunity to respond after complaints were presented to the ICASA council.
Telkom regulatory affairs GM Gabriel Celli began by defending the 3GB cap it implements on ADSL offerings as a method of ensuring each subscriber gets a fair amount of bandwidth.
"Our research shows that the average user utilisation is well below 3GB, so it seems sufficient."
Celli also defended Telkom`s position on the monthly R699 line rental - which numerous presenters slammed as exorbitant and unnecessary - insisting that Telkom is actually incurring a deficit in the local loop.
"Claims that revenue is being made there are incorrect. Attendants were told that it is simply a matter of us putting some equipment down, and the rental charge would quickly cover that. That is too simplistic.
"Operating costs are accrued, and they must be maintained and updated, so you can`t say once you have covered the capital expenditure, you have covered all the costs."
Celli said Telkom is also addressing the issue of high ADSL costs. "We will announce a number of price reductions over the next two months as part of our short term strategy, but I cannot say what our long term strategy is going to be."
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