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Free the Web: South Africa Breaks Free of Internet Overcharging – Unlimited Broadband Arrives

Phillip Dampier March 22, 2010 Broadband Speed, Competition, Data Caps, MWEB (South Africa), Public Policy & Gov't, Video 5 Comments

South Africa is the latest country on the way to finally discarding Internet Overcharging schemes like usage caps and usage-based billing.

MWEB, one of South Africa’s largest residential broadband service providers, last week “threw down the gauntlet” and unveiled an unlimited broadband option among its various rate plans.

“We realized there’s a major gap in the market. South Africa doesn’t experience the Internet like the rest of the world does. It’s a fantastic opportunity to change the Internet in South Africa,” MWEB CEO Rudi Jansen told News24.

For a country that has never known anything but expensive, slow, usage-capped Internet, MWEB’s announcement is nothing short of a broadband revolution for 49 million South Africans.

“This is not the end. There are still probably three or four big things that have to change in this market and for us, this is the first step. The other things that have to change are we have to get the mobile operators to offer wholesale data. The more competition there is, the better it is for the market,” said Jansen.

For $73.50US per month, MWEB offers 4Mbps DSL service that is truly unlimited, which is a radical notion in a country used to usage caps averaging 3GB per month.  Customers willing to tolerate slower speeds can reduce their unlimited broadband bill considerably — 384kbps starts at $30 a month; 512kbps is priced at $41 a month.  The company does admit to throttling torrent services, but customers have managed to bypass the throttle by encrypting their torrent traffic.

Although these speeds and prices are terrible in comparison to North American broadband plans, for South Africans, MWEB’s announcement was big news.  That’s because the competition charges far higher prices, often for limited service:

  • Telkom, South Africa’s state phone company, wants $35US monthly, five dollars more than MWEB’s lowest speed unlimited alternative, for its DSL service with a 3GB usage allowance;
  • Paying $39.50US per month buys you 10GB of usage from Afrihost;
  • Using 3G wireless mobile alternatives are for the deep-pocketed only.  Paying $65.50US per month nets you less than a 2GB usage allowance;
  • South Africa’s ‘Screamer’ offers a pricey unlimited plan at $54US per month for 384kbps service;
  • Neotel offers an unlimited service package, but it’s so confusing few customers can be certain what they’re getting.  (Read this South African blogger’s experience with Neotel.)

MWEB hired marketing firm Quirk to generate buzz about the company’s unlimited service option.  Earlier this month, a Facebook group called Free the Web popped up asking consumers what improvements were needed in South Africa’s broadband service.  It attracted more than 15,000 followers in just two weeks.

What were South Africans complaining about?  Usage caps. Broadband users despise them, especially in a country where 5-10GB allowances are considered ‘generous.’  But the lack of competition for monopoly state-owned phone company Telkom also featured prominently.  Most South Africans rely on DSL service that first starts with renting a line from Telkom.  Telkom prices those in accordance with its monopoly status, and requires consumers to pay line rental fees combining both data and voice services, even if a customer only intends to use the line for data.  Because ADSL broadband speed is totally dependent on the phone company, and Telkom has no incentive to upgrade, few in South Africa can expect to see broadband service exceeding 4-8Mbps.  Most obtain considerably less, often well below 1Mbps.

“Telkom has to allow users of ADSL to split the line rental for the telephone line and the line rental for ADSL. That absolutely has to happen; then this market will grow,” Jansen said.

Jansen

MWEB hopes the unveiling of unlimited broadband will transform South Africans use of the Internet and bring prices down.

“Ubiquitous broadband is what this country needs to grow. We want to do our part in getting South Africa there,” said Jansen. “I hope [our competitors] follow us because I think as a country we desperately need it.”

Jansen may have his wish.  Hours after MWEB announced unlimited broadband, its competitors began to follow suit, meaning South Africans can finally follow Australians and New Zealanders discarding hated Internet Overcharging schemes.

Mybroadband.co.za took note of several broadband package changes coming as a direct result of MWEB’s new service (One South African Rand = 13.6 US cents):

Vox Telecom responded quickly and announced that @lantic will be launching bundled ADSL offerings – which include both ADSL access and an uncapped ISP account.  Pricing starts at R339 for a DSL384 bundle while a 512 Kbps service will cost R589 and a 4 Mbps solution R889.  This undercuts MWEB’s bundled pricing by R10 per month.

Openweb also joined the price war by announcing that they will resell MWEB accounts at the same rates as MWEB.

This is however not where it ends.  Afrihost said that consumers can look forward to their uncapped ADSL services next week, and G-Connect also indicated that they will respond to MWEB’s recent announcement with a competing service.

Even the state monopoly phone company Telkom has started talking about offering unlimited service.

“Uncapped speed-locked ADSL service consumer offerings are in development. However, no time-frames, offering specifications or price points can be disclosed at this stage. In the development process, Telkom is striving for optimal quality, reliability and affordability,” said Ajith Bridgraj, Telkom Senior Specialist for Media Relations.

MWEB expects a surge of new customers, which leads some to worry if the company can sustain its network under the burden of throngs of new customers.  Jansen says they can, noting their connectivity ultimately comes from Seacom, which is an important provider of international connectivity between Africa, Europe, and beyond.

Early tests by Mybroadband appear positive:

MyBroadband got its hands on an uncapped 4 Mbps test account to take the service through its paces – and early test results are very promising.

For basic email and surfing the MWEB uncapped account performed well, and results from Speedtest.net were on par with SAIX and IS based offerings.

Local Speedtest.net downlink speeds ranged between 3.28 Mbps and 4.13 Mbps while local uplink speeds ranged between 0.26 Mbps and 0.42 Mbps.

International Speedtest.net results – tested with servers in London, New York and Brussels – ranged between 2.96 Mbps and 3.61 Mbps while international uplink speeds were fairly steady at between 0.3 Mbps and 0.32 Mbps.

Local latency was fairly consistent and ranged between 17 ms and 41 ms in tests to Johannesburg and Cape Town based servers.  International latency was however less consistent, and ranged between 285 ms and 528 ms to the UK and US.

The MWEB uncapped account performed well with all bandwidth intensive applications.

YouTube videos streamed without any buffering, but some buffering was needed when moving to high definition video streaming (480p and more specifically 720p).

Standard file download speeds were quite consistent at between  2 Mbps and 3.4 Mbps while multi-threaded FTP and HTTP downloads sat at around 3.2 Mbps.

Good news for those keen on torrent services is that the MWEB uncapped account seems torrent friendly.  We selected 10 of the most popular torrents, and total download speeds ranged between 2.8 Mbps and 3.2 Mbps.

American broadband providers contemplating Internet Overcharging schemes of their own often point to usage limits and usage-based billing schemes that exist in other countries, implying they are well-tolerated by consumers abroad and should be likewise domestically.  The truth is, such pricing schemes are as despised abroad as they are domestically, and most countries seeking to improve broadband consider eliminating them a top priority.

[flv width=”448″ height=”356″]http://www.phillipdampier.com/video/Carte Blanche Consumer – No Broader Than a Band.flv[/flv]

South African news program ‘Carte Blanche’ provides this general overview of the current state of broadband in South Africa, and the challenges that must be faced to improve it. (10 minutes)

[flv width=”384″ height=”308″]http://www.phillipdampier.com/video/News24 MWEB Unveils Unlimited Broadband 3-19-10.mp4[/flv]

South Africa’s News24 network reported on MWEB’s unlimited broadband package including an interview with MWEB CEO Rudi Jansen. (3 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/South African Broadband.flv[/flv]

As part of MWEB’s social marketing campaign, ordinary South Africans talk about their broadband experiences, what the Internet has done for them, and the things they hate the most about South African Internet Service Providers. (9 minutes)

Currently there are 5 comments on this Article:

  1. Ian L says:

    I think you have your pricing messed up…unfortunately uncapped DSL is significantly more expensive than you’re saying it is…

    Here’s the pricing in South African Rand and US dollars…

    384k – R349 – $47.58 – ~$20 to Telkom for line rental
    512k – R599 – $81.66 – ~$44 to Telkom for line rental
    4M – R899 – $122.56 – ~$56 to Telkom for line rental

    So, but for the $50-ish 384k tier, you’re looking at a ridiculous amount of money for an uncapped connection, though 4M DSL is by far the cheapest per download megabit.

    The Telkom line rental reminds me of what Qwest does in its footprint for standard DSL service (not ADSL2+, not VDSL2): 1.5M DSL can be had for $25 per month plus ISP fees, and 3-7M DSL is $32. Sounds like a downright bargain compared to what Telkom is charging.

    I’m very curious as to why MWeb isn’t going ahead with wireless technology for access; unlicensed gear should be reliable enough, and they could pocket the equivalent of $20-$56 per month rather than giving it to Telom (or just use the money to lower customer pricing).

    • You are quoting prices for line rental which I exclude because:

      1) Most South Africans use their current voice line concurrent with their DSL service, so they are not required to pay an additional line rental fee for a physically separate line pair.

      2) Almost every MWEB customer is transferring service from Telkom or another provider, in which case they were already paying the line rental fee, which does not change unless a customer chooses a different speed class for service.

      3) There are certain cases where customers cannot choose the all-inclusive package because of contracts with other providers, Telkom, etc. Until the bundled option becomes available to them (combining line rental with broadband service onto one bill), they are paying MWEB just for the broadband service.

      For purposes of comparison, Telkom charges $75.61 for their 4Mbps service + $56.31 for line rental, totaling $131.92 and that service has a usage allowance of 5GB per month. Each additional gigabyte is $8.83 for traffic-shaped service, $15.46 for unshaped traffic. Sites hosted within the country can be reached for less – $2.05 per gigabyte.

      That means you can pay one price with MWEB and not have to worry about the stinging overage fees ever again, or pay even higher pricing with Telkcom and get stuck with a 5GB usage allowance and the very real possibility of exceeding your cap and paying an outrageous price for doing so.

      Wireless Internet has worked in some areas (iBurst), but customers also complain about effective speed and pricing. Uncapped broadband is a market changer in South Africa.

      • Ian L says:

        I’m not saying that MWeb is a bad deal considering the competition, but talking on the one hand about DSL companies in the US and their higher monthly fees for dry-line service, then ignoring the line rental in South Africa doesn’t strike me as unbiased. You don’t compare incremental pricing between cable and DSL as if it were standard pricing 🙂

        Compared to the compettion, MWeb did a really good thing. However broadband service at decent speeds and without usage limits is by no means cheap down there.

        As for wireless, iBurst sounds like a different (mobile?) technology versus what I was thinking of (fixed wireless). iBurst also has a very low cap, and low download speeds (1 Mbps versus 4 Mbps for DSL).

        • I don’t really talk much about dry line DSL service here, period. South African broadband remains obscenely expensive in comparison to Europe and North America, but is trending in the right direction and is dispensing with usage caps. Like Oceanic countries, part of the pricing problem is limited international capacity. Domestic ISPs who try and push Overcharging schemes on us routinely claim such schemes are routine and accepted in foreign countries. We’re illustrating neither claim is accurate.

          • Ian L says:

            True, however most companies in the U.S. have business tiers that don’t include a cap. Canada is different, but Comcast for one is relatively inexpensive cost-wise for an upgrade to an uncapped tier ($6o I believe for 12/2 no-cap internet). Time Warner Cable never capped business service, and generally a business tier can be had for $100 or less. I’m unsure about how AT&T bills business DSL in Reno however I’ve never heard reports of caps on business tiers, which only cost a few dollars more than residential tiers. Cox is similar to Time Warner, except that Cox actually does have caps; they’re just all soft caps.

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