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Dial-up ISPs – The compelling sum

by Rudy Nadler-Nir

Science fiction author Ray Bradbury named his masterwork “Fahrenheit 451” after the temperature of the fire used to burn books. Book-burning has tickled the imagination of every dictator since books appeared in print and Bradbury offered a bleak view of a society in which a fireman’s job is to start fires – and use them to burn books.

Fahrenheit 451, Bradbury’s “melting point for paper”, became a concept denoting the point of no return where societies turn on themselves and implode in a huge cloud of self-destruction, annihilating their own literary lore.

I thought about Fahrenheit 451 when I noticed what appears to be the emergence of a host of new Internet Service Providers (ISP), all of whom claim to be a viable alternative to the two major players (namely M-Web and World Online) – good service at cheaper rates.

ICL, running Absa’s Internet backbone, plans to offer connectivity at R59 per month. MyConnection, a planned project from Interprise plans to do the same: a R59 per month service. Then, Insurance company Auto & General offers its clients access. The cost? You guessed it: R59. Finally, A local student portal, Get a Life, announced that it will offer basic connectivity facilities for R39 per month with an alternative unlimited access package for R75 per month (this brings the average cost to R54 per month).

These new offers come on the heels of an announced increase in monthly subscription rates announced by the big ones – they plan to increase current subscription rates to around R130.

Here is an interesting thought: imagine that an increasing number of alternative ISP will offer their services at R59 per month (assuming we’re talking serious players, not fly by nights). With time, it’s very likely that users will view this amount as an acceptable alternative to the major ISP.

Users will think: “M-Web charges R134 per month. ICL charges R59 for the same service. ICL is not a here-now-gone-tomorrow operation. This is not free Internet – so they’re in for the business.” The rest, as they say, is only a click away.

Should R59 become an acceptable alternative, it’s easy to see how anything above this amount could prove lethal: a melting point, a Fahrenheit 451. The thinking is simple: since R59 is the amount (almost) everybody is happy to charge, and since it’s so much cheaper than mainstream ISP, it must be the “compelling sum” to pay – that magic sum that cancels all others.

Users are likely to have a question for M-Web and World Online: “If I can get service at R59, why do you guys charge double that amount?” The ISPs will probably play the premium card: “we give you top-quality service, superb connectivity, world-class speed.”

Originally, M-Web planned to be an OSP (Online Service Provider) rather than an ISP. The model envisaged can be seen as something similar to the “make you own pizza” model – you pay for the basic configuration, then add whatever you wish and pay extra for the various “add-ons”. On its initial announcement of this business model, M-Web’s basic pizza was still around R89.

So, what happened? Well, on top of that, M-Web added services such as virus checking on all email, access to all Encyclopaedia Britannica content, and all the other extras it packs into that all-consuming box we see in its TV ads. This, one would imagine, is M-Web’s premium card – the reason for the additional R45 you will pay each month.

Are users likely to be so impressed by these services that they’d be happy to fork out what amounts to 50% of the basic costs for such services? Not likely. Remember that the pizza model allows you to pay only for the basics – while M-Web’s pizza is an all-or-nothing deal. You simply cannot “make your own OSP”.

I believe that such un-subtle attitudes will cause users to define their “non-negotiables” (for example – ease of connectivity, speed, security) and come back to those who offer connectivity at the compelling sum – R59.

Users will then, probably, ask two final questions: “Can I get my basic needs for R59 per month?” and, if so, “Where do I sign?”

Why is this so important? Because on the 10th anniversary of South African Internet, we are yet to find a successful online business model – seeing that the dial-up model took a knock through rate increases and that the revenue-from-advertising model is battling market apathy.

R59 per month is the Fahrenheit 451 of our industry because it re-defines the value of the service we get. I need to pay for good-quality connectivity and speed of access, and I can live with that. Problem is that there is very little to justify an additional R70 per month – and that is where M-Web and World Online can
expect the largest churn.

Rudy Nadler-Nir is an independent e-strategist and Brain-for-Rent. Check Rudy’s personal Website, at http://eclectic.co.za or email your arguments to him at mailto: rudyn@eclectic.co.za

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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