Internet TV fails on price

Internet connectivity may be considered a basic human right in some countries, but it remains out of reach of many South Africans, as even the most innovative of solutions are still too costly for the lower income bracket of society.

This week, SA's two top mobile operators, Vodacom and MTN, unveiled devices that offer Internet connectivity on existing television units.

Both devices come with launch prepaid vouchers, which can be used as data bundles; thereafter, customers will have to buy prepaid data at normal data rates to access the Internet.

Vodacom claimed the latest innovation will bridge the digital divide in SA, while MTN stated its device would bring affordable Internet access to SA's unconnected masses.

But at R749 for Vodacom's WebBox device and R999 for MTN's InternetOnTV, analysts have slammed the price point, arguing that the emerging market at which the devices are aimed will probably baulk at the prices, as well as at the cost of data.

Frost & Sullivan industry analyst Spiwe Chireka believes current mobile services are targeted at living standard measures (LSMs) of between four and 10, which range between R2 880 and R29 690 in terms of average household income per month.

Based on the claims that MTN and Vodacom will target the lower end of the market, the Internet TV products may be targeted at the LSM brackets of between one and four, which range between R1 386 and R2 880 average household income per month.

Chireka says neither product is likely to disrupt the market, or much less lend itself to being the bridge over the digital divide.

“And that is before the upfront cost of the additional device. While the devices are innovative and it is a very creative initiative, the business models behind them don't seem likely to spur mass uptake,” he continues.

While MTN's complete offering is R250 more expensive than Vodacom's product, analysts point out that MTN's flexible payment options and a variety of data bundles may give it a competitive-edge.

Vodacom's WebBox includes a keyboard that comes with a SIM card and an inbuilt modem, which offers services that include Internet browsing, SMS and e-mail messaging. Other services include FM radio and an online photo album, as well as games and video and music players.

The introductory offer includes a 2GB SD card, a prepaid SIM card and 100MB of data valid for three months. The operator claims to have a 24-month contract offering in the pipeline.

However, as it stands, users will pay Vodacom's high prepaid data tariff rates for a GPRS or Edge connection, instead of 3G. The operator says a 3G device will follow shortly.

Goldstuck notes that while he has not had the opportunity to test either product, Vodacom may be off to a bad start without 3G.

MTN InternetOnTV is a home phone and Internet device in one, including a built-in 3G modem that supports 7.2Mbps connectivity. The package includes a keyboard, RCA cable and mouse.

InternetOnTV can also be used to make and receive phone calls and SMSes at the same time.

“Unlike some competing products, MTN InternetOnTV offers social media integration, MS Office document support and 3G 7.2Mbps. Furthermore, the built-in media player also supports MP3, AAC, DIV, WMA and MPEG4 codecs, while access to e-mail services is also provided,” explains Mapula Bodibe, GM for consumer marketing at MTN.

Chireka is of the view that without flexible payment plans the operators are unlikely to make inroads into the lower end of the market.

MTN will offer a flexible payment option for the device, which will be available from selected Jet retail stores; existing Jet account-holders may pay the device off over six months, interest-free.

The operator is also more flexible than Vodacom in its data offerings. “MTN has a range of Internet bundles from 10MB to 2GB, as well as a one-day uncapped Internet bundle. We will soon be introducing a 90-minute Internet bundle to provide another cost-effective way for consumers to access the Internet,” explains Bodibe.

Both Goldstuck and Chireka believe the offering is simply an alternative to mobile data.

“The devices seem like experiments to find new ways to grow the market, add new services and generally address the issues that come with market saturation in the networks' core business of voice calls,” explains Goldstuck.

“Because Internet access is growing so rapidly on cellphones, an assumption is being made that users are becoming comfortable enough with the medium to explore it on other platforms,” he continues.

Nonetheless, given the failure of the pricing model supporting these devices, Goldstuck maintains that the cellphone remains the only obvious tool for bridging the digital divide.

Related story:
Get ready for Internet TV