Internet providers at war in South Africa


But while the price war is brilliant for existing users, it is unlikely to pep up the stagnant demand among new users. The way things are going, South Africans may soon have to stop complaining that the cost of Internet access is setting world records in the rip-off stakes.

Bold advertisements proclaim price cuts of 61% here, 50% there, and more generous data downloads everywhere as the service providers introduce some astonishing reductions. But before we get carried away, it’s worth pointing out that the prices are cheaper, not actually cheap, and that “high speed” in SA is still snail’s pace by global standards. Nonetheless, surfers have never had it so good.

Consumers should expect a hiatus now as the players sit back to assess the impact on their customer numbers, profits and market share. Telkom hopes to persuade up to a fifth of its customers to sign up for its ADSL broadband internet services by 2011, compared with 6% now, but rules out any more drastic price cuts as there is a distinct lack of competition from new operator Neotel.

Retail marketing manager Steven Hayward says Telkom would rather offer faster access to improve the value, instead of more price cuts. Telkom now advertises speeds of up to 4096KB per second and up to 3GB of data downloads a month for R516. Its overall fees have dropped 24% in a year, Hayward says.

Rudolph Muller, founder of the MyADSL website for broadband users, phrases it differently. “What they are saying is that they are sitting on a cushy, monopolistic environment and can abuse their position and charge the high prices,” he says.

Telkom also pared back the wholesale price it charges rival internet service providers (ISPs) to use its backbone, but only by a paltry 5%. That means ISPs that offer their own brands over Telkom’s lines have little room to manoeuvre their own fees down.

Says Sean Bezuidenhout, of the ISP Gamco: “Although there have been some wholesale discounts on ADSL, consumers are going to see very little change to their pricing.”

Far more drastic slashing by Vodacom, MTN, Sentech and iBurst now make wireless internet access less expensive than the fixed-line version. Sentech has made itself a viable player with a slew of lower-priced, higher-speed offerings for anyone within wavelength distance of its radio towers. With prices starting at R99, it is aiming to win over customers who are still using a dial-up connection.

MTN users can pay as little as 20c a megabyte, with 2G of data a month at speeds of up to 1,8MB a second costing R399. Price cuts of up to 20% are designed to make mobile data affordable to more of the population, says MTN SA’s GM for consumer marketing, Donovan Smith. In response, iBurst is giving subscribers 200MB-500MB extra data a month, in a bid to boost subscription figures that are already climbing almost 3000 a month.

Vodacom’s packages to wirelessly connect computers to the internet have become up to 61% cheaper, and CEO Alan Knott-Craig claims its data fees are among the most competitive in the world. Two years ago users were paying R40 a megabyte, and that has dropped to below 19c.