Telkom, Neotel to do battle over local loop - TechCentral

Telkom, Neotel to do battle over local loop

Neotel has filed a complaint against Telkom at Icasa

Neotel has fired the first salvo in what could quickly become a ferocious battle over access to Telkom’s copper cable network. TechCentral can reveal exclusively that Neotel has filed a complaint with the Independent Communications Authority of SA (Icasa) against its rival, asking the authority to give it access to the fixed-line incumbent’s local loop.

In a submission to Icasa, dated 23 March, and which includes copies of full correspondence between the two operators, Neotel has set out the reasons it believes it should be given immediate access to Telkom’s “last-mile” infrastructure of copper cables into businesses and residential homes.

A lot is riding on the outcome of Neotel’s submission because it could mean the difference between local-loop unbundling taking place in 2011 and a lengthy, drawn-out process that could take years.

The telecommunications industry has been awaiting Neotel’s complaint to Icasa with bated breath as it represents a litmus test for using facilities-leasing regulations as a way of achieving local-loop unbundling. It’s believed Icasa will use the complaint to force unbundling to happen in the short term, instead of having first to go through a process of developing detailed regulations to manage the process.

Icasa dropped a bombshell on the industry last year when it said Telkom’s copper infrastructure represented an “essential facility”, meaning its competitors could request access, using regulations that were published in 2010.

Essential facilities include any telecoms infrastructure that is required to provide services to customers. Undersea cables and the local loop are specifically mentioned in the Electronic Communications Act, which governs the sector.

In many markets, incumbent operators like Telkom have used their control of this infrastructure to squeeze out competition by charging high prices for access.

Icasa’s facilities-leasing regulations are meant to prevent abuse by dominant players.

Communications minister Roy Padayachie wants the local loop unbundled by November, and if Neotel’s complaint is upheld by Icasa, the process can begin in earnest.

Neotel was always the most likely candidate to test Icasa’s facilities-leasing theory, and it first made a request to Telkom to access the local loop in November 2010.

Telkom's Andrew Barendse has rejected Neotel's request

According to Neotel’s complaint, it has requested that Telkom give it access to two telephone exchanges, one in Benmore Gardens in Sandton and the other in Rosebank, Johannesburg. Within these exchanges, Neotel has requested that certain aspects of the local loop be made available to it, including termination equipment, the main and handover distribution frames, and tie circuits.

It has also requested that Telkom make space in the exchanges for Neotel’s own equipment racks, either in cages or in a separate room. It wants to connect to its own fibre infrastructure located outside the exchanges.

Neotel made the request in terms of processes stipulated in the facilities-leasing regulations.

Telkom, however, appears to be steeling itself for a fight. It has clearly stated that it does not agree that facilities leasing is a means for other companies to gain access to the local loop and has declined Neotel’s request.

In a letter signed by Telkom’s wholesale account manager, Johan Botha, the operator argues that local-loop unbundling is “still enjoying the attention of the regulator, but is some way from being finalised”. He adds that Neotel is acting prematurely in requesting access to the infrastructure.

Neotel made a second and third request to Telkom in December and January, pointing out that the facilities-leasing regulations cover the local loop and that fuller local-loop unbundling regulations are not required.

However, Telkom isn’t relenting. In correspondence to Neotel, it insists that the access its rival is requesting falls under local-loop unbundling, not under facilities leasing.

“The entire purported request for the lease of copper last-mile facilities is a frivolous attempt on the part of Neotel to impress upon Telkom a convoluted interpretation of the facilities-leasing regulations in a manner that gives credence to the erroneous belief that facilities-leasing regulations contemplate the instigation of a regulatory process culminating in the unbundling of the local loop.”

Telkom has long argued with Icasa about the classification of the local loop as an essential facility and pushed the same argument in its responses to Neotel. Its understanding of the legal definition of an essential facility is a facility that “cannot feasibly be substituted”. However, Telkom maintains that the mobile operators have created a substitute, which it calls the “wireless local loop”.

The operator has also slammed Neotel for “persisting in formulating speculative requests which are clearly beyond the contemplation of the applicable regulatory dispensation”.

Icasa has previously indicated to TechCentral that it will apply its mind to Telkom’s argument that the local loop is not an essential telecoms facility.

In a last ditch attempt to get Telkom to reconsider, Neotel sent a letter to Telkom’s group executive for regulatory affairs, Andrew Barendse, on 2 March. “Having exhausted all available means to resolve this request amicably, Neotel offers Telkom one final opportunity to respond favourably to our facilities lease request within the next five working days, failing which Neotel will have no alternative but to refer the matter to the regulator.”

Barendse declined the request two days later, prompting Neotel to file its complaint late last month. An Icasa spokesman was not immediately available for comment. However, it is likely the authority’s complaints and compliance committee will hear the case.  — Candice Jones, TechCentral

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11 Comments

  1. The_Librarian on

    I’m not one for Nee-Tel, but this time I’ll cheer them on.

    Access to the local loop is needed. Expect Telkom to fight back ferociously.

  2. Come on Neotel, we need you to win this fight! Please don’t let us all down again

  3. Well personally I would not fight Telkom on this one. Within the next 10 years, the old last mile would be null and void in anycase. Wireless is the only way to go, stop harassing Telkom over old technologies.

  4. @Chris I think the exact opposite is true – wired connections (copper/fiber) are the only choice for services like triple play, streamed media and high-bandwidth applications, which we’re moving towards rapidly. Wireless can’t come anywhere near to matching wired for sustained throughput for many users in concentrated areas – ie. where people live and work. The thought of having fiber is nice, but the existing Telkom copper infrastructure can deliver 1st world internet to millions of users today, if the infrastructure just got a little more attention.

  5. If I were a betting man, I’d be putting all my money on Neotel. Not because I have an special feelings for them, but because it’s sooooo OBVIOUS that the wired local loop is an essential facility. All Neotel has to do is present some of the reasons that some OECD countries used to declare the local loop an essential facility. If they really want to destroy Telkom, then they could also use the EU’s essential facilities doctrine for persuasive effect…a definite KO argument in my view. Raising the “wireless local loop” argument is also not likely to fly very far as wireless does not generally offer the same functionality.
    Telkom is simply following the standard incumbent mantra: litigate as long as possible to keep them off your turf and you’ll keep making money while you hold them at bay!

  6. Telkom SA stated with the repealing of the old Telecommunications Act and their old licence now new ECNS and IECNS licences all regulatory obligations regarding fixed line services became null and void a week ago at ICASA with Ms Mziza (Regulatory Executive) from Telkom present. I am now amazed that they want to fight giving these facilities to Neotel. Does Telkom really know what Telecommunication and regulations are really all about. What a joke !!!!!!!!!!

  7. i agree with greg
    this is south africa- we cant expect fibre to reach everyone even in 10 yrs and the existing copper is good enough to give us a much better internet IF it got enough attention.
    wireless is not stable enough

  8. Uh, ok Chris, you can wait 10 years for your wireless (for me, not an option, my house/area is the equivalent of a Faraday Cage -_-) while I enjoy jumping on board with a company that has my interests at heart (or even just pretends to) and will actually send a technician to my house within 5 working days…

  9. Telkom is being obstinate in their argument to retain ownership of LLU. Most of this is due the cordial relationship they enjoy with Government. The sad part is that even if Telkom were to win this case, they are doing so at grave expense to ordinary South Africans; and this is when I have a serious problem with both Telkom and Government. I am really keen to understand why Government on the one hand encourages competition as a principle, but on the other does not introduce effective policies to allow for such an environment. Can you imagine if Telkom had “exclusive” rights to RF spectrum how archaic our ICT services would have had been?

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