ADSL price increase on the cards

Internet Access in South Africa 2012 report warns that ADSL price increases will be bad news for Telkom

Staff WriterDecember 17, 2012

The impact of ongoing ADSL price increases will solidify the decline of ADSL and herald the demise of Telkom as an Internet service provider. This is according to the Internet Access in South Africa 2012 report by World Wide Worx.

The report, which was sponsored by MSN and endorsed by ISPA, stated that Telkom’s decision to increase ADSL prices in 2012 is a slap in the face of government’s broadband plans.

“Telkom’s first increase in the history of ADSL in this country [in 2012] … made a mockery of government pronouncements about bringing down the cost of broadband,” the report stated.

According to World Wide Worx, Telkom can argue that it is currently migrating ADSL users to higher speeds at the same price, but this does not address lack of access.

The report stated that it had long been anticipated that Telkom would eventually bring down the cost of ADSL line rental to stimulate growth, but the opposite has now happened.

ADSL prices in South Africa

Warning from history

Telkom has steadily been increasing the price of its analogue lines over the last decade, which may have been partly to blame for the continued decline in the company’s fixed line subscriber numbers.

World Wide Worx argues that the same will happen with ADSL subscriber numbers if Telkom continues to increase ADSL rates.

“The ADSL price increase is strategically dangerous for Telkom. Being the first increase in nine years of ADSL provision, it may well signal a trend of ongoing price increases, much in the way that the cost of a normal fixed line phone rental increases every year,” the report stated.

“Should this be the case, the prospects for any further ADSL growth will be dimmed. Based on a scenario of marginal increases every year, we can expect the product life cycle curve to be forced solidly into place.”

World Wide Worx said that the resultant graph of price versus users would look something as follows.

Clearly, the impact of ongoing ADSL price increases will have the same effect as the current strategy of ongoing fixed line rental increases: it will solidify the decline of ADSL, and herald the demise of Telkom as an Internet service provider.