2010: the year bandwidth prices nosedived

It has been a year of falling bandwidth prices in SA. Though it took a little time before it happened, the arrival of the Seacom undersea cable jumpstarted a downward spiral in broadband prices.

With access to lower international bandwidth prices, Internet service providers were given the chance to step up their game this year.

But exactly how much less are you paying for bandwidth this Christmas compared to last year?

Afrihost director Greg Payne says consumers are paying up to two-thirds less than they were a year ago for fixed-line bandwidth on Telkom’s digital subscriber lines.

This time last year, Internet providers were charging about R70/GB for 1GB of bandwidth on average. To put that into perspective, a standard 10GB capped account would have cost the consumer about R8 400 a year.

Now, the average cost is about R29/GB, translating into R3 400 over year for 10GB/month — a R4 920 saving.

Consumers could even buy 50GB of data without spending as much as they did last year for 10GB. A 50GB account from Afrihost, for example, costs R475 per month, or R5 700 a year.

Afrihost was one of the first companies to slash bandwidth prices — as early as September last year. Payne says that at the time it was charging less than cost price for bandwidth. It was confident that input costs would plummet.

At the top end, the cost of bandwidth has dropped to as little as R9,50/GB.

“We believed that prices would come down thanks to the new undersea cables and we were a late entrant to the market and so we needed to hit the market by storm,” says Payne.

Afrihost’s campaign resulted in it signing up more than 25 000 new subscribers in the six months that followed the first cuts.

Prices from rival MWeb have also plummeted, falling from R89 for 1GB of data last year to around R26 now.

But by far the most revolutionary development this year was the introduction of uncapped bandwidth accounts from MWeb. Not worrying about how much bandwidth they consumed changed the way many South Africans used the Internet.

Head of products at MWeb Nathier Kasu says people can now stream video, download video and music, and get stuck into online games without worrying about running over their bandwidth caps and getting cut off.

However, he says by far the most attractive aspect of uncapped broadband has been the fact that customers are able to budget on a fixed monthly amount. Before uncapped products came along, many consumers would top up their bandwidth when they ran out, leading to some months costing more than others.

MWeb’s uncapped service has been widely taken up, and Kasu says the company does have a few users he describes as “power downloaders”.

He says that, theoretically, if a user downloads constantly throughout the month using a 4Mbit/s line they could download more than 1TB of data. “We have had a few users that reached that limit,” Kasu says.

Despite the big drop in prices, Afrihost’s Payne says a lot can still be done to decrease the overall cost. “International bandwidth is now very well priced, but local bandwidth is still expensive,” he says.

In general, Internet providers buy up national bandwidth from Telkom at wholesale rates and on-sell those to consumers. Payne says there is quite a lot of room to reduce these costs.

Also, fixed-line broadband prices are inflated by the fees consumers have to pay to Telkom for line rental. These prices may start to come down when Telkom’s local loop — the “last mile” of copper cables between consumers and Telkom’s exchanges — is unbundled next year.

Fixed lines aren’t the only area where bandwidth prices have come down. Thanks to Cell C and Telkom’s 8ta, there’s been a lot of movement in mobile data, too.

Both 8ta and Cell C have introduced more competitive mobile data pricing and this could prompt their bigger rivals, MTN and Vodacom, to follow suit next year.

Cell C’s new data prices are set at such a level that one analyst, Arthur Goldstuck of World Wide Worx, has even suggested its pricing is aimed at Telkom’s fixed-line offerings.

For bandwidth-starved South Africans, that’s music to the ears. — Candice Jones, TechCentral

It's give and take with 8ta | ITWeb

Paul Vecchiatto, ITWeb Cape Town correspondent

According to analysis, mobile newcomer 8ta's per-minute billing makes its offerings more expensive.
While Telkom's mobile service, 8ta, is cheaper for landline rates, its prepaid offering is billed per-minute and not per-second, making its more expensive.

This is according to independent telecommunications expense management company DataRoom.

DataRoom, which helps clients manage their telecommunications expenses by examining their itemised billing, used random samples of typical call detail records (CDRs), or itemised bills.

The rates used were as published on the various mobile operators' Web sites last week and do not take into account changes announced by Vodacom this morning.

The research was done in three exercises. The first related to overall call patterns and was an analysis of 1 400 090 minutes from GSM voice contracts, reflecting the following split: 40.16% of talk time minutes terminating to MTN, 40.34% of talk time minutes terminating to Vodacom, 7.15% of talk time minutes terminating to Cell C, and 12.35% of talk time minutes terminating to a fixed-line.

DataRoom found it was not an effective comparison to calculate the ultimate rand difference overlaid on various prepaid contracts. It also points out that individual call patterns vary greatly and must be contextualised for individuals.

The second exercise was for a sample of 210 CDRs, with the 8ta call rates of per minute increments compared to a per-second rate to mobile and fixed-line of R1.75 per minute, that was billed per second. This exercise excluded incoming rebates offered on 8ta on a promotional basis and SMS costs.

Of the 210 CDRs, 25 were to Telkom landlines, and DataRoom found the R1.75 rate that was billed per-second by the other network operators was 25% more cost-effective than the 8ta rates.

The final exercise was a random sample of 375 CDRs with the 8ta per-minute billing increment, compared to a per-second rate to mobile and fixed-line of R1.75 per-minute, that was billed per-second. Again, the incoming rebates offered by 8ta were not considered and neither were SMS costs.

DataRoom found 8ta was 18% more cost-effective than the R1.75 flat rate comparative.

Call management

Observations by DataRoom were that peak and off-peak times are not transparently displayed on the various mobile operators' Web sites, which makes it difficult for consumers to manage their own call patterns where rates for peak and off-peak differ.

DataRoom says Vodacom, MTN and Cell C reflect the billing increments in their respective rate sheets.

Thirdly, DataRoom says 8ta does not reflect its offering as billed per-minute. “This means that for a 10-second call, you will pay for one minute. This is important to know, as it impacts heavily on the resulting effective rate the consumer pays. This is contradictory to costs being fully transparent to the consumer,” says the DataRoom analysis.

The analysis states 8ta's base cost (without value-adds) is the same as the Cell C Easychat AllDay offering.

DataRoom says 8ta's offering of one free second per call for every three seconds of incoming calls received is only valid for a limited promotional period, but that 8ta has not disclosed the duration of this period.

It says the free SMSes offering by 8ta, whereby 50 free SMSes are granted for every five paid ones, is a new offering to the market and is a significant differentiator for the consumer who uses text a lot.

Commenting on the DataRoom analysis, World Wide Worx MD Arthur Goldstuck says: “It seems that Cell C do have a point in that 8ta have effectively copied their rates. However, the analysis shows some interesting points, like just how cheap an SMS is for a telecoms utility.”

Goldstuck says his own research has shown that cellular calls billed per-minute are at least 40% more expensive than those billed per second.

Peter Walsh Consulting - telecoms consulting and optimisation

For a long time now I have wanted to focus on my skills and knowledge without the travel requirement and the stress of working in a high pressure environs. Whilst my position at DataRoom taught me more than I could have hoped for, everyone has a time limit and a tolerance level and I had reached my limits on both. My time to move on had clearly come. I wanted less travel time, a balanced working lifestyle and a lot less stress.

So I took a long hard look at what I wanted to do, who I wanted to do it with and how I wanted to be in my life. Where does my passion lie and what skills and knowledge can I share with my target market; businesses requiring insight into voice telecoms were some of the questions I asked myself.

It all starts with the age old problem businesses face with voice telecoms. Making and receiving phone calls is fundamental to just about every aspect of economic activity and the associated costs account for a substantial part of the operating expenses in any business.

Whilst these costs are unavoidable, they can be reduced. History and experience tells us that most businesses are spending too much time and money in the following key areas;

• making phone calls
• connecting to the back office when on the road
• renting infrastructure from service providers
• managing the costs associated with calls, connectivity and infrastructure

Managing these aspects of telecoms in business requires unique skills and knowledge specific to voice telecoms. Management teams often find it challenging to do so 100% effectively.

So I decided to start a consulting business, Peter Walsh Consulting, offering cost effective solutions for the management of voice telecoms. Our target market is businesses wishing to reduce telephone costs and sustain the savings into the future.

“Peter Walsh Consulting” is focused solely on voice telecommunications.

We get to understand your business need intimately. We have a deep understanding of how the service providers and vendors operate and we know how to build solutions that cater to your unique business requirements.

Our vision is to bridge the gap between the vendors / service providers and a business’s management team. Our strategy is ensuring your management team is able to deliver on a cost effective voice telecoms strategy.

Benefits of a partnership with Peter Walsh Consulting include;

• optimising voice traffic and infrastructure
• maximising savings
• ensuring continuity for the business
• increasing skills and knowledge
• improving business processes around telecoms
• documenting strateg
• sustaining cost reductions through up skilling and educating all the role player

What is the business need?

Procurement initiatives are typically contractual term and volume agreements, discounts on offer and least cost routing focussed. However this “service provider” or “vendor” facing approach is not ideal and leaves significant savings opportunities untouched.

9 out of 10 South African businesses become reliant on their vendors and service providers for knowledge and information. The manner in which this information is presented does not necessarily highlight areas of concern and is by definition not supplier independent and often not in the best interests of the business.

Using vendors and suppliers to “mark their own homework” can not only result in lost savings opportunities but there will also be no increase in the business’s knowledge and skills required to manage costs and sustain savings.

Even with traditional initiatives such as least cost routing [premicells], VoIP and supplier term and volume agreements in place; we find there to be anything from an additional 15% - 30% in savings left on the table when a service provider or vendor facing approach is used.

Managing voice telecoms is both time consuming and can be costly to sustain.

What can we offer your business?

• Optimisation of voice telecoms – call costs and infrastructure rentals
• Telecoms Auditing
• Telecoms Expense Management
• Supplier / Vendor Requests for Proposals
• Reduction in human resource requirements
• Increased in-house skills and knowledge

To learn more about our offerings, or read references from other businesses and service providers;

• phone - 083 441 6093
• email - peter.walsh@telkomsa.net
• web - http://www.linkedin.com/in/peterwalshzar
• blog - http://peterwalshconsulting.blogspot.com

Why Peter Walsh Consulting?

About Peter Walsh

Peter Walsh has 13 years experience consulting to large businesses in South Africa. 10 years of this was spent as founding shareholder and Sales Director for DataRoom; a Telecoms Expense Management [TEM] focused company in South Africa.

Businesses large and small have benefited from his experience; both in the South African marketplace and in his role developing the DataRoom solution offering.

Apart from extensive experience in consulting and TEM; he has sold and or consulted on PBX / IPT, LCR, Cell Phones, 3G cards, Wide Area Networks, Cell Phones and Telephone Management Systems. He has planned and implemented multiple points of failover for voice telecoms [redundancy] for businesses with up to 5000 employees on a single site.

Vendors such as Dimension Data and service providers such as Neotel, Nashua Mobile and Vox Orion have made use of his skills and knowledge to deliver better solutions and offerings into their clients or manage their own infrastructure.

References on: http://www.linkedin.com/in/peterwalshzar

His skill set in understanding and managing voice and voice infrastructure was honed whilst working with both the service providers and their customers; to ensure that the solutions we developed at DataRoom added value to all the roles players involved in managing voice telecoms.

About Peter Walsh Consulting

All consulting is done on a supplier independent basis. We work with the top telecoms consultants in the country and have the ability to support your business nationwide. We have strong relationships at all the main networks and service providers for fixed line and mobile in South Africa.

Understanding both the service providers and clients business need makes for a solid knowledge base and skill set when it comes to managing a business’s voice telecoms requirements.

We can optimise your voice traffic and voice infrastructure, assist you in negotiations with your suppliers, embed skills and knowledge into your business, help you formulate and document process and ensure you drive down costs and sustain the savings into the future.

Ends

Peter Walsh
Cape Town
Sept. 2010