There is growing mystery surrounding telecommunications regulator Icasa’s plan to begin cracking open Telkom’s copper access network into homes and businesses to the fixed-line operator’s competitors.

TechCentral has learnt that there are intense discussions going on behind the scenes between Icasa and Telkom about the details of how the process of local-loop unbundling will work.

Talks are focused on how Telkom can deal with its so-called “access-line deficit”, where the fixed-line operator does not recoup the cost of maintaining the average line in service through basic telephone line rental. These discussions, it’s understood, have resulted in a delay in the implementation of a precursor to unbundling known as bit-stream access, which Icasa had promised would kick in on 1 November. No new deadline has yet been set.

Telkom’s rivals regard local-loop unbundling as a priority that will increase competition by providing Internet service providers with direct access to Telkom’s “last-mile” infrastructure.

Government originally gave Icasa a deadline of 30 November 2011 to implement unbundling. The authority missed that deadline and instead set itself a new deadline of 1 November 2012 for introducing bit-stream access. This won’t provide Telkom’s rivals with access to its copper but will get them closer to it.

Telkom has warned that intervention by Icasa must take the access-line deficit into account and find a means of compensating the operator for it. The operator says that it effectively subsidises its copper network because basic line-rental fees don’t cover the cost of maintaining the network.

Icasa now says that ensuring that fixed-line access prices are fairly addressed is a necessary precondition to any successful form of local-loop unbundling.

“The authority continues to work with Telkom to develop a mechanism to address the access-line deficit, such that this mechanism has as little impact on all industry stakeholders as possible,” it says in a written statement sent to TechCentral. “This includes evaluating and addressing any unnecessary regulatory burdens that increase the cost of service provision.”

It says that as soon as a “position on the access-line deficit has been concluded”, it will “move forward with a working group on bit-stream services”.

Internet Solutions regulatory director Siyabonga Madyibi says the only information he has received about the process is that Icasa and Telkom have not been able to reach an agreement about the access-line deficit. This, he says, appears to be why Icasa has missed its deadline for introducing bit-stream access.

Internet Service Providers’ Association regulatory adviser Dominic Cull says one of the challenges facing Telkom and Icasa is quantifying the size of the access-line deficit.

“My understanding is that they are now in a position to quantify it,” Cull says.

The amount, he says, will have been calculated according to international regulatory accounting practices, and other markets will have been used as examples because the access-line deficit is not a problem unique to South Africa.

According to Cull, Telkom has estimated that the deficit is in the region of R8,6bn/year. Part of this could be reduced if Telkom addresses its labour inefficiencies, but this is difficult to do because government, its largest single shareholder, won’t support retrenchments.

Cull says unbundling could actually assist Telkom in recovering part of the deficit because it would result in the company putting its telephone lines to use in a “more efficient manner”. However, he says unbundling as a regulatory remedy is “dead”.