PC/Internet bundles stall

By Damaria Senne, ITWeb senior journalist

Johannesburg, 01 Nov 2007

iBurst has terminated its PC/Internet bundle offering while Sentech has ceased to actively market its bundled product. MTN previously said sales of its PC/Internet bundle were "trickling in slowly".

iBurst MD Alan Knott-Craig Junior says iBurst`s PC/Internet offering did not sell well enough to justify the administration and risk management costs the company incurred.

The probable reason for poor sales is that consumers prefer to buy hardware to their own specifications, from a familiar vendor like Incredible Connection, rather than take the "one-size-fits-all" bundled offering, he says. "The offering was not worth our while."

The high price of PC hardware and software also impacts on whether people can afford Internet access, he says.

Sentech product manager Mike Kuczmierczyk says Sentech will continue to offer its PC/Internet bundle. However, the company is no longer actively marketing it. He would not be drawn on the number of PC/Internet units Sentech sold. "All I can say is the offering definitely sold below expectations."

Good intentions

Broadband providers initially introduced PC/Internet bundles as a way to lower the barrier to Internet access and drive broadband penetration in the country. Telkom, Vodacom, MTN, MWeb and Polka also provide PC/Internet bundles.

Telkom and Vodacom would not state how well their PC/Internet bundles are selling, saying the matter would be addressed at the companies` mid-year results presentation on 19 November.

World Wide Worx MD Arthur Goldstuck and MyADSL founder Rudolph Muller previously said PC/Internet offerings should be priced lower to offer an attractive value proposition for mid-income earners.

Muller cites the example of India, where a PC/Internet bundle costs R100 a month. Both Muller and Goldstuck maintain current offerings fail to address the real problem of high bandwidth prices.

Knott-Craig Jnr says SA`s low Internet penetration levels have nothing to do with bandwidth price. Low Internet penetration in SA is primarily caused by expensive laptops, PCs and software, he notes. He adds that Internet providers have urged hardware manufacturers to lower prices, taking into account that SA is an emerging market. However, the discussions were not fruitful.

Muller dismisses Knott-Craig Jnr`s statement that SA`s low broadband penetration is not caused by high bandwidth prices.

"Vodacom and MTN would tell you the moment they drop price, they see significant increase in broadband uptake. And every single expert that has come into SA, including speakers from the Organisation for Economic Cooperation and Development and the International Telecommunications Union, agree that price is a factor," he noted.

Price debate

Dell brand manager Ben McDonald denies that local broadband operators approached the company with the view of lowering hardware costs to drive broadband penetration.

He also argues that market forces have already forced hardware prices down. There is no need for a special "make a computer cheaper" campaign, he says.

"From our point of view, prices on laptops and PCs have gone down. Dell has been a major player in reducing the prices of hardware since its inception 24 years ago. Also, if you compared the price of an average PC today from three years ago, you would be surprised by how low it has dropped."

BMI-TechKnowledge senior analyst Richard Hurst sees merit in Knott-Craig`s argument. "I do tend to agree with Knott-Craig that the basic needs of many of South Africans remains at a basic level and that in order to remedy this, government should seek to increase basic utility infrastructure such as electrical power," he says. This will create an enabling environment for Internet penetration, he adds.

Hurst also notes that iBurst offers an entry-level broadband package for R49 per month, placing services within reach of the average citizen.

However, Muller says this offering does not provide enough bandwidth to qualify as a true service for consumers. "The unfortunate truth is that many unsuspecting consumers are taking this information at face value only to discover the truth after signing up for the service."

Knott-Craig says the offering is ideal for someone who uses basic Internet services like paying bills and checking e-mails.