The Internet is starting to deliver its real potential in South Africa with monopolist Telkom now facing competition as a major domestic company, MWeb, offers cheaper phone calls using computer technology.
MWeb’s Broadband Talk offers national phone calls from computer to landline at just 50c a minute compared to Telkom’s 99c.
MWeb’s pricing is similar to Internet telephony giant Skype, which has been offering computer-to-landline calls in South Africa for some time, at 48c a minute.
MWeb comes in cheaper when it comes to calls to mobiles with a rate of R1,45 per minute versus Skype’s R1,64 and Telkom’s R1,84 (including VAT).
Telkom, which announced this week that it was cutting broadband access costs by up to 32%, is making free software available to its subscribers to make computer-to-computer calls.
Users either use a headphone and microphone plugged into their computer or a special adaptor, which allows calls to be made from a conventional phone. The underlying technology is known as VoIP or Voice over Internet Protocol.
VoIP is a disruptive technology that undermines the fixed-line business model of incumbent telecoms operators by allowing users to direct their voice calls via their broadband line at a fraction of normal voice costs.
Computer-to-landline calls are offered by companies such as Skype (and now MWeb) at cut-rate prices.
A consumer’s analogue phone and phone line plug into the adaptor known as a Skype box, which then plugs into a USB port on a computer allowing VoIP calls to be made and received via your analogue phone.
The Skype box retails for about R315 and South African online retailers say they are selling hundreds of Skype phones, headsets and Skype boxes every month as tech-savvy South Africans jump ship from the fixed-line monopoly, which they claim has excessive call charges. South Africans businesses are saving thousands of rands by embracing the new technology.
Naspers-owned MWeb is offering its Broadband Talk as a free service with its ADSL subscription package.
Telkom has joined the VoIP market in a limited way, offering its Internet customers free software Telkom Internet Communicator, which allows free voice calls from computer-to-computer.
Telkom’s executive for Telkom Business, Rikus Matthyser says its VoIP offering can connect to traditional fixed lines and cellphones, but these services will only be offered once the Independent Communications Authority of South Africa has regulated interconnection agreements between value-added networks and telecoms operators.
Telkom’s CEO Papi Molotsane says VoIP is going to erode its market share in the voice space and Telkom is going to have to embrace it rather than fight against it.
“It’s there, we have to work with it,” says Molotsane. “Destructive technologies by their very nature, if you avoid them, will destroy you. We have a limited VoIP service right now, but we need to move more into the next generation network and grow into the VoIP market.”
VoIP’s leading promoter is a company named Skype whose free software allows users to call other Skype users for free and also offers cheap calls to traditional telephones and cellphones.
Skype was sold to leading online auction house e-Bay in September last year for $2,6-billion as well as a further $1,5-billion if it meets specified performance targets over the coming years.
Users can purchase call-time credits called Skype Out from the Skype website using the online credit card payment system to top up their calltime balance.
Skype announced last month that it was allowing all users to call fixed-line and cellphone numbers in the United States and Canada for free till the end of the year. Previously users paid two US cents a minute.
Skype North America said millions of users were flocking to Skype every month and the free calls for the rest of the year would mean even more consumers would make the switch to Skype.
Skype is adding 150 000 users a day without costing them a cent, and the business model is based on attracting the largest amount of users possible rather than maximising the revenue from each individual customer.
Skype has more than 54-million users worldwide and market research firm iSuppli has estimated that global VoIP subscribers would reach 197-million by 2010.