What is paygo?

Alan Knott-Craig

The concept of prepaid airtime began in the late 90’s when the mobile industry started selling voice minutes in vouchers rather than via 24-month contracts.  


MTN called it pay-as-you-go[1]

Vodacom called it prepaid airtime, although its product brand was Vodago.


Paygo essentially unlocked the entire population of SA as an addressable market of consumers of airtime, and directly led to the exponential growth of the mobile phone industry in South Africa. Today, more than 80% of SA’s estimated 65 million SIM cards are paygo.


Fast forward twenty years and the fiber industry is evolving in a similar way. After spending nine years saturating communities that can afford long-term contracts and can pay via debit order, the fiber industry is now looking to expand to lower-income homes, which means adopting a paygo model.


The big difference between the fiber and mobile operators is that the mobile operators apply pay-as-you-go to volume of data rather than time.


For example, if you buy R12 of Vodacom airtime you get 100 megabytes of data.


Compare that to the fiber operators, where you pay R500 for 30 days of data, no matter how many megabytes, gigabytes and terabytes you use.


In other words, mobile operators sell you capped internet (mobile data), whilst fiber operators sell you uncapped internet (fiber).


Until late 2022, no one would sell you uncapped fiber via paygo.


In other words, no one would sell you paygo internet that is linked to time, not volume.


Which is why the fiber industry is running out of steam. It’s already passed four million unique homes. That’s about fifteen million people. That’s probably the maximum number of people that can afford making long term commitments.


The remaining 13 million households (and 50 million people) in SA are waiting for paygo fiber.


Until ISP’s offer an uncapped paygo fiber product, the industry will bump up against the hard ceiling of four million homes that can afford postpaid/prepaid fiber.


To clarify: When I talk about mobile data, I automatically assume it’s capped. When I talk about fiber internet, I automatically assume it’s uncapped.


Mobile = capped
Fiber = uncapped


Further clarification: There are two broad definitions of types of customers in the telecom industry: Postpaid and prepaid.


Postpaid refers to products for which the customer pays AFTER using her data. It can be divided into two categories:


·      24- or 12-month contract

·      Month-to-month


Prepaid refers to products for which the customer pays BEFORE using her data. It can be divided into two categories:


·      Monthly-prepaid. Paid monthly upfront

·      Pay as you go (paygo) - paid upfront in increments as small as 24 hours


To the average South African, there’s a big difference between having to pay R150 upfront (for a month) versus paying R5 upfront (for a day), even though the total sum is the same, ie: 30 days x R5 = R150.


The mobile operators figured that out a long time ago, which is why you can buy airtime in chunks as small as R12.


The fiber industry still needs to appreciate the difference between monthly-prepaid and paygo.


Only when fiber time is sold in increments of one day can it be accurately described as paygo.  


Which is why we created Vulacoin, and then we we created Paygozo, and then we rolled out fiber in the Kayamandi township.


To prove that fiber in low-income communities is commercially viable, but only if it's offered on a paygo basis.

[1] For the sake of simplicity, I will refer to pay-as-you-go as paygo henceforth.

Related post