Just fizzle, no pop

The local loop unbundling report promises more fizzle than pop as far as liberalisation of the telecommunications industry is concerned.

It is not the fact that communications minister Ivy Matsepe-Casaburri has set a deadline of 1 November 2011 for the unbundling process, nor is it the fact that it is a process rather than an event, and it is also not because of its potential to open up the market that makes it a policy lame duck.

Rather, no one knows exactly why we have to do it, or exactly what the demand for services and competition will be. We do not know if it is even suitable for SA, which has classified itself as a developing economy.

The communications minister first announced the formation of the local loop unbundling committee in her budget vote speech of 2006, just over a year ago. The committee, comprising a number of experts in their fields, was a temporary and part-time assignment, and it seems members were only given eight months from their time of appointment to complete the task.

As a result, the report seems to be comprehensive, but it uses information that is readily available in the public domain. Because of this, the most heavily documented case of unbundling in the report is the UK experience and the problems it has had with its own incumbent British Telecom.

While the report does mention other countries, such as the US, it has not one reference to any other developing economy where the exercise has been tried or is being considered.

Local loop unbundling has been adopted as a key telecommunications policy driver in countries such as Bosnia Herzegovina and our neighbour, Botswana. Both of these countries are classified as "developing", yet no mention is made of their experiences.

The report, government officials and other proponents of local loop unbundling talk about the benefits of such an implementation, but what are the real goals and objectives?

Mention has been made of increasing competition and so reducing prices and lowering the cost of business. Also, it is a means to bring broadband to the market cheaper and quicker.

But opening up the local loop is not necessarily the easiest way to create telecommunications competition.

Andrew Barendse, a former associate professor of telecommunications policy and now with Telkom's regulatory department, pointed out this fact in his interview with the Parliamentary Portfolio Committee on Communications last year.

[The report] has not one reference to any other developing economy where the exercise has been tried or is being considered.

Paul Vecchiatto, Cape Town correspondent

Barendse said research has shown competition to the incumbents has been most effective from alternate infrastructure developers, such as cable TV companies and wireless operators.

He pointed out that India and a number of European countries found their telecommunications industry liberalised almost in a de facto manner when these alternate infrastructure players began delivering voice and data services direct to the customer.

In SA, the real competition to Telkom has come from the mobile network operators. For many of the country's poorest people, this has proved to be the most convenient and cost-effective means of communications. However, it could and should be cheaper.

The report also either does not mention or gives a cursory examination to other issues that will have a direct impact on local loop unbundling.

Firstly, the issue of cable theft is far greater in this country than in, say, the UK. Just how Telkom and the people accessing the exchanges will deal with this is not even proposed.

Secondly, the issue of costing, such as renting space, equipment, etc, is given a brief mention, and this is unacceptable as the economics of access are extremely complicated and the ability for a new entrant to understand them has a direct bearing on their survivability.

The Independent Communications Authority of SA, which has to draw up the regulations for local loop unbundling, already has its hands full. It should stick to the requirements of the Electronic Communications Act, which deals with local loop unbundling, and focus on the licence conversion process, as that will give market players the greater sense of how the field lies.

Finally, policy and regulatory focus should also be on "unbundling" the interconnection regime, so the whole issue of fairness in wholesale pricing is properly addressed.