The lockdown can hurt ISPs – Depending on the impact in the coming months

Internet service providers (ISPs) are one of the industries which are the least impacted by the prolonged COVID-19 lockdown, but concerns remain over the long-term economic impact.

South Africa has been under strict lockdown for two months, which means many employees worked from home during this period.

This was good news for ISPs, as working from home requires a stable Internet connection. There was, however, also a downside.

The regulations forced many businesses to close their doors during the lockdown, which had a negative impact on both their income and that of their employees.

Many companies had to cut salaries to stay afloat while others had to stop paying salaries completely and even retrench staff.

The impact of these decisions started to filter down to ISPs, with many companies and residential clients asking for payment holidays or cancelling their services.

Cool Ideas co-founder Paul Butschi told MyBroadband the uptick in demand during the lockdown was undone by clients who cancelled or could not make payments.

Cybersmart founder Laurie Fialkov said for every new order, there is at least one of their existing customers who is struggling to pay because of financial problems.

He said they are trying to assist wherever possible through payment holidays, reduced payments, or converting customers to prepaid packages.

Telemasters CEO Jaco Voigt said they also had to accommodate requests for delayed payments from some clients.

He said there are customers that face a lot of uncertainty due to the economic situation, which had a serious impact on business activity and momentum.

No salary cuts or retrenchments

Not one of the ISPs which MyBroadband spoke to had to implement any salary cuts or retrench staff due to the lockdown.

Cool Ideas’ Butschi said they have not had to cut any salaries and that there are no plans to implement salary cuts in future.

Voigt said Telemasters’ focus on operational efficiency over the past two years helped them to avoid salary cuts and retrenchments during the lockdown.

“We are obviously keeping our fingers on the pulse as more information from government becomes available – we are nimble and can change as and when needed,” said Voigt.

Other ISPs, including Cybersmart, Afrihost, and Cipherwave also avoided any salary cuts or retrenchments.

Afrihost CEO Gian Visser told MyBroadband their top priority is to make sure that there are zero retrenchments because of this COVID-19 pandemic.

Afrihost has also started a fund and other initiatives to assist staff who are facing challenges during this period.

Concerns over the future

The ISP industry continues to sign up new customers and operate fairly normally during the COVID-19 pandemic, but there are concerns about the long-term impact of the lockdown.

Butschi said he does not believe we have seen the true impact of COCID-19 on the economy yet, and that it is likely to phase in over time.

He said the economic situation will depend on how long the lockdown continues, which can be significant if it continues for much longer.

Cipherwave MD Wayne D’sa told MyBroadband they have a general concern around the business confidence in South Africa.

“As we are heading to level 3 of the lockdown where most businesses will be moving to re-open, we will only start to see the true impact of the lockdown in the coming months,” he said.

He thinks the overall growth in the ISP market is going to be flat as a result of trying to assist customers financially while maintaining overall cost inputs.

Voigt said there is currently a lot of uncertainty which he hopes will clear up as the government provides more details about its plans.

“The more certainty government provides, the better-equipped business will be to make plans and decisions,” he said.

Despite this uncertainty Voigt remains upbeat about their prospects, especially with working from home becoming the norm.

“Not discounting the very serious economic fallout of the pandemic, we are positive that this can very well be the catalyst to drive buy-in and uptake in our offerings,” he said.