Telkom defends fibre prices deemed anti-competitive

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 22 Apr 2021

Telkom has defended the pricing of some of its fibre products which had been labelled anti-competitive.

This week, media reported that prominent Internet service providers (ISPs) have raised concerns that the company’s fibre pricing may be anti-competitive as it is sold below cost.

The deals in question are Telkom Retail’s 25/25Mbps fibre package on the Openserve network at R449 per month, which is the cheapest on the market. Telkom is also running a promotion for a 25/5Mbps package in April for R399 per month on a 12-month contract.

However, the telecommunications company has said there is nothing untoward about these prices.

In a statement issued to ITWeb, Telkom says the pricing is not anti-competitive, but rather having the foresight and agility to serve South African consumers during the COVID-19 pandemic.

Telkom Retail also claims it does not get preferential treatment from its wholesale network infrastructure unit Openserve and that it also makes use of other fibre providers to provide affordable broadband services to its customers.

Responding to the anti-competitive price allegations, the telco says: “We believe that these accusations and analysis lacks vital context and presents incomplete arguments.”

It explains that Telkom’s decision to provide the products at the R399 and R449 price points is not anti-competitive in that it is part of a campaign to assist subscribers who are facing financial difficulties and who have had to work, study and conduct other economic activities from home during the COVID-19 pandemic.

The company argues that although Telkom was not the first to introduce a consumer fibre bundle at these price points (MWeb being the first), the R399 price point was initially introduced as a three-month promotional product on the 10Mbps speed in November 2020.

It notes that when Openserve upgraded its speeds and removed the 10Mbps entry-level product, Telkom Consumer applied the same price point to its new 25/5Mbps entry-level product as a six-month (1March to 1 August 2021) promotion for a 12-month subscription, largely to assist with the COVID-19 crisis.

The company adds that it introduced the 25/25 Lite promotional product at R449 per month.

“Given the number of players and highly competitive nature of the fibre market, Telkom is surprised that competitors are accusing it of acting anti-competitively when it has a relatively small market share and cannot be accused of abuse of dominance when entities like MWeb, Afrihost and others have higher FTTH [fibre-to-the-home] subscriber numbers.”

Commenting on the matter, Ofentse Dazela, director for pricing research at Africa Analysis, says Telkom does have a point that it is actually not the first service provider to offer this entry-level package at price points below R483 per month, which aggrieved competitors now deem as break-even point for a 25Mbps plan entry-level plan, which was previously a 10Mbps entry-level package prior to the recent Openserve line speeds upgrades.

According to Dazela, as far back as 2018, retail service providers such as Cool Ideas and Internet Republic were already charging customers R399/month for a 10Mbps uncapped offer, and R479/month for a 20Mbps uncapped plan on Openserve’s network.

“Were these price points not below the R483 per month thought to be the break-even point for an entry-level package then, and did any competitors complain? Why is it an issue now that Telkom is charging below the R483 for its entry-level uncapped offers?”

He adds that between 2019 and 2020, more ISPs such as Mind the Speed, MWeb, Network Platforms, RSA Web, Saint ICT and Webafrica started charging extremely low monthly fees ranging from R313pm to R479, for packages with downloads speeds between 10Mbps and 20Mbps on the same Openserve network.

The issue of anti-competitiveness was again never raised with these service providers at the time, Dazela notes.

“Following the recent upgrades by Openserve, we have seen Telkom and Webafrica positioning themselves as the first movers to charge below R450 per month for a 25Mbps asymmetrical uncapped package, but it is startling that only Telkom is now been picked on for entering price competition in the FTTH, something which they did not initiate given the historical pricing context highlighted above,” he concludes.