Where does South Africa really stand regarding broadband prices

bealtine

In this article they propose an alternative way of measuring various broadband offerings, a measurement "Cost per Mbps per GB". This is a way of comparing international offerings.

http://www.moneyweb.co.za/mw/view/mw/en/page71?oid=142266&sn=Detail

Where does South Africa really stand regarding broadband prices?

According to recent media reports, South Africa's broadband prices are beginning to look good. Is this true though?
Rudolph Muller
21 June 2007

According to recent media reports, South Africa's broadband prices are beginning to look good. Is this true though?

The 2007 Africa Competitiveness Report, which was released recently, places South Africa seventh on the list of African countries with the lowest broadband prices.

This information gave rise to some coverage suggesting that South Africa is not doing too badly when it comes to broadband prices. However, this is far from the truth, especially if we broaden our horizon and include international fixed-line broadband services.

But even on the continent, SA is not a leading figure. South Africa is ranked below countries like Morocco, Egypt, Madagascar, Senegal, Botswana and Mauritius, a fact which should cause alarm bells to ring.

Another cause for concern is that the 2007 Africa Competitiveness Report does not seem to take monthly usage allowances into account when doing pricing comparisons, a flaw often encountered with broadband benchmarking.

Accurate comparisons

Most broadband providers, including Telkom, differentiate on price between the various broadband offerings based on two factors, namely speed and the monthly usage allowance.

It is necessary to take these two factors into account when doing any international broadband pricing comparison, which makes an index based on "Cost per Mbps per GB" a suitable measurement.

Applying these criteria show that South Africa's DSL offerings are extremely expensive when compared to international standards.

The fastest broadband offering in South Africa is Telkom's DSL 4Mbps service. This service is priced at R675 per month and allows for a 3GB monthly usage allowance which means the service costs R56,25 per Mbps/GB.

In Morocco - Africa's leading broadband provider - the fastest current offering is a 20Mbps ADSL service, priced at R770 per month and allows for unlimited usage.

In Australia broadband users pay R901 for a 20Mbps service with a 60GB usage allowance, while the price of an unlimited 8Mbps service from BT in the UK costs R353 (it should however be noted that the BT offer includes a wireless home hub, free off-peak phone calls, 250 WiFi minutes and costs only R269 for the first three months).

The average per Mbps/GB price for these three countries is 71c, 79 times less than the price in South Africa.

The fact that South Africa's incumbent operator's premier broadband offering is over 7 900% more expensive than countries like Morocco, Australia and the UK does not paint a positive picture.

Mobile broadband

Unlike the local fixed line sector, South Africa's mobile broadband prices are very competitive when compared to international standards.

Vodacom currently charges R389 for a 2GB package on their 1,8Mbps HSDPA service, which equates to R108 per Mbps/GB. MTN's offer of R399 for 2GB of HSDPA traffic means that their subscribers pay R111 per Mbps/GB.

This may seem high when compared to international fixed-line offerings, but if one looks at similar mobile broadband offerings in countries like Australia, the UK and New Zealand the picture looks far rosier.

In the UK, a 1GB mobile broadband service from Vodafone costs R638 while a similar service in New Zealand retails for R323. In Australia a 2GB mobile broadband service, also from Vodafone, costs R 842.*

The average cost per Mbps/GB for these three international mobile broadband offerings is R256. When compared with Vodacom's R108-00 and MTN's R 111-00 per month, it becomes clear that South Africa's competitive wireless broadband environment has resulted in aggressively-priced mobile broadband services.

It is further interesting to note that while South Africa is nearly 8 000 % more expensive than Australia and the UK in the DSL space - using the per Mbps/GB criteria, local mobile broadband prices are nearly 80% cheaper using the same criteria.

Fixed-line versus mobile broadband

According to the latest OECD broadband statistics, 98% of all broadband connections overseas are fixed line services, while South Africa shows close to a 50/50 split between wireless and wired connections.

This "unbalanced" situation in South Africa can be attributed to the current monopolistic fixed-line industry where DSL prices are high and service levels are generally low. The wireless broadband environment - in comparison - is fiercely competitive which resulted in relatively low rates and high service levels.

Local wireless broadband services can compete effectively against DSL on both speed and pricing, which has caused many South Africans to opt for a wireless offering in preference of DSL.

In most developed countries the low cost and high speed of fixed-line broadband services makes it nearly impossible for mobile broadband providers to compete against DSL, cable or fibre-to-home offerings.

Mobile broadband services are generally used as a complementary service for the sake of mobility rather than a primary broadband connection.

The world has become a single marketplace with the advent of broadband, and while an African comparison may be interesting, it does not accurately show where South Africa fits into the worldwide broadband picture.

A massive digital divide has already developed between the developed world and Africa, and unless local fixed-line broadband offerings fall in line with international standards this divide will merely expand.

* It should be noted that month-to-month data-only prices were used for the mobile broadband comparison for the sake of accuracy, and that there are savings that accompany 24-month contracts or bundled offers.