Local loop unbundling or CPS?

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 19 Feb 2009

Fixed-line telecoms players yesterday debated the value of carrier pre-select (CPS) regulations proposed by the Independent Communications Authority of SA (ICASA).

Internationally, CPS has been used as a regulatory measure to promote telecoms competition in countries that have small emerging players and large incumbent fixed-line monopolies. It is for the most part followed by local loop unbundling (LLU), an issue that has long been on ICASA's agenda.

While Telkom has not condemned CPS, it feels there is little need for it. Panel members, who participated in the CPS hearings, explained that, for Telkom, LLU would make more sense than CPS.

The company admits new players like participant ECN could benefit dramatically from the solution.

Logical vs physical

CPS is at its heart a form of unbundling; however, there is no physical change and it requires companies to still pay interconnect fees for termination and now also origination of the call. CPS allows a customer to use the network of the company it has subscribed to (for instance Telkom) to make a call using a service by another company (for instance Neotel).

Telkom can then charge an origination fee and Neotel will also have to pay the interconnect fee of the network provider where the call terminates. The solution has worked well in many countries across the world, because all providers are able to build bundled specials that all telecoms users can take advantage of.

LLU takes a slightly different approach, opening up the access to the last mile infrastructure to all telecoms providers, giving them access to customers from the exchange points. Telkom currently owns all the copper last mile access to the home in SA.

The two processes solve similar problems: access to infrastructure that had not previously been available. The real difference is that CPS happens on a virtual (logical) level while LLU is the physical access.

Lucky for some

ECN CEO John Holdsworth explains that it has previously only been able to justify last mile access to its major clients' head offices, while branches are left unconnected by the company. “With CPS, we will have access to the logical infrastructure that we did not have before and reach out to our customer base.”

Telkom says companies like ECN have a case for CPS, because it will allow them to cheaply build a customer base around the exchange points. Once the customer base is built, there is another case to unbundle the local loop and provide physical access, the company continues.

Telkom already has the last mile in hand and does not need CPS to build its customer base around the exchange points. However, it has been ready for CPS since 2003 when it first heard Neotel was entering the market, and has committed to following the regulatory process along with ICASA.