The Internet Service Providers’ Association (ISPA) says that further reductions in Internet Protocol Connect (IP Connect) prices are urgently required to keep fixed-line connectivity competitive in South Africa. 
IP Connect is the wholesale product through which third-party ISPs connect to Telkom’s network. IP Connect is responsible for up to 70% of the cost base of the connectivity provided by third-party Internet service providers (ISPs).
Cutting the IP Connect rate is part of the phased approach ICASA has adopted as regards the unbundling of the local loop. In line with this approach, in April 2012, ICASA announced a reduction of 30% in the rate. This reduction led to a significant and almost immediate decrease in retail prices offered to businesses and consumers in South Africa by third-party ISPs represented by ISPA.
“The retail ISP market has shown time and time again that high levels of competition lead to pricing transparency and wholesale rate cuts are quickly and efficiently passed on to consumers.
“With the local-loop unbundling process stalled, ISPA urges ICASA to consider mandating a further reduction in the IP Connect rate to help drive prices lower until other options for service provision become available,” says Marc Furman, co-chairman of ISPA.
“We believe that ICASA should act swiftly to reduce the IP Connect cost further and look to review it on an annual basis. This is a palliative measure that worked well and should be employed again.”
Cost aside, ISPA points out that the Telkom IP Connect wholesale product has not seen any significant upgrade or improvement since it was introduced a decade ago. Despite being critical to the service that ISPs provide to their customers, it remains “best effort”, with no service level agreement or quality of service guarantee available to the ISPs that use it.
“Fixed-line ADSL is facing increasingly stiff competition from mobile operators, in part because fixed-line operators remain constrained by the lack of competition in respect of the local loop,” Furman points out. “ISPs need to reduce their cost base to develop innovative new products that will compete with mobile data offerings – and help achieve the National Development Plan’s goal of universal broadband access.”