The Big Change

Subscribe by email

Subscribe by rss

The Big Change Feed What is a RSS feed?

Telkom Internet set to dominate dial-up

What it couldn’t do through the courts, Telkom is now attempting to do through good, old-fashioned competition: dominate dial-up Internet access in South Africa. This week’s annual results were highly revealing not only for the dazzling financial performance Telkom has turned in, but also for the trend lines that show its success at moving into fields some would regard as outside of its ambit.In 1996, Telkom attempted to use the courts to have all Internet Service Providers (ISPs) in South Africa declared illegal, or at least to have them meet regulatory requirements that could have shut down the industry. Telkom lost the battle, although it never conceded that the legal battle was over.

It was a mystery why Telkom should take such an antagonistic view towards what were some of its best customers, and those internal politics have remained an enigma.

In the meantime, however, they tried a far more effective strategy, but one that raised valid protests that they were competing against their own customers: they started an infrastructure provisioning ISP, SAIX, and a dial-up ISP, Intekom. The latter was always something of a maverick, with its own culture and a solid and loyal customer base, but one that was never a serious challenge to larger ISPs.

Then they launched Telkom Internet, and absorbed Intekom back into the fold and back into the corporate culture. Now they went the obvious route: using their massive billing run to market the ISP to the phone-using masses. A year ago, they had 98 000 customers on their books, making them the fourth largest dial-up ISP in South Africa. It was obvious, then, that they were going to challenge number two and three, Tiscali World Online and Absa Internet, before long. And so they did.

Their latest annual results show a huge 44% growth for Telkom Internet, to 142 000 subscribers, making them the second largest ISP in the country. And, while MWEB still enjoys a substantial lead, they are anxiously looking over their shoulders. Two years from now, the unthinkable may become reality: MWEB may become number two in the dial-up market.

That does not, of course, make Telkom the best ISP, but their price advantage is enough to deflect attention from their lack of a content offering and the tremendous value-add that MWEB builds into their packages. At the same time, of course, Telkom is making hay while the SNO fails to shine. In the absence of a second network operator, Telkom happens to control many of the fixed costs faced by ISPs, which prevent them from competing effectively on price with their own telecommunications provider.

Obviously it’s not fair. But using unfair business advantages to destroy the competition is a step up from using the courts. The flip side of the coin is that, when Telkom no longer has the monopoly, it should expect no favours from the competition.

  • Arthur Goldstuck is editor of The Big Change and managing director of World Wide Worx. He can be contacted by e-mail on mailto:arthurg@internet.org.za

No comments yet. Why not say something?

About

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.

Read more ...