Broadband price cuts slammed

By Damaria Senne for Telkom
Johannesburg, 02 May 2007

Competitors may drag SA's fixed-line monopoly, Telkom, in front of the Competition Commission, as they allege the company's new broadband packages are priced anti-competitively.

This comes after Telkom recently announced its new offerings would bundle DSL access and data charges, offering up to 18% discount on its previous broadband prices. This puts the fixed-line operator ahead of its mobile competitors in terms of its 1GB and 2GB offerings, while also bringing broadband prices closer to wholesale levels.

Steven Hayward, Telkom's managing executive of the retail division, says the company is introducing a new 1GB entry-level package, where existing fixed-line customers pay R279 per month. New customers pay a line rental cost of R92.98 per month, he says.

Prices for Telkom's 2GB prices were slashed by 18%, to R364 per month, while 3GB prices were reduced by 12%, to R675 per month, Hayward says.

The offering also allows Telkom to compete with mobile operators, he says. "This is probably the cheapest available broadband in SA."

While the mobile wireless providers continue to offer the lowest entry barrier, with 500MB costing between R189 and R250 per month, a comparison of equivalent services shows Telkom's 1GB offering is the lowest priced.

A comparison of wireless services undertaken by MyADSL last week showed Vodacom's 1GB offering costs R289 per month, while Sentech's product costs R299 and iBurst's offering is priced at R308 per month. MTN does not offer a 1GB broadband package. However, its 2GB offering costs R399 per month. This offering is more expensive than Telkom's 2GB version, which is R364 per month.

Anti-competitive

World Wide Worx MD Arthur Goldstuck says while Telkom's new offering is another way to bring down the cost of ADSL, it is not a business- or competition-friendly move.

World Wide Worx director Steven Ambrose and MyADSL founder Rudolph Muller argue Telkom has discounted ADSL retail prices to such an extent that they are close to wholesale prices. This provides thin margins for ISPs to operate, they say, making it difficult to compete with Telkom's offerings.

Additionally, Telkom also offers the Do Broadband product, bundled with Telkom Closer, its voice offering, further strengthening its position by providing something ISPs cannot compete with, Muller adds.

"I would be very surprised if ISPA [the Internet Service Providers Association] did not take the matter up with the Competition Commission," both Muller and Goldstuck say.

Muller adds that ISPA lodged a similar complaint in 2005. However, the Competition Commission has yet to rule on the matter.

ISPA was unable to comment at the time of publication. However, a source close to the advocacy group says ISPA's fair competition working group is aware of the anti-competitive concerns around Telkom's new ADSL products.

The working group is discussing the best strategy for ISPA to use to tackle this and a number of options are available, he says.

These include a fresh Competition Commission complaint, adding the new products to one of the existing complaints, or lodging a complaint with the Independent Communications Authority of SA, he says.