SA's telecommunications industry is heading for a battle over access to the last mile, because Telkom, the dominant fixed-line operator, is prepared to fight the process in Parliament and in court.
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.
Local loop unbundling (LLU) has been on the cards for the past decade, but has yet to become a reality in SA. In May 2007, then communications minister Ivy Matsepe-Casaburri set Telkom a 2011 deadline to free the last mile, a commitment the department repeated last November.
The Independent Communications Authority of SA (ICASA) recently released a discussion document on LLU. The regulator says it will have regulations in place by November to facilitate open access to the last mile.
ICASA councillor William Stucke previously said unbundling potentially applies to all local loops, regardless of the form of access and the operator.
No agreement
However, Telkom's group executive for regulatory affairs, Andrew Barendse, says the industry will not reach consensus on unbundling the local loop, because the incumbents, Telkom and the mobile operators, will defend and maintain their positions.
Vodacom's executive head of technical regulation, Mortimer Hope, says “attempts to drag Vodacom into this are misplaced”. He argues ICASA's discussion document specifically refers to the copper last mile, and does not provide for wireless access to be freed.
Telkom will fight local loop unbundling in Parliament, at ICASA and in the courts, says Barendse. He was speaking to ITWeb at a forum to debate the issue, which was hosted yesterday by the South African Communications Forum (SACF).
Walter Brown, SACF project manager, warns the process of unbundling the local loop “can descend towards a costly confrontational development process, with insignificant outcomes”. However, if the sector pulls together, freeing the last mile can be a “powerful tool for national development”.
Do it right
Khetan Gajjar, head of new business development at Internet Solutions, says the restricted access to the last mile is curtailing innovation, because the incumbent's pricing is a substantial amount of the cost of broadband through an independent service provider.
Angus Hay, GM of strategic business development at Neotel, says the November deadline will only be achieved if all the players cooperate. He argues international experience shows that, where access to the last mile has been opened up, it has increased broadband competition, and led to more options and better pricing for users.
Hay argues the copper link should be priced at a discount to the retail price. He says local loop unbundling is not a “silver bullet” for all broadband, but is an important tool.
Wireless dominates the basic telephony and Internet access market, but this does not negate the argument for improving competition in the fixed-line segment, says Hay. “It's not a choice of one or the other.”
Hay argues freeing the last mile will result in competitors sharing the cost of investing in the access infrastructure.
No point
Barendse questions why the industry is looking at how to unbundle the last mile, when Telkom does not believe the sector has justified why the local loop should be unbundled. “The fundamental issue has not been addressed.”
International experience shows that unbundling the last mile of copper linking end-users to the exchange is costly and complicated, says Barendse. LLU will be counterproductive and would not increase access to communications, but instead would cost SA's economy jobs, he adds.
Trade union Solidarity previously warned Telkom would be forced to shed jobs if the last mile is unbundled because it generates a large amount of revenue from the copper infrastructure.
Barendse says LLU will not serve the goal of universal access, and there are technical, economic and legal issues around freeing the last mile.
Local loop unbundling is not designed for the local market, where there is a low tele-density, argues Barendse. He believes SA needs a bigger network, rather than unbundling the existing limited infrastructure.
Barendse says it will be expensive to open up access to the last mile, and questions whether the benefits will justify the cost.
Telkom has been subsidising access to the local loop, and has not been able to recoup the full cost, says Barendse. He points out that the company would end up subsidising its competition if the retail rate is charged, and pricing access at a wholesale cost would result in other telecoms companies paying more than end-users.
Izaak Coetzee, Telkom's executive for regulatory affairs, says South Africans have not paid for the copper infrastructure, because the operator has been subsidising the cost. He says citizens “basically owe us some money”.
As a result, there is an “access deficit”, notes Coetzee, which Telkom has not been able to recoup.
Parliamentary Portfolio Committee on Communications chairman Eric Kholwane says SA needs to expand its current telecommunications infrastructure. He cautions that whatever the outcome is, it must be done correctly and have a positive effect on the market.
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