Afrihost and Vox Telecom have joined MWeb in trimming the cost of broadband.
However, players in the industry say the local loop must be unbundled before South Africans feel any real benefit.
Last week, Internet service provider MWeb dropped a bombshell on the industry, when it released a range of uncapped ADSL packages, with competitive prices. The news was expected to start a price war and reshape the local Internet industry.
MWeb's consumer and business offerings start at R219 a month, excluding Telkom line rental, which undercuts other prices in the industry.
In November last year, ITWeb noted the cheapest uncapped ADSL product was R399 per month, for a 384Kbps ADSL line, offered by Screamer. MWeb now offers the same line speed for R219 per month.
However, both Afrihost and Vox, the latter through its subsidiary @lantic, have joined the price war and dropped the cost of their offerings. Even more price cuts could be in the pipeline if the local loop were to be unbundled, argue industry commentators.
Yesterday, Afrihost launched what it claims is SA's cheapest uncapped ADSL, from R197 a month for an uncapped 384Kbps ADSL line, without line rental. “Over the past few months, we have been testing an uncapped product, which we are now ready to introduce to the market,” says CEO Gian Visser.
Vox's @lantic said yesterday it will offer three uncapped products, including ADSL line and uncapped data bundles. The company's uncapped 384Kbps ADSL line, including Telkom ADSL line rental, is R339 a month.
Constraints
The industry says inaction by the Department of Communications (DOC) and the Independent Communications Authority of SA (ICASA), in respect of freeing up the local loop, is undermining further price cuts.
ICASA is set to unbundle the local loop by November next year. The unbundling process has been dragging on for several years with umpteen delays.
Afrihost sales director Greg Payne says - taking a 4Mbps line with a 5GB cap - as much as 79% of the cost is access to the Telkom network. “And you haven't even downloaded your first e-mail yet.”
Payne says the access costs must come down, although there have been mixed results internationally when the local loop has been unbundled. He queries why the regulator does not step in and make connectivity more affordable in the short-term. @lantic MD Dederick Venter says the cost of broadband is still too high in SA. He hopes the company's price drop will “force the hand of the incumbent operators who stubbornly protect their revenue streams to the detriment of consumers”.
Venter argues that SA needs more broadband penetration and this “can only be achieved by a reduction in wholesale prices and the unbundling of the local loop. Only once these issues are dealt with will we see truly competitive prices for the consumer.
“It is not in the best interest of service providers to start a price war among ourselves, but due to the constraints imposed by Telkom and the lack of decisive action from ICASA and the DOC, we simply cannot afford to sit and wait any more.
“A lack of true wholesale options from the cellular providers and Telkom make it almost impossible to compete on equal footing,” he adds.
In agreement
His view is echoed by Vox Telecom MD Douglas Reed, who says the cost of broadband services in SA is being driven down by competition, despite Telkom still holding a monopoly over the Internet market.
“The degree to which Vox, MWeb and every other player in the market can cut their tariffs is frustratingly highly constrained by Telkom,” says Reed.
He points out that Telkom still owns the local loop, and this is stifling competition because “ISPs still pay heavily for the right to use a facility that was funded by taxpayers in the first place”.
Reed explains that access to the local loop can account for up to 90% of the fees ISPs charge their customers, which means more “significant price cuts can only be unleashed when the regulator finally delivers on its promise to unbundle the local loop”.
“The message to our telecommunications regulator is clear: nothing is more effective than letting the free market determine pricing. It is imperative that ICASA's plans to liberate the industry are accelerated, since local loop unbundling and number portability will let us unlock further price cuts.”
The regulator did not respond to requests for comment.
Meanwhile, Telkom says it has been involved in the process around local loop unbundling and will continue to be involved. “Telkom is awaiting ICASA's direction regarding what the next steps in the process will be,” says Ajith Bridgraj, the company's senior specialist for media relations.
Click here for a table comparing the new uncapped offerings.
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