Picture: ISTOCK
Picture: ISTOCK

A wholesale price reduction by IP Connect has caused an increase in regional internet service providers (ISPs), Telkom subsidiary Openserve says.

IP Connect allows ISPs to connect to Openserve’s broadband network to enable them to provide high-speed internet to customers.

The price of connecting to the broadband network is said to be the single largest cost component competing ISPs face in providing choices in terms of fixed-line ADSL services to end users.

Openserve says its customers will pay 25% less for the IP Connect service from August. This is the second reduction in two months.

Openserve houses all Telkom’s fixed-line network infrastructure and sells capacity to other companies at wholesale prices.

Openserve’s chief marketing and sales officer, Prenesh Padayachee, says through the rate reductions there has been an increase in regional ISPs.

"We lowered the barrier to entry. This has enabled underserved areas to have access to the internet," he says.

Padayachee says that price cuts should also filter through to consumers.

Openserve has been working to improve the broadband ecosystem with the objective of continuously reaching more South Africans in more places with our broadband access
Alphonzo Samuels
Openserve CEO

"While we have seen uptake in broadband, what is key is that these reductions to ISPs should be passed on to consumers," Padayachee says.

Openserve CEO Alphonzo Samuels says the wholesale pricing across the entire Openserve fibre broadband portfolio will decrease by an average 9%.

Moreover, its 2Mbps and 8Mbps offerings will be upgraded to 4Mbps and 10Mbps, respectively.

"Openserve has been working to improve the broadband ecosystem with the objective of continuously reaching more South Africans in more places with our broadband access," he says.

The Internet Service Providers Association (Ispa), which represents hundreds of ISPs, welcomed the rate adjustments and upgrades by Openserve, particularly the cut in the wholesale IP Connect cost. "Ispa notes that the ISP industry has consistently translated savings on the IPC [IP Connect] rate into price reductions and increased value for ADSL subscribers and anticipates this will once again be the case," it said.

Openserve has connected 2.2-million premises with fibre optic cables. It has more than 149,000km of fibre nationally.

Padayachee says there could be further price cuts in future.

In 2016 Telkom spent R8.6bn in expanding its network infrastructure, with most of the money going to its fibre. It may spend a similar amount in 2017.

Padayachee says Openserve is investing for future growth.

The company firmly believes that by stimulating the growth of fixed broadband in SA, "we are contributing to economic growth", he says.

A report released by World Wide Worx and fibre infrastructure provider Dark Fibre Africa last week predicts that the South African internet user population in 2017 will rise to 22.5-million from 21-million in 2016.

The report shows that the single most common use of the internet among South African adults is communication, followed by social networking and information.

While more South Africans are connecting to the internet, the high costs of data are still stifling growth.

Economic Development Minister Ebrahim Patel is expected to establish an inquiry into the state of competition in the data market. Patel has urged data suppliers not to await the inquiry’s outcome but to reduce data costs of their own accord as soon as possible.

The commission would investigate the data services value chain and its interrelationship with other parts of the information and communications technology sector and the broader economy, he said.

It would benchmark South African data costs against those of other countries and establish whether the quality and coverage of data supply were adequate by international standards and aligned to the country’s developmental needs.

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