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Telkom will share the local loop, says ICASA

South African telecoms regulator, ICASA, has gazetted a notice that it intends to commence the process of forcing Telkom to open up its fixed line infrastructure to competitors through the process of Local Loop Unbundling, and the incumbent’s recent protestations regarding carrying the costs are “not convincing”. The ‘Explanatory Note’ says that public hearings will take place on the 17th and 19th February, and gives operators a cheeky 30 days over the Christmas period to draft their responses.

All shore leave is cancelled for legal bods on the good ship Telkom, in other words.

Local Loop Unbundling (LLU) is the process by which ISPs other than Telkom are allowed to install networking equipment in exchange buildings, and use Telkom’s ‘last mile’ of copper wire that’s already in the ground to reach customers. Right now, ISPs build internet services off of Telkom wholesale and pass on those costs to their customers.

In other countries – such as the UK – where LLU was successfully introduced against a monopoly telco prices for internet access tumbled as competition hots up. A rival to Telkom in South Africa, for example, might choose to do away with the bizarre ‘third charge’ on your bill for ADSL access on top of bandwidth and line rental. Or they might decide to swallow the cost of line rental to compete.

There is a downside. When LLU was introduced in the UK it was followed by years of customers complaining that they were locked into deals that promised low prices but gave poor service because of the high cost of switching suppliers that LLU also brings.

Telkom’s main argument against LLU, however, was that it would actually increase prices and reduce access, on account of the fact that the potential user base is so small. By chasing an ever decreasing number of fixed line subscribers in urban areas with tempting offers of lower prices and more speed, all companies involved would have less to spend on vital infrastructure extending their networks to the internet have-nots in rural areas.

Poppycock and pishaw, says ICASA. Or it would if it wasn’t writing in a government gazette, we suspect. In an annexe to the notes, the regulator lays the blame for South Africa’s poor internet service firmly at Telkom’s door, citing “flaws” in its accounting model and a lack of competition slowing down Telkom’s ability to innovate and win customers.

The number of fixed copper lines being used by end-users has reduced dramatically, with Telkom losing 1 693 000 customers since 2000. This represents a reduction of 31% over 12 years. This reduction is linked not only to the introduction of alternatives for access to communications but also the cost base and quality of retail service provision provided by Telkom, as stated by the previous Chief Executive Officers of Telkom itself.

It also notes that 191 customers per employee is way behind international standards, and that Telkom really needs to shape up in the employee efficiency department.

Tough stuff, there. Overall, says the regulator, Telkom’s arguments are “not convincing” and it intends to push on with LLU as laid down in the new South Africa Connect policy document.

There is a bone for Telkom in the document though. Although the regulator dismisses the arguments for a statutory mechanism for recouping the company’s investment costs,  an Access Line Deficit recovery scheme, it does suggest that there won’t be plans to regulate prices for LLU access as happened overseas.

There is no intention that any licensee providing access should suffer any financial harm. In terms of access to any for of local loop… the network owner has the right to set the price to ensure future sustainability of their own private network services and future investment commitments. The licensee seeking access… is obliged to pay… any associated usage fees.

It’s going to be a tough one for Telkom to fight, as it’s facing a new determination from both ICASA and the Department of Communications to get on with LLU, by the looks of it. Even so, expect an angrily worded press statement some time tomorrow.

(Image – Joseph A Carr)

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