Way, way overpriced

Moneyweb has reported on an independent report commissioned by the South Africa Foundation has found South Africa’s “international bandwidth costs to be 399% more expensive than the average country surveyed“. Wow!

Here is just an extract from the article:

Sarah Truen, analyst from G:enesis Analytics, the body that conducted the research, said the findings on international bandwidth were the “most extreme?? of the product range that it had studied. But, on almost all other counts, South Africa also fared very poorly.

The report was commissioned as part of the ongoing efforts of business and government to encourage the development of the call centre market, an area that has been identified as having huge potential for the country. A McKinsey study recently found that business process outsourcing (BPO), which is predominantly the call centre industry, could generate up to 150 000 jobs in South Africa. South Africa Foundation executive director Michael Spicer said a “range of focused interventions?? had to take place in order for this potential to be reached. One of the most significant barriers was found to be the high cost of telecoms, but due to the contested nature of some of the other research into this subject, it decided to commission an independent study.

In order to obtain a representative sample of countries against which to compare South Africa, Truen said G:enesis had carefully chosen countries with effective telecommunications sectors, constructing an index of telecoms competitiveness including penetration levels in internet and telephony, investment and prices. Best practice peer group countries chosen included Brazil (probably the nearest comparable country to SA), India, Malaysia, Morocco, Philippines and Thailand. Countries chosen as examples of international best practice included Canada, Hong Kong, Israel, Norway, Singapore, Sweden, South Korea and the United States.

On most fronts, South Africa was more expensive, and in most cases the most expensive, of the comparative countries. This included pricing on services like business ADSL (always on broadband), domestic leased lines, international leased lines (international bandwidth), retail ADSL (always on retail broadband), and even retail data (local ISPs, where there is competition, but the ISPs still have to buy international bandwidth from Telkom at retail, rather than wholesale prices).

On ADSL costs, Truen said G:enesis had included Telkom’s latest prices, after cuts earlier this year. But, although Telkom’s prices had come down, South Africa became less competitive over that period because other countries dropped their prices even further.

This study seems to vindicate a recent complaint by the industry laid with Icasa, and around which public hearings were held, into Telkom’s high ADSL pricing. Telkom argued that its broadband pricing was fair.

Anyone surprised?

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