Telkom takes on Vumatel

Fibre-to-the-home operator Vumatel will soon begin a pilot to offer uncapped 100Mbps fibre connectivity to Alexandra residents at R89 a month.

If the pilot’s a commercial success, it has an ambitious plan to connect millions more in underserviced areas inside the next two years.

This is the first move by a connectivity provider to specifically target township markets with an offering at a price point that’s exceptionally compelling.

Alphonzo Samuels of Telkom’s Openserve contends it’s “been in townships for a long time”. It has fixed-wireless access coverage and fixed-line coverage in Alex, but it hasn’t seen uptake. Note, Telkom’s entry-level (4Mbps) uncapped service costs R599 a month.

Selling uncapped, highspeed internet access at under R100 a month could upend the broader market. Speaking at the Southern Africa Telecommunication Networks and Applications Conference (Satnac), Samuels admitted he’s “struggling to see the business model”. While referring to international benchmarks, he conceded this pricing had not been seen before.

“Remember, they’re calling it a pilot. If you look at the contention ratio, it’s not exactly what they’re offering to other customers.”

Vumatel will apply a contention ratio of 20:1, which means as many as 20 customers will use the same 100Mbps of capacity. In the worst case, with all 20 placing high demands on their connections, customers will experience speeds of around 5Mbps. The contention ratio, and deploying aerial (not trenched) fibre, has helped Vumatel achieve its aggressive pricing.

Importantly, this pilot isn’t being subsidised by its customers in the suburbs. Vumatel’s Niel Schoeman told Techcentral: “This is a fundable model… we have a little bit of magic that will make the economics work.”

Installing fibre is not straightfoward and there are infrastructure challenges in informal areas. Samuels argues a more appropriate model would be to get the fibre backbone connectivity in place, then layer a Wi-Fi offering on top.