Telkom to fight LLU all the way
Telkom has once again come out fighting in the wake of further LLU announcements.
Local Loop Unbundling has been delayed, and delayed, and delayed. Towards the end of last year, Icasa released regulations, followed some three months later by an explanatory note on said regulations.
The explanatory note, among other points, stated that Icasa does not consider Telkom's access line deficit (ALD: the difference between what it charges for line rental versus what it costs it to maintain the lines) to be as much of a problem as Telkom does, and that, as such, it 'has no relevance in determining access to the local loop', thereby removing one of the obstacles to LLU being implemented. Icasa had considered an investigation into the ALD a prerequisite for the finalisation of the LLU regulations, and this has now been struck off the 'to do' list.
In terms of its explanatory note, Icasa has given licensees two options when it comes to how access to the loop will be regulated, and it's these options that it is currently seeking input on. Licensees will either have access to the local loop in terms of the facilities leasing regulations, or specific terms and conditions for LLU will be drafted and, it seems, included in the facilities leasing regulations (the note is not explicitly clear here).
What's significant is that it means LLU is going to be implemented in terms of the facilities leasing regulations and thus not just be applicable to Telkom. Icasa had asked for comment on the draft regulations and is holding hearings on 17 to 19 February. It has not given any indication of when the regulations may become final. Telkom, in any event, plans to fight LLU to the death.
According to Miriam Altman, head of strategy at Telkom, the company doesn't believe LLU is the solution to government's problem of trying to reduce communication costs and roll out broadband nationally. She also believes that LLU could be very damaging to Telkom, its national network, and the country.
Altman cites the same reasons stated by CEO Sipho Maseko and the inputs into the process made by the company's regulatory team - competitors will cherry-pick only profitable exchanges, LLU will benefit the rich, not the poor, etc. One of Telkom's major arguments has been how much it spends on its network (billions per year, much the same as the other major operators) and that LLU would compromise its next generation network rollout, force it to increase prices in order to compensate for the loss of high-value customers it expects its competitors to cherry-pick.
"We need to think of the country," Altman pleads, a line of argument that is not likely to gain much sympathy given how badly Telkom treated 'the country' in the past.
In terms of access to any form of local loop (fixed line copper, fixed line fibre and/or wireless access), the network owner has the right to set the price to ensure future sustainability of their own private network services and future investment commitments.Icasa
Altman also says that forcing Telkom to produce a product and then hand it over to competitors to sell is like a company spending R250 million building a mine, taking the product out of the ground and then being forced to give the product to competitors to sell - which is about what happens in many wholesaler-reseller-retailer relationships (sometimes without the 'forced' part).
Telkom, she argues, is being forced to give away its product at cost. This is not strictly true. Icasa has gone to great pains to point out that licensees providing access to local loops should not suffer financial harm. Says Icasa: "In terms of access to any form of local loop (fixed line copper, fixed line fibre and/or wireless access), the network owner has the right to set the price to ensure future sustainability of their own private network services and future investment commitments." Additionally, the draft regulations emphasise that access to the local loop must be on a non-discriminatory basis, and that a licensee must charge a fee similar to that charged to itself or entities under its control.
Icasa had considered an investigation into the ALD a prerequisite for the finalisation of the LLU regulations, and this has now been stuck off the 'to do' list.
The regulations also state that the ECNS licensee requesting access is obliged to pay for any once-off capex costs incurred in providing that access, as well as any billing system-related costs. The regulations require Telkom (or any other vertically-integrated operator) to price transparently and separate out retail and infrastructure services. Licensees that own a local loop must submit a standard price list to Icasa, as well as publish the same on their website.
Regulatory head Alka Sood, acting general executive, Regulatory Affairs, argues that LLU will cost Telkom a lot of money in terms of the investment it needs to ready exchanges for LLU, particularly "if, for example, a competitor only wants one or two lines, the whole exchange still has to be groomed," she notes, which is true. Aside from the provisions outlined above in terms of costs and their recovery, however, in terms of the facilities leasing regulations, licensees may also decline requests that are not technically or financially feasible.
While Altman comments that the regulations purportedly apply to all licensees, 'everyone knows they mean Telkom'. Icasa has gone out of its way to be particularly explicit about the regulations applying beyond the fixed line operator, and to the mobile operators and other ECNS licensees, for example.
As for the expected costs and take-up of LLU by competitor operators, Telkom doesn't have figures, although it is doing a research project on the matter.
Will it refuse outright to unbundle? No, says Altman. "We have a fudiciary duty to do it, but it would be so damaging to Telkom, the national network and the country."
First published in the February 2014 issue of ITWeb Brainstorm magazine.