Unbundling delays hinder competition

As the November deadline for unbundling the local loop draws closer, hope is fading that the process will be finalised this year, hindering competition in the telecoms sector.

Local loop unbundling (LLU) has been on the cards for at least five years. After several delays, the Department of Communications last November finally set a deadline for the process to be wrapped up by November this year.

However, Telkom's contention that access to its copper network isn't necessary, because there is a wireless last mile, is set to create a heated debate when the public consultation process starts, and delay matters even further.

Telkom's hold on the last mile of copper has meant new operators have to innovate through wireless technology to gain access to houses or businesses to provide services.

While bigger players are able to roll out their own infrastructure to close the gap, access to the copper connection is vital for smaller players to compete in the fixed-line sector. More competition will benefit the end-user, as market forces will see prices coming down.

Dominic Cull, owner of Ellipsis Regulatory Solutions, doesn't expect any real progress on LLU this year. “We're going to start the dance; when the music stops is another question altogether.”

Cull says there may be regulations, perhaps in the form of facilities leasing, this year. However, the practical aspects of implementing unbundling, such as price, will take some time to negotiate.

Maleka says once the document has been published, a public consultation period will start. He didn't provide a timeframe for when this may happen.

However, the consultative process is expected to involve heated discussions. Telkom says there are too many variables to sort out before the local loop can be unbundled, as there isn't clarity over what regulatory process ICASA must follow.

Before anything else can be done, essential facilities must be defined, says Telkom's chief of corporate governance Advocate Ouma Rasethaba. In addition, a review of the entire market would have to happen, she says.

Cull says this could take a few years, if ICASA has to review the mobile and fixed market to work out whether Telkom dominates all last mile access technologies.

Telkom doesn't believe the last mile of copper is an essential facility because it can be substituted by a wireless loop, Cull says. “Wireless local loop these days is more than a substitute for both voice and broadband communications.”

In addition, contractual relationships between parties must be sorted out, as must price and technical parameters, says Rasethaba. “Given the number of variables, Telkom does not believe that the November 2011 deadline for LLU is realistic.”

However, cellular companies argue that the whole point of unbundling the last mile is to free up the copper infrastructure. MTN SA chief corporate service officer Robert Madzonga says the point of LLU “has always been to break the fixed-line monopolist stranglehold on the last mile copper infrastructure”.

Madzonga says there is still a monopoly over copper, which is why unbundling is needed. “There should not be any confusion between the competitive mobile wireless access with that of fixed-line local access. These are different markets and the architectures are completely different.”

Cell C's executive head of regulatory affairs, Mothibi Ramusi, says communications minister Roy Padayachie must first set the rules on what needs to be unbundled, and where the unbundling must take place on the fixed-line network. Cell C is consulting all parties to understand what “exactly” will be delivered in November, says Ramusi.

Huge Group CEO James Herbst says access to a last mile is critical to allow smaller telecoms players to compete head on with giants in the sector. He says access would pave the way for more competition, which would ultimately benefit end-users because prices would come down.

The ongoing delay in unbundling the last mile is eroding the window of opportunity for smaller players to compete, which will stunt growth in the sector, says Herbst.

However, Herbst doesn't expect the fixed-line last mile to be unbundled soon, because Telkom's argument that there is an alternative to freeing up the fixed-line last mile is credible. Mobile operators have established a last mile through wireless technology, which is already more pervasive than Telkom's points of presence, he says.

“If I had last mile access, I'd be able to quadruple my business in 18 months,” Herbst says. Huge would look at mobile solutions to grow the business, he adds. "This is becoming a wireless world."

Jacques du Toit, MD of Vox Orion, points out that LLU shouldn't be limited to copper, which is an outdated technology. “LLU is only applicable to the old copper infrastructure that was subsidised by our government at the time. Unless ICASA makes a ruling that it should include newly laid fibre, the user will be stuck with old technology.”

Du Toit says: “With new fibre networks and licensed wireless networks being deployed all over the country, customers have a much larger choice when it comes to capacity, scalability and quality.”

Angus Hay, GM of strategic business development at Neotel, says LLU “opens the door to new business models”. He says unbundling the last mile will allow Neotel to expand its offerings outside its own network.

“The longer LLU is delayed, the longer it will take for the benefits of competition to reach all broadband customers,” says Hay. “LLU is not a silver bullet, but it is certainly a key step in the process of liberalising our telecoms market.”