Telkom CEO Sipho Maseko. Picture: BUSINESS TIMES
Telkom CEO Sipho Maseko. Picture: BUSINESS TIMES

Fixed-line operator Telkom has launched new products that will reduce wholesale prices to internet service providers (ISPs), as part of its agreement with the competition watchdog to increase competition in the market.  

The agreement comes after a two-year investigation by the Competition Commission, which found that Telkom subsidiary Openserve was overcharging ISPs for moving data from a local area to one of the major data centres in the country.

In 2019, the commission instructed Openserve to reduce pricing for IP Connect within two months. IP Connect allows ISPs to connect to Openserve’s broadband network to enable it to provide high-speed internet to customers. Openserve houses all Telkom’s fixed-line network infrastructure and sells capacity to other companies at wholesale prices.

The new price cuts, to be introduced by Openserve, will allow ISPs to manage their costs and compare the Openserve fixed broadband prices with the prices of other wholesale broadband providers more easily. The move will enhance competition in the fixed broadband connectivity market, said the company.

In its Data Services Market Inquiry, the commission said “given Telkom Openserve has benefited from prior state investment and a licensed monopoly position, the commission is of the view that a prima facie case of excessive pricing exists for this level of mark-up”.

Telkom said it had agreed with the commission that the new product suite to be offered by Openserve will introduce transparency and remove any perceived competition problems associated with the provision of wholesale broadband connectivity.

In a statement, Telkom CEO Sipho Maseko said Openserve has been considering changing the way it provides wholesale broadband over its copper and fibre infrastructure for some time.

 “Telkom is pleased that following concerns identified during the data services market inquiry, we were able to reach this settlement with the commission,” said Maseko.

He said the structure and initial pricing of this new offering would reduce wholesale charges to ISPs for fibre broadband wholesale customers and in this way remove the pricing concerns raised in respect of IP Connect

The same report by the commission had demanded that the two dominant mobile operators, Vodacom and MTN, slash internet connectivity prices by 30%-50% or face prosecution.

In March both operators announced measures to reduce their data prices: Vodacom by up to 40% and MTN by up to 50%. 

gavazam@businesslive.co.za