DOTCO, the Cape Town-based Internet service provider (ISP), the first ISP to offer high capped 30GB ADSL accounts through its "All You Can Eat" (AYCE) service, has petitioned the Independent Communications Authority of South Africa (ICASA) in terms of the provisions of section 53 of the Telecommunications Act.
DOTCO is complaining that Telkom`s recently announced pricing structure for resellers of its ADSL service prejudices certain operators and discriminates against them.
Telkom allows ISP wholesalers to do the provisioning and authentication of their own ADSL users, or it resells accounts through its South African Internet Exchange (SAIX) division.
Telkom`s new pricing structure - which comes into effect on 1 November 2005 - is based on per-gigabyte usage for those ISP wholesalers that do their own provisioning and authentication, as opposed to the current fixed amount for a "fixed cap" or an agreed maximum usage over a month.
According to DOTCO MD Johan Ferreira, it appears as if Telkom is intent on using this per-gigabyte-based billing model as an instrument to pass on a radical cost increase to its resellers while bypassing the regulatory approval procedures for increases.
He says the move effectively marginalises smaller, independent ISPs that have been promoting, marketing, selling and self-regulating or authenticating Telkom`s 30GB ADSL service on behalf of the telco giant.
"The new structure forces self-authenticating ISPs to `hardcap` or strictly limit usage to clients," said the AYCE founder.
He says Telkom has made no such assertion, creating a significant advantage for the organisation and an incentive for end-users to switch to the TelkomInternet service or services provided by Telkom-authenticated service providers.
"The option will be for the independent ISPs to either absorb price increases or pass them on to our customers. These hikes could be as high as 800%," he says.
From 1 November Telkom will charge ISPs R1 620 (excluding VAT) for its 30GB "shaped" service. DOTCO resells this service in terms of its current "capped" agreement with Telkom for just R580 per month via its AYCE service.
In its submission to ICASA, DOTCO states that the changes are designed to benefit Telkom`s own Internet service - which will be perceived as more cost-effective - and disadvantage ISPs other than Telkom-authenticated organisations.
Brendan Hughes, of Michalson`s Attorneys, who successfully defended the Hellkom Web site against Telkom recently, is again entrusted to make sure Telkom`s tactics are unsuccessful.
Ferriera says the so-called "shaped" service - usage-based billing - is neither a product improvement nor a new innovation.
"The new service is technically a step backwards because of the way in which the user will be addressed when the `cap` of 30GB is reached.
"In terms of Telkom`s `Option Two` service which appears to be the only viable alternative for independent ISPs, the users will have their service impacted by 16 or 64 kilobits-per-second throttling mechanisms and increasingly frequent session disconnects as the threshold is reached and even exceeded.
"Even with these constraints in place, Telkom will be unable to prevent occasional `overshoots` the costs for which ISPs will be liable.
"The only solution will be to pass these costs on to the end-user who will already be suffering the annoyance of a severely crippled and sporadic service."
He says in order to manage their responsibility for these overrun charges, self-authenticating ISPs will need to implement more frequent session timeouts and slow down the Internet speed of their users.
"Both of these measures will negatively impact our clients` Internet usage by frequently interrupting their connectivity and providing them with an inferior speed Internet connection which undermines the very purpose of ADSL as an always on, high-speed Internet solution.
"Users of Telkom`s own Internet service - which is sold at a fixed cost even when there is an overshoot - will not be subject to these inconveniences and disadvantages," says Ferreira, whose AYCE offering gives it a major share of the high-end ADSL market.
"Telkom is currently advertising a 24-month ADSL contract with `soft` capping. In terms of this agreement, once a limit is reached, restricted access to international content will still be permitted, while unrestricted access to local content will still be available.
"AYCE currently costs R580 per month, this will increase to over R1 700 for the same, if not an inferior product.
"For example, a `soft` capped user would still be able to visit and transact on a local Internet banking site. A `hard-capped` user would not."
Ferreira points to additional hurdles that will prejudice ISPs in their bid to sell ADSL services.
"Independent ISPs that perform self-authentication, accounting and auditing functions have to - contractually - make use of an expensive Telkom-supplied SAIX connected Diginet service.
"Diginet services involve long contractual commitments which will financially and physically commit ISPs to the Telkom infrastructure for long periods of time, further discriminating against them.
"It seems Telkom is trying to milk every last cent from already disgruntled ADSL users and further abuse their monopoly in SA`s telecoms industry," says Ferreira, who is seen by many as a "real-life David" in a battle with the telecoms Goliath.
A recent report by Dr Tim Kelly of the International Telecommunications Union describes Telkom`s monopoly as `disastrous` and his report shows that SA lags behind even Mauritania in terms of telecoms development.
Ferreira says this lends further credibility to what most Internet users already know - that Internet prices in SA are prohibitively expensive.
"After the ICASA hearings in May into the high costs telecommunications in SA, these actions by Telkom are a hammer blow.
"It seems Telkom is once again trying to take the South African consumer for a ride, but we at DOTCO and AYCE will try our utmost to make sure this does not happen," adds a defiant Ferriera.
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