Local-loop unbundling comes 'too late' - TechCentral

Local-loop unbundling comes ‘too late’

‘Too little, too late.” This was the general reaction of Internet service providers, telecommunications companies and telecommunications analysts last week after the regulator released its discussion document on unbundling the local loop.

The regulatory process, which a ministerial directive ordered the Independent Communications Authority of SA (Icasa) to complete by November this year, has been delayed for years. In an apparent attempt to save face last week, Icasa insisted it would meet the deadline by finalising its regulations on local-loop unbundling.

The discussion document, which quotes from the policy directive of the late former communications minister, Ivy Matsepe-Casaburri, stipulates that the unbundling process should be urgently completed and “implemented” by 2011. It is anticipated that Icasa will not meet the implementation deadline — after a barrage of questions from industry players and the media at a briefing on the discussion document this week, it appeared to shift the goal posts.

Ovum Telecom’s senior analyst Richard Hurst said that the longer Icasa took to unbundle the local loop, the less consumers would benefit. “By the time the government and Icasa put a gun to Telkom’s head and say unbundle the local loop now, they will say you can have it — it’s worthless,” said Hurst.

Some stakeholders and analysts told the Mail & Guardian that the unbundling could take up to two years to complete, depending on the model Icasa uses. Icasa is considering four different models, which are detailed in its discussion document. Other industry stakeholders said that, if all operators played ball and did not stall the process with legal challenges, which were common in the regulation of the broadband and telecoms sector, unbundling could be achieved within months.

Neotel's Angus Hay

Telecoms analyst Dave Gale said that you had to look at the theory and the practice of unbundling. “In theory, it is very important to unbundle the local loop because it makes available the network to Telkom’s competitors,” said Gale. “Whether it is practical or profitable is another story. It’s a hell of a lot of work and I’m not sure if the real returns will be worth it.”

Another analyst, who would comment only on condition of anonymity, said that, with Icasa’s poor track record, he doubted whether unbundling the local loop would have any effect on any of the major players. “Pricing will be the big issue,” he said. “What is it going to cost Telkom to provide access to the local loop?”

The analyst also said that Telkom had previously argued it had an “access deficit”, which arose when an operator’s average access charges were not set high enough to cover the provision of the service. Telkom CEO Nombulelo Moholi was reported as saying that to keep the average fixed-line service it cost about double the R133,30/month it charged for line rental. She said the shortfall amounted to a total of R2bn to R3bn a year.

Icasa mentions the access deficit in its discussion document, but Icasa councillor Thabo Makhakhe said in response to a question that Icasa had no figures to establish the access deficit and was hoping that it would emerge from the unbundling. Neotel’s head of strategy, Angus Hay, said regulators around the world had learned to deal with access deficits and often the focus came down to efficiencies.

“You look at an operator in its current state and you look at the efficiencies of the operator and you say next year you need to be 10% more efficient,” said Hay. Of the four unbundling models proposed by the regulator, Neotel favoured the full unbundling of the local loop, he said. “The four models shouldn’t be seen as a shopping list for operators. Neotel would not consider this process successful if the full local loop was not unbundled.”

Gale agreed and said: “For the local loop to be properly unbundled, Icasa needs to give access to all Telkom exchanges around the country on a 24/7 basis.” Telkom issued a brief comment after the release of the discussion document and said that it had not had time to review the document. “The company is in the process of examining the document and will comment on the matter at a later stage,” it said.  — Lloyd Gedye, Mail & Guardian

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