Tembinkosi Bonakele , Commissioner of the Competition Commission. Picture: SUPPLIED
Tembinkosi Bonakele , Commissioner of the Competition Commission. Picture: SUPPLIED

Fixed-line operator Telkom has reached an agreement with the Competition Commission to substantially reduce wholesale broadband access costs, the commission said on Monday.

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

In December 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.

In March, Telkom announced new IP Connect prices from Openserve as part following the outcome of the commission's inquiry into high data prices.

The commission said Openserve would introduce a new wholesale product suite to replace IP Connect. The structure and the proposed initial pricing of this new offering from Openserve 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”.

Illustration: DOROTHY KGOSI
Illustration: DOROTHY KGOSI

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.

In a statement, commissioner Tembinkosi Bonakele said the commission “welcomes the effective price reductions for wholesale broadband fibre infrastructure to ISPs, as this should result in lower prices to consumers and even small businesses which are increasingly reliant on fibre networks to run their businesses”.

Bonakele also welcomed the commitment of Telkom to zero-rating essential educational and government services websites, as well as increased transparency in pricing.

“Poor consumers especially will benefit from the zero-rated initiatives and displaying the cents per MB prominently will help consumers make informed decisions over what bundle offers the best value,” he said.  

The commission said while Telkom was not cited in the report as having high data prices, the inquiry proposed industry-wide measures to improve transparency to consumers over the effective price per megabyte  and also recommended the introduction of free or zero-rated data for essential public benefit organisation web content to assist poorer consumers.

The partially state-owned operator has agreed to improve transparency of pricing in line with the commission's recommendations. Telkom will display the cents per megabyte for all its data only packages and will notify its customers of the in-bundle effective rate per megabyte in its purchase confirmation messages to subscribers.

gavazam@businesslive.co.za

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