The retail price of ADSL data continues to fall, with a number of Internet service providers offering capped accounts at less than R2 per GB.

These prices are very close to the cost of providing the service, which means these companies rely heavily on breakage (where a customer does not use all their data) to make a profit.

While Telkom’s recent IP Connect price cuts are good news for ISPs, it remains the largest cost in providing an ADSL service.

With a starting price of R380 per Mbps (Ex VAT) for IP Connect, it is costlier than international bandwidth, which is priced at around R150 per Mbps (Ex VAT).

Peering helps to drive down the cost of local connectivity, but some companies which refuse to peer freely still add a cost for local bandwidth.

Apart from bandwidth costs, ISPs also have to budget for equipment, support, marketing, hosting, and billing.

The graphic below shows an estimate of the cost of providing 1GB of ADSL data to a consumer, based on figures from one of South Africa’s largest ADSL providers.

It should be noted that this is the wholesale cost for an ISP, and does not include profit.

More on ADSL

Vox Telecom increases Fat Pipe ADSL data caps

South Africa’s most popular ADSL bundles – Price showdown

Top 5 ADSL and VDSL ISP speeds in South Africa