While the term land grab has negative association, in the telecommunications space it means good news for consumers.
This is according to Warren Bonheim, chief commercial office of ISP Zinia, who points out that South Africans pay a lot more than other countries for broadband.
However, MTN’s move this week to slash fibre broadband pricing indicates that broadband pricing may be starting to bottom out, he says.
“Land grab in the context of the telecoms industry is a strategy large networks have of offering last mile fibre with pricing at breakeven levels, to secure customers and market share on a large scale,” Bonheim says.
He explains that once a customer is on the fibre network the telecoms provider will have retention of those customers. This allows the networks to get a return on investment of the actual fibre, which is the majority of the costs. “With the fibre infrastructure paid off said network will be able to out price its competitors and ‘secure that land’,” he says.
“The fibre space is very exciting with networks jousting for land and market share, but ultimately it is consumers and businesses that benefit from this competitive strategy.”
However, Bonheim explains that cheaper doesn’t necessarily mean user will get the speeds promised, and that South African broadband users still get relatively low value compared to the rest of the world.
He cites the 2015 Ookla Household Value Index statistics as evidence, where South Africa came 56th out of 64 tested countries when comparing actual speed and “promised speed”.
His concern with this strategy is that locking in customers through long contracts and underperforming in terms of delivery could result in the long-term damage to rrelationships – especially because businesses often only pick up issues with lack of coverage or delivery after signing up for the offer.
The price cuts are a great step in the right direction, Bonheim says. “But as telecommunications providers we have to continually work on bringing more value to businesses. This means bringing the best speeds, contention ratios and uptime to meet their needs and providing better service levels. We need to make sure once the customer is brought into the fibre experience that we deliver consistently.”
Zinia is also a wholesaler that compares products and providers for companies says: