'LLU won't cause earthquake'

Delaying the local loop unbundling (LLU) process has watered down the effect it will have when it finally does happen, say analysts.

Speaking at a panel discussion last week, communications minister Roy Padayachie said there is a policy directive that LLU must happen by November. The Independent Communications Authority of SA (ICASA) says that in a couple of weeks, there should be a better picture of which way SA will go on the matter.

However, analysts say the industry cannot expect to see unbundling implemented by November. ICASA may issue regulations by then, but rolling out access to the last mile is only likely to happen some time next year.

Telkom is expected to challenge ICASA's regulations, which will delay the process even further. The sector is determined to have access to the last mile, as freeing the copper infrastructure would spur competition, aid innovation, push prices down and help grow the country's economy.

However, Telkom does not want the local loop unbundled. The operator argues it will not help grow access to communications, but will instead cost the economy jobs at a time when the country is slowly recovering from the recent recession.

LLU has been on the cards for the past decade, but has yet to become a reality in SA.

Padayachie said LLU worked for some countries and not for others, and SA is deciding which model to go with.

World Wide Worx MD Arthur Goldstuck, also at the panel discussion, said these delays will dilute the effect of LLU.

“For what impact LLU will have, we need to look at WiMax. Regulatory ineffectiveness killed it off.”

He explained that the long time it took to deal with WiMax is what caused its small impact and the same thing is going to happen to LLU.

However, Goldstuck said this doesn't mean LLU shouldn't still go ahead. It's still necessary to do it, but the impact will be less than what it would have been if it had happened earlier.

“We shouldn't expect it to cause an earthquake.”

Speaking at the Southern Africa Telecommunication Network and Application conference, Angus Hay, GM of strategic business development at Neotel, mentioned the case of the Australian government buying the local loop from the incumbent with the same money it would have used fighting operators in court.

However, Andrew Barendse, group executive of regulatory affairs at Telkom, said with the Australian case, it is a mature, fixed market with around 100% penetration, and the Australian government had the AUS$43 billion budget to absorb it.

He added that the South African picture is very different. There is a myth around LLU and its link to broadband penetration, according to Barendse.

“There is no correlation between LLU and increasing broadband access in rural areas.” He added that parliamentarians have said LLU is pro-rich and anti-poor.

“We caution against seeing LLU as the remedy for every conceivable ill that exists in the ICT market. It certainly is not going to solve the problem of universal access for all.”

Barendse said there is also a myth that, for example, a request by Neotel to unbundle in Sandton is going to solve the access problem in a rural village. “LLU is not going to help the situation in deep rural areas.”

“We need to overcome the level of mistrust that has developed between government and operators,” said Hay.

He explained that what is often missed is the power local government can achieve by leveraging competition that is inherent in the private sector and that drives services. “LLU is all about competition that will drive prices. There's no way rural rollout will be enhanced by LLU, but let's see what will actually happen.”

Hay said about half the DSL users in the market are those critical small to medium enterprises. “They are the engine of growth of the economy. They are the part of the economy government has struggled to stimulate.

“We need to reduce the barriers for those small to medium enterprises. We need competition in broadband for those small to medium enterprises. Competition is key. It's not about every individual having a DSL line. That's not the point.”