ISPs await SAIX structure

By Damaria Senne for Telkom

Johannesburg, 25 Aug 2006

Internet service providers (ISPs) may have to choose between increasing the risk associated with customer credit and suffering losses when they implement the provision not to cap local bandwidth, in accordance with the new ADSL regulations.

According to Greg Massel, chairman of the Internet Providers Association of SA, if the ISP chooses to remove the cap, it will carry a greater credit risk. If it charges a flat rate for ADSL services to accommodate the no-cap provision, it runs a risk of making a loss.

ISPs will have to wait to see how Telkom restructures the wholesale ADSL accounts of the South African Internet Exchange (SAIX), and offer services as dictated by this structure, he says.

Massel notes there is a very real cost of local bandwidth, which is exacerbated because ISPs are still forced to purchase facilities from Telkom.

"Until ISPs are granted the necessary permission and licences to operate their own fibre and radio frequency infrastructure, local bandwidth will remain excessively costly."

One also has to keep in mind that ISPs selling their own bandwidth via ADSL incur a massive surcharge to Telkom for the IP Connect link into the ADSL network that is relative to the size of the link, he says. This link is used whether or not the ISP is transmitting local or international bandwidth to the user, he notes.

While the Independent Communications Authority of SA (ICASA) has stated that local bandwidth should be uncapped, it has not prevented ISPs from charging for that bandwidth at a market-related price, Massel adds.

Before Telkom introduced the capping system, users could surf local sites free when their allocated bandwidth was finished.

Billing model

Massel says there is scope for completely new billing models that circumvent a number of these problems - if ISPs could realistically and fairly compete by selling their own bandwidth via ADSL, instead of selling Telkom SAIX accounts.

"Until authorities prevent Telkom from being anti-competitive, it will dictate the structure of ADSL offerings in the market and prevent innovation in ADSL product structuring and billing," he says.

Ideally, Telkom should scrap the IP Connect fee, thereby allowing ISPs to deliver their own bandwidth and structure their own packages, Massel states. Telkom is double-charging for this: it charges the ISP to get to the end-user through the IP Connect fee, and then charges the user to get to the ISP through the ADSL access fee, he says.

Telkom should engage the ISPs and allow them to give input to the structuring of SAIX service offerings based on their clients` requests, he adds.

"Telkom should be listening to its customers, which in this case are the ISPs and indirectly, the end-users."

A Telkom spokesperson was unable to provide comment on what the fixed line operator`s plans are regarding the implementation of the regulations.

ICASA chairman Paris Mashile stated previously that the issue of bandwidth interconnect charges will be addressed in the interconnection and facilities leasing regulations.