FNB Connect - FNB Launches "cheap" Internet and VOIP services

I am sure by now that you have heard that FNB plans to offer cheap Internet connections and phone call to its customers. If you have a sense of De' Javu don't be surprised, this was tried by Absa in 2006 with disastrous results.

At the time Absa, via their marketing director, Santie Botha, denied vigorously, that this was simply a strategy to get customers to switch to Absa, and that  the service would be discontinued in the near future, as it was patently unsustainable. Of course this is exactly what happened 6 months later. Micheal Jordaan, FNB's CEO, has denied that this is what will happen with FNB's offering, since he claims, it is not a free service but a cheap, paid for one.

Jordaan claims that FNB has already installed the infrastructure for its banking needs, and is simply finding a way to leverage its already substantial investment. I have hear it reported that reference is made to sending out 700 million SMS per year, but what sending SMS's has to do with Internet bandwidth or VOIP services is a bit of a mystery to me. In addition, why a bank, or any business for that matter, would over-invest in capacity and infrastrucutre it didn't need for its core services and products, and did not plan to grow into, is beyond me, perhaps the FNB shareholders need to ask some questions of the board.

Basic ADSL and VOIP Services

The offerings from FNB are basic ADSL connectivity and a VOIP service. So its offer to cut telephone call costs is no great innovation, neither is its ADSL broadband offering.

VOIP - Success depends on consumer uptake

The fact is that VOIP has been in the South African market for a while now and, except for some corporates, it has failed to take off with consumers. The main reason for this, is that it is difficult to get the various VOIP applications to work with cell phones, and trying to convince a consumer to use a phone plugged into their ADSL line, with some initial costs outlays, is a hard sell. So on this count there is nothing special about FNB's VOIP service and I predict they will fair no better than any of the other VOIP providers out there. Except maybe they can spend more on marketing.

"Cheap" ADSL

On the ADSL side, FNB claims to be cheap. The fact is that they simply match the existing pricing of R69 per mb from existing providers. Sure they are cheaper than some of the more expensive providers, but they are not cheaper than the market. Certainly they do not offer significant savings. Tests on the FNB backbone do, however, proove that their service is superior in download and upload speeds, both internationally and locally. 

I am certain this will come down rapidly as more consumers take up the service and their contention ratio increase, in the same way that the iBurst bubble burst once their infrastructure reach saturation point, and their base station contention ratios shot through the roof. Besides there is soon to be a massive decrease in international broadband costs in the coming six months as the new international cables come on line. I bet that FNB will be slow to respond to the price decreasing that will be coming through from other, more aggresive, providers.

Banks can't get lending right, do you trust them to get IT right?

So my basic point is that FNB's offering are not innovative, or new, in any way; they do not offer a major cost saving to any broadband user that is not already available in the market, so this appears to be another marketing exercise.

Banks can't even provide their core services any more. Look what they did to the world economy, and now they want to try and play at being an IT company.  What next? Branch out into the insurance market? Oh wait they already tried that.

I have my doubts that this will be successful. What I can say is, if you are going to switch, do it now, and take advantage of the low contention ratios and abundant bandwidth while you can, but I seriously doubt this offering will be around a year from now.

It will, no doubt, be sold off to some big existing ISP, with sage words from FNB about the need for them to "focus on our core competencies and services".