A case-study into the cost of hotspots in South Africa

In this post we shine light on hotspot pricing, that is, we consider whether hotspots are expensive in South Africa and in particular whether one would be better off getting one’s own broadband connection. In order for this post to have any value, we have to supply some definitions and make some assumptions. These include defining what a hotspot is and making assumptions about the average hotspot user and the typical hotspot location.

Before we go any further we’ll qualify the use of the word expensive. By this we mean pricing relative to other options within South Africa. It is well known that bandwidth is orders of magnitude more expensive in South Africa than in the majority of the rest of the world. In a nutshell broadband is expensive in South Africa relative to the rest of the world due to the effects of a telecommunications monopoly by Telkom. This monopoly has been dismantled on paper but is for all intents and purposes still in effect.

The first assertion we’ll make is that hotspots are locations where people are given the option of sharing a broadband Internet connection using WiFi. In order to use the hotspot users are expected to authenticate themselves in some way and are granted Internet access for free or in return for some form of payment. We assume that the typical hotspot user is someone who is in a given location (or residence) on a temporary basis with the period of stay ranging from minutes to months. We also assume that the average hotspot user values convenience. Lastly we’ll assume that a hotspot location is one which accommodates users fitting the description listed above. Such locations include restaurants, airports, hotels and other forms of residences.

Since we have mentioned that users are in a location on a temporary basis, lets consider a user, called Jane, a tourist who will be in South Africa for 3 months. Broadband access is important to Jane and upon arrival she notices that she’ll have access to a hotspot charging 40c per Megabyte for the duration of her stay. Jane has a laptop with a built-in WiFi card and so she has the option of using the hotspot. Jane’s time is also important to her but at the same time she is a savvy consumer and so spends some time investigating alternative options. Since she will only be in South Africa for 3 months a 24 month contract is not an option for her. She notices that most broadband packages are priced based on the the amount of Megabytes purchased and also require the purchase of some form of modem. She determines that approximately 2000 Megabytes per month would suffice for her needs. Her research reveals the following options:

  • an iBurst laptop modem at R 1820 and a pro novice month-2-month contract at
    R 529 per month. Total cost over 3 months: R 3407
  • a Sentech MyWireless flexi1000 plus 31 day notice contract at R 449 per month and a Sentech modem at R 1500. Total cost over 3 months: R 2847
  • a Vodacom 3G My GIG Two Prepaid at R 389 for 2GB and a compatible modem at R 2000. Total cost over 3 months: R 3167

With the above mentioned costs she determines that she would pay 45c, 46c and 53c per Megabyte respectively when factoring in the cost of the modem. The least expensive price is 12% more than the hotspot price which has the added convenience factor.

Given the above mentioned costs not to mention time and hassle involved in getting connected (and disconnected in the case of a contract), she opts to use the hotspot instead where she is not forced to spend R1500 or more just to get a compatible device. She spends R30 to instantly get connected to the hotspot with the WiFi adapter already built into the her laptop.

With this example we hope to have made a strong case for hotspots being less expensive than other offerings. Appart from pricing, the convenience factor is an intangible benefit that adds significant value and it is of varying importance to the man on the street but in general of high importance to the average hotspot user. For the sake of simplicity we have not compared hotspots and alternative offerings based on the quality of the underlying connecting in the given location, this is clearly an important factor and one which would be included in a more comprehensive price comparison.

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