Local loop unbundling, which was meant to kick off this month, is on hold until a mechanism is put in place to solve the tricky issue of Telkom's access deficit.
Freeing the last mile will enable more competition in the sector, which will trim prices, and also has the potential to add about R1 billion in revenue to the telecoms sector. The process began in April, when Telkom cut the cost of IP connect - Internet service providers' (ISPs') single biggest cost - by 30%.
This month was meant to see Bitstream come into effect as part of the Independent Communication Authority of SA's (ICASA's) phased approach to unbundling the local loop.
However, Bitstream, which allows ISPs to connect into Telkom's digital primary switch unit, can only happen once a mechanism is put in place to resolve how to cover Telkom's effective subsidy of copper.
Telkom has argued the cost it charges end-users to access copper is less than the cost of the line. Although ICASA said in March that it, Telkom and other stakeholders would assess the scale of the deficit as a precursor to Bitstream, a mechanism that has yet to be put into place.
As a result, the cost of ADSL is unlikely to come down any further, and ISPs cannot compete more effectively and use additional margins to expand their services to under-serviced areas.
Waiting game
ICASA spokesman Paseka Maleka says ensuring that fixed-line access prices are fairly addressed is a necessary precondition to any successful form of local loop unbundling. "As soon as a position on the access line deficit has been concluded, the authority will move forward with a working group on Bitstream services."
The regulator continues to work with Telkom to develop a mechanism to address the access line deficit, while at the same time aiming for the mechanism to have as little impact on all industry stakeholders as possible, says Maleka. The process includes evaluating and addressing any unnecessary regulatory burdens that increase the cost of service provision, he adds.
Maleka could not provide a timeframe for when the process would move forward, but adds that ICASA is aware of discussions regarding the future role of Telkom, including the recommendations made in the National Development Plan (NDP), and is awaiting a conclusion on this matter.
The NDP, which was released earlier this year, proposes that Telkom be split into two units: a wholesale unit, focusing on backhaul operations; and a retail telecoms business.
Telkom says it has been working cooperatively with ICASA, and working teams from both ICASA and Telkom have been engaged in discussing the recovery scheme, which is a precursor to Bitstream implementation.
Adverse effects
Internet Solutions' executive for regulatory affairs, Siyabonga Madyibi, says the delayed implementation will continue to have a negative effect on competition as margins available to ISPs will continue to be under pressure. "This decreases the scale of innovation and network investment."
Madyibi says the absence of competition, or lack of effective wholesale access to the last mile, means lack of affordable access to the Internet by ordinary consumers, which ultimately has a negative effect on the penetration of broadband services to the under-serviced areas.
Derek Hershaw, CEO of MWeb ISP, says Bitstream should offer two benefits to ISPs, depending on how the solution is technically deployed. He says there should be greater control over quality of service and the ability to differentiate services from competitors and better pricing than the current IP connect model.
"It's an easier service for Telkom to manage and takes a load off their infrastructure, and those savings should be passed on to the ISP."
Hershaw adds that the biggest problem of the delay is that the existing over-priced IP Connect, which makes up half an ISP's cost, remains in place. "Unless we see pricing relief, it's unlikely that ADSL prices can come down much further."
Additional reporting by Bonnie Tubbs.
Share