ICASA must address line rental

By Paul Vecchiatto for Telkom
Cape Town, 03 Aug 2006

While Telkom`s new ADSL pricing helps reduce connectivity costs, the real impact will only come once the regulator addresses the line rental issue, says BMI-TechKnowledge telecommunications analyst Tertia Smit.

Effective from 1 August, Telkom`s prices have been reduced by 2.1% across the board, with ADSL connectivity seeing the sharpest cuts. According to Telkom, price changes will benefit ADSL users who will enjoy a reduction in rentals of up to 32%. The average decrease in ADSL rentals is 24%. Residential line rental is now R130 a month.

Telkom will also, where possible, bump up users on the 192Kbps service to the 384Kbps at no charge and the former speed will eventually disappear.

"The reductions are in line with our [BMI-T`s] prediction that ADSL prices will fall by 50% over the next two years," Smit says. "However, further reductions will depend on how the regulator [the Independent Communications Authority of SA] addresses the line rental issue."

Smit says nowhere else in the world do ADSL users get charged for subscribing to the service plus a line rental fee.

"It is not a model that is acceptable anywhere else. If a competitor enters this market, they would be advised not to follow it. However, the regulator must force the issue," she says.

Smit also says the ADSL reductions are consistent with Telkom`s previous statements that it would reduce the pricing once more users come online and scale of economics comes into play.

"There is still pent up demand for ADSL services and Telkom is not keeping up with it. This is opening an opportunity for the mobile players," she says.

Inflationary pressures

Steven Hayward, Telkom`s managing executive for retail marketing, says: "If one considers inflationary pressures, in real terms there is a price drop of 5.6%. This indicates Telkom`s ongoing commitment to providing affordable access to telephony for all our customers."

The new pricing structure also means reductions of up to 20% in the monthly rental for residential ISDN services, a decrease of up to 39% in the rates for international private leased circuits as well as significant cuts in long distance and international call charges.

Local call charges remain unchanged at 59.4c, with the per-minute rates being 38c and 16c for Standard and Callmore times respectively.

The price of long distance calls have been reduced by 10%. Long distance calls will now cost 72c per minute during Standard time and 36c per minute during Callmore time. The minimum charge for long distance calls has also dropped by 10% (8c), to 72c.

There is also a 9.9% reduction in the average price per minute of international calls. In addition, the following DSL price adjustments also come into effect:

The indicated DSL prices exclude ISP costs, line rental and call charges.