Consumers and businesses may soon have to pay more for fibre internet products as internet service providers (ISPs) respond to cost increases by fibre network operators (FNOs).
Having largely frozen prices since the Covid-19 pandemic, FNOs such as Telkom’s Openserve, Vumatel and Frogfoot have begun raising the fees they charge ISPs for accessing their networks to bring them in line with inflation.
This may affect cash-strapped consumers, while raising the cost of doing business in a digital economy.
Though mobile data prices have decreased nearly 50% in the past three years due to regulatory and consumer pressure, South Africans still find this form of internet access expensive. Given its unlimited nature, speed and stability, fibre remains the cheapest in SA and has become the go-to source for large and small businesses, as well as wealthier households.
Information communication technology consulting company Africa Analysis notes that between January and March 2023, several fibre operators made price and line speed changes to their wholesale fibre-to-the-home packages. It notes that some ISPs have in turn increased prices by up to a 10th.
“Wholesale” refers to a model by which fibre operators allow ISPs such as Mweb and Afrihost to use their networks to provide internet access to customers or end users. The fees for the use of these fibre networks is what is set to rise.
Ofentse Dazela, director of pricing research at Africa Analysis, said this is the first time in the past two years that FNOs have increased their pricing. Over this time, the operators have generally increased line speeds.
“While the fees charged by the top ISPs for month-to-month uncapped offerings show a slow downward trend over the past two years, the general expectation is the market will probably see a wave of increases introduced by ISPs in line with FNOs that have recently confirmed wholesale prices for the first time in two years.”
This is already happening.
Customers of Cool Ideas, one of the largest ISPs in Gauteng, recently received notification of price increases from FNO Metrofibre, which will take effect in August.
“Metrofibre have increased their pricing for the 100Mbps package and as a result Cool Ideas has been forced to increase pricing for this product,” the ISP said in a statement last week. This specific package has risen by 5%.
Herotel, which had the lowest monthly fees for uncapped packages in the past two years, recently increased prices for its uncapped packages by an average of 8.3%.
Dazela said the announced wholesale price increases will affect consumers and the ISPs. “Many of these FNOs justified the price adjustments as inflationary increases.”
While the speed upgrades are mostly implemented by FNOs at no additional charge, the ISPs will have to purchase additional capacity to accommodate the higher speeds, he said. Thus, “speed upgrade will have a positive spin-off on FNOs from a revenue perspective”.
ISPs unwilling to absorb additional charges for extra capacity to accommodate the higher speeds are likely to pass these fees on to customers in the form of increased retail prices.
“It must also be emphasised that while the FNOs have a large influence on the ISP pricing, the pricing analysis by Africa Analysis shows that over the past two years, some ISPs have continued to increase pricing,” said Dazela.
Over the past decade, SA’s fibre market has grown to more than 2-million households. With 17-million households across the country, there is an opportunity to further expand access to fibre internet services.
Homes passed is a measure used in the fibre industry to denote the number of potential customers a company has access to by virtue of their service being available in an area.
Telkom’s Openserve has the largest fibre network in SA but has lagged Vumatel on the homes front. It has been investing to close this gap, recently crossing a million homes.
Remgro’s telecom business, CIVH, recently formed a new infrastructure company as part of its R13bn deal announced in 2022 to merge its Vumatel and Dark Fibre Africa units with Vodacom’s fibre assets to create one of the largest fibre companies in SA.
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