[By Candice Jones]

The Independent Communications Authority of SA (Icasa) is taking a bold gamble in its efforts to unbundle the local loop, the last mile of Telkom’s copper cables that connect consumers to the fixed-line network.

The authority is hoping facilities-leasing regulations, in place since last year, can be used to allow other licensed telecommunications companies access to Telkom’s last-mile network.

The process is likely to prove controversial. However, it may help promote competition. Many countries that have done it, including Australia and the UK, have enjoyed a significant boost in broadband roll-out.

More competition in the SA broadband market is urgently needed, so it’s hard to argue against unbundling. Until other service providers have access to Telkom’s exchanges, broadband prices will remain higher than they could be.

The plan to force Telkom to allow access to its last-mile infrastructure has been in the pipeline for about five years already, though, until last year, there had been little progress on the matter.

In 2007, former communications minister Ivy Matsepe-Casaburri set a deadline of November 2011 for full unbundling. At the same time, she appointed an oversight group to look into it, which published a paper on its economics and viability.

But has Icasa left the process too late? When one considers that the UK’s fixed-line incumbent, BT Group (formerly British Telecom), started unbundling its local-loop assets in the 1980s and had only managed to provide access on 105 000 lines by the turn of the century, are we expecting too much?

After years of nagging, BT’s regulator, Ofcom, had to change BT’s licence conditions to get it to comply with unbundling requirements.

Icasa believes it has the answer to a speedier process in the facilities-leasing regulations it published in 2010.

When the regulations are read with the legislation that governs telecommunications in SA, Icasa appears to have a strong argument.

In terms of the Electronic Communications Act, the local loop is considered an “essential facility”. Effectively, essential facilities include any bit of telecoms infrastructure that is required to provide services to customers. Undersea cables and the local loop are specifically mentioned in the act.

Icasa’s regulations were meant to prevent Telkom — or indeed any operator — from abusing its position in the market, and ensure that services leased to competitors are done so transparently.

As an essential facility, the local loop falls under the facilities-leasing regulations and must be made available to operators if requested.

There’s a problem with this approach, though: in many other countries that have tried to use facilities-leasing regulations, instead of a full set of specific unbundling rules, it has not worked out all that well.

So how is Icasa’s plan different? Well, for one thing, it says it’s not putting all its eggs in one basket. If the process works, it will provide supporting documents setting out in detail what exactly telecoms licensees will have access to. If it doesn’t work, Icasa will work on a full set of unbundling regulations.

Icasa’s plan should face its first test soon. Telkom rival Neotel has already made a request for access to the local-loop. Neotel says Telkom has turned it down.

The company has not yet decided how it will approach the situation, but it could create a test case if it lodges a formal complaint at Icasa against Telkom’s refusal to grant it access. If it does this, the authority will be able to test whether the facilities-leasing regulations are sufficient to manage unbundling.

If Icasa succeeds, it will release a document detailing exactly what the local loop involves, and which aspects other operators will be entitled to use.

Assuming this scenario plays out in Icasa’s favour, it’ll mean it’s able to meet the November deadline set down by government for full unbundling to take place.

It will also mean that the regulator will be able to meet the minister’s deadline of November by avoiding several drawn-out market investigations.

However, like incumbents in other markets, Telkom is likely to fight its regulator every step of the way. Remember, the operator has an exceptionally well-resourced legal team at its disposal.

Already, Telkom has hit back, saying wireless local loops — operated by companies such as MTN and Vodacom — provide an adequate alternative to the fixed local loop for both voice and data services.

Icasa is ready for the fight and has assigned a top team of councillors to the matter, many of whom served on the sub-council that dealt with wholesale call termination rates.

Though it is a gamble, Icasa appears prepared for battle. Advanced preparation could prove to be the loaded dice in its pocket.