So we’ve heard from ICASA this morning that broadband pricing structures in South Africa should aim for R329/40Mbps, because that’s what a small start-up in the centre of Johannesburg is offering. It’s all part of a plan to accelerate Local Loop Unbundling (LLU), which will allow other ISPs to use Telkom hardware to provide services.
In most European countries LLU was completed years ago, allowing private firms to compete with the incumbent provider and thus bring down access costs for ADSL.
This pricing goal is good – and better than international standards – but is it actually achievable? Naturally, I asked the expert – Mark Seftel of Maboneng Fibre, the start-up referenced by ICASA – how he hits prices which are considerably lower than anyone else in the country (that R329 includes 20GB of data).
His answers weren’t that surprising, and suggest ICASA have a lot of work to do if they want to follow the Maboneng model.
Two things are essential he explained: a good fibre infrastructure – which downtown Joburg has but the rest of the country doesn’t – and a high population density of both residential consumers and businesses. I refer the right honourable reader to my previous answer on that one. The area Moboneng hits is packed full of students and businesses that rely on high speed services – Seftel knows he has a customer base crying out for this kind of access who’ll buy en masse if the price is right.
The difficulty facing a wider scale rollout is what Seftel describes as “cost per endpoint” – ie. the number of people you can hit with a single connection in lower population densities.
Even within the relatively well connected are Maboneng covers, initial set-up costs are high, including a refundable R999 charge for a modem.
“You can’t achieve the same price in the suburbs,” he says. Not until there’s better, and cheaper backhaul.
There’s also a passion behind Seftel’s business which isn’t mirrored in other ISPs. While Maboneng is a thriving business whose models makes sense, he says, they also see themselves as part of the regeneration process of Joburg. He could charge a lot more for his service and get away with it, but he doesn’t have to.
“To be successful in our area,” Seftel says, “We think almost like a public sector body around issues other than supply of service.”
Another thing that helps Maboneng beat the market, Seftel explains, is that he’s invested a lot of money into ‘in-building infrastructure’. With the increasing amount of fibre in the ground, the weakest link is often the building wiring, especially in multi-occupancy buildings. Maponeng has spent a lot of money skilling up on optical networking, using GPON, in order to beam gigabit speeds around via line of site where it’s cheaper than cabling.
Seftel isn’t too downbeat though. He says that his pricing structure can be replicated nationally, in the cities at least, and he’s been in talks with both government and private providers around the issues. It’s just going to take a lot more than targets and goals to do it.