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A letter announcing Telkom`s intention to change its ADSL pricing structure for ISPs underscores the arbitrary effect of the telecommunications utility`s decisions on small and medium-sized companies. A letter announcing `s intention to change its ADSL pricing structure for ISPs underscores the arbitrary effect of the telecommunications utility`s decisions on small and medium-sized companies.

Internet service providers (ISPs), like the listed DataPro, have been selling a 30 gigabyte product for the last six months.

The mooted changes, due to take effect on 1 November, also appear to be contrary to Icasa`s (the Independent Communications Authority of SA`s) findings in its recent examination of Telkom`s ADSL practices.

The inquiry was prompted by complaints from ADSL users over the cost and structure of the service, including the three gigabyte consumer cap.

On 5 August some ISPs, who have been selling the controversial 30 gigabyte product for as little as R200 per month, received a Telkom letter detailing changes to the costing. The letter is addressed to ISPs reselling the SAIX ADSL service.

From November, an ISP selling the 30 gigabyte shaped product would have to pay Telkom R1 620.

Soft issue

Another change to Telkom`s policy will be a switch from the current soft cap service, which allows a user to continue to access local sites when the international bandwidth allocation is exhausted, to a hard cap excluding local use as well.

This appears to fly in the face of Icasa`s findings, which state: "The Authority is of the opinion that the count of local use towards the cap should be removed.

"This is more so as the inclusion of the cap on local use has an indirect effect on the hosting and increased use of local web sites."

Session times will also be shortened to 12 hours. Currently sessions time out every 24 hours, which means a subscriber could exceed his or her cap within the period before Telkom is aware of it as the authentication server only sets itself once a day.

Small fry

A number of smaller ISPs will be directly affected. Two of the first were Cape Town-based Dotco with its "allyoucaneat" offering, currently priced at R580 for 30 gigs per month, and Port Elizabeth-located Axxess, priced at around R349 per month.

Telkom allowed a number of other small ISPs to offer similar services with prices as low as R200 per month. However, its latest pricing model effectively puts an end to these services, as it is based on a per-gigabyte usage, meaning that the unit cost comes down, but the total overall price rises dramatically.

"The change means there is a charge per gig rather than a fixed amount for a fixed cap. Consumers could end up paying ten times more for the same service," Dotco MD Johan Ferreira says.

Axxess partner Paul Fontana says Telkom has used the service offerings by the smaller ISPs as a means to test the market. "They came in, let us have a bit of a price war amongst ourselves and then came out with a model that suited themselves," he says.

Competition or partners?

They also criticised the new pricing model for not giving recognition to ISP resellers who may be bringing in the most business.

"The biggest discount is 10% for a final authentication service for 501 gigs or more at R95 per gig. That is not taking care of the resellers. Resellers make their money by selling, our value-add is the advertising, the public relations around the product and the billing systems," Ferreira says.

Dave Gale, new business development director for Storm, says the price changes "are typical of the way in which Telkom handles its channel. It does not see the channel as a means of selling to the customer and so the decisions are arbitrary".

Gale adds: "In some way this pricing model is good because it brings Telkom`s pricing closer to that of a wholesale pricing structure. Even if the pricing is out of line." Storm does not resell the ADSL products.

The upside

DataPro MD has a more sanguine view as he says the price will drop dramatically for consumers who just use the two and three gig products. "Telkom`s view is that it will also cut down on abuse of the service."

He says those small ISPs who have been selling the heavily discounted 30 gig product "won`t have a product to sell this November".

According to Telkom`s Icasa submissions, those who abuse the ADSL service include gamers, online traders and users who download feature-length films.

"If gamers are such abusers, then why does Telkom nurture them through the gaming portal on the SAIX web site?" Dotco`s Ferreira says.

The fact is that the ADSL service is used by many small and medium businesses as a business enabler, allowing them to contact customers and suppliers in a fast and efficient manner, but Axxess` Fontana says the cost is constraining their abilities. "There is an ongoing programme of port-shaping reducing the effectiveness of the ADSL service for small companies. This means that services such as Skype and Kazaa cannot be used and this is increasing the cost of doing business," he says.

Oh, for an audience

Dotco and Axxess say they are trying to get meetings with Telkom to state their cases and determine their new business models.

"It looks like we will have to charge by gig in the future," Ferreira says.

Fontana says he hasn`t come to any firm conclusions yet, because the Telkom model and decisions change so often.

"We are quite used to them saying one thing and then immediately changing their minds," he says.

Storm`s Gale says the impact of Telkom`s "haughtiness" is that it has created such bad will that many people and companies will switch to the SNO

out of spite. "These kind of issues are not good for the industry. We have knee-jerk reactions to sudden implementations of regulations and this does not help anyone," he says.

Gale quotes US economist John Rutledge who says: "In today`s service-driven economy, the speed of the telecommunications network determines the speed of commerce, which we measure as GDP."

According to Telkom`s 2005 Annual Report, telecommunications makes up 6% of SA`s GDP, which the SA Reserve Bank currently measures at around R1.4 trillion.

Despite repeated calls, Telkom has not responded to iWeek`s inquiries.

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