The Independent Communications Authority of SA (ICASA) says the high cost of IP Connect (IPC) could be a barrier to competition in SA's fixed-line Internet sector, and as such plans to conduct a study into the cost of electronic communications in SA.
This comes in response to the Internet Service Providers' Association's (ISPA's) urgent call yesterday for the authority to step in and do something about the steep costs involved in ISPs providing connectivity to end-users.
IPC, the wholesale product through which third-party ISPs connect to Telkom's network, is responsible for the bulk of ISPs' costs to deliver Internet services to customers. According to ISPA, this can be up to 70% of the total costs involved.
Cut to compete
ISPA says further reductions, such as those made in April last year, are urgently needed in order to keep fixed-line connectivity competitive in SA.
ICASA concedes that a reduction in wholesale prices has the potential to stimulate competition and drive down the cost of communications. The regulator says it "may well be necessary" for a reduction in the IPC price to take place before any fixed-line Internet product can successfully compete against alternative Internet access prices.
ICASA - which has in the past been slated for dragging its feet on regulatory issues - says it appreciates that a reduction in the IPC price would be a major benefit to all ISPs. However, the authority says "any price reduction must also be tempered with an acknowledgement of the costs of providing Internet connectivity".
The Internet industry body says the retail ISP market has shown time and time again how high levels of competition lead to pricing transparency, and that wholesale rate cuts are passed on to consumers quickly and efficiently.
Local loop lull
Marc Furman, co-chairperson of ISPA, says fixed-line ADSL is facing increasingly stiff competition from mobile operators. "[This is] in part because fixed-line operators remain constrained by the lack of competition in respect of the local loop."
ISPA notes that cutting the IPC rate is part of the phased approach ICASA has adopted as regards the unbundling of the local loop.
Local-loop unbundling (LLU), the process that gives companies access to Telkom's telephone exchanges linking homes and offices, has been stalled by objections from Telkom.
In light of the delay in the LLU process, ISPA has urged ICASA to consider mandating a further reduction in the IPC rate, until other options for service provision become available.
Furman says ISPA feels ICASA should act quickly to both reduce IPC rates, and review it on an annual basis. "This is a palliative measure that worked well [in the past] and should be employed again."
Product stagnation
ISPA adds that, cost aside, the Telkom IPC wholesale product has not seen any significant upgrade or improvement since it was introduced a decade ago.
"Despite being critical to the service that ISPs provide to their customers, it remains 'best effort', with no service level agreement or quality of service guarantee available to the ISPs that use it."
While details are at this stage vague, ICASA has committed to investigating these issues, primarily the costs and potential across the value chain of electronic communications. The authority says the study includes "the costs of national long distance backhaul and other input services".
ICASA says it will engage all stakeholders on its plans for this project "in due course".
Telkom had not responded to a request for comment by the time of publication.
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