ADSL scene unlikely to change in SA

Telkom`s monopolisation of the local telecoms market has seen South Africans paying about 50% to 80% more than they should be for ADSL, say local players, but they concede the situation is unlikely to change in the near future.

SA boasts 268 ADSL providers, according to Internet service provider, Web host and Web designer directory ispza.com. Offerings range in price from R63 a month for 1GB accounts, to R6 769 a month for a 50GB cap business offering.

However, MyADSL founder Rudolph Muller warns that real competition is needed to bring the country in line with the rest of the world.

"This is a fast-growing market, with many small guys cropping up whose main line of business is Web hosting or selling dialup connections. These guys can afford to offer cheap ADSL, and this is bringing down prices in the market, but essentially everyone is reselling Telkom`s broadband," Muller comments.

He predicts SA will eventually see a few big players, such as MWEB and DataPro, dominate the service providers` market, with a myriad of smaller service providers, who do little advertising, competing for the lower end of the market.

"I don`t think we can expect to see Telkom`s position change any time soon. It will continue to dominate as it has control over SAT3 [international bandwidth], local bandwidth and the copper infrastructure in the ground. The SNO [second national operator] is unlikely to have much effect on the ADSL market though, but could possibly compete in the WiMAX space," Muller adds.

On the ADSL front, he sees possible competition from Sentech, whose recently launched wireless broadband offerings could impact Telkom to a limited extent.

"If we could open up the market though, prices should drop by between 50% and 80% within a year. And we would also see a drastic uptake in ADSL in this country."

Some 35% of all ADSL subscribers in SA are businesses, but residential subscriptions are picking up as cheap 192Kb-speed 1GB services are becoming available, Muller notes. However, he says, these are considered poor services globally.

However, SA is still seeing demand for dialup Internet services, Muller states, adding that this is in contrast to the rest of the world, where DSL services are cost-effective and well-received by clients.

Steve Davies, co-founder of Connection Telecom, agrees that the fundamental issue surrounding SA`s ADSL market is the tight control of Telkom, making it difficult to differentiate between the various ADSL service providers.

"All of them are reselling Telkom`s ADSL in one way or another, and Telkom is not exposed to any real competition at the access level. In short, the market could be much more competitive, and it`s up to ICASA [the Independent Communications Authority of SA] to ensure more even pricing," Davies says.

He also believes an ICASA call for an unbundled local loop would possibly give players such as the SNO a chance to compete more fairly against Telkom.

"I don`t see that the SNO would have any projects to create parallel infrastructure to Telkom`s. The country`s copper infrastructure is an irreproducible national asset. In the UK, for instance, all service providers are granted equal access to the national network. It should also be the case here."

Meanwhile, it has been reported that most industry players have called for a firmer stance on pricing regulations, as ICASA prepares to hold public hearings into its draft ADSL regulations, aimed at creating a more competitive ADSL market and protecting the consumer.

The draft regulations, published in November last year, emphasise consumer protection, calling for a model that would enable subscribers to top-up or buy extra bandwidth, once they`ve reached their monthly cap, without having to purchase a new user account.

A date for the hearings has yet to be set.

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