Telkom resumes least-cost routing battle

By Phillip de Wet for Telkom
Johannesburg, 26 Feb 2003

Telkom`s two-year battle against what it calls the illegal circumvention of its network resumed this week with a court hearing on least-cost routing (LCR).

LCR, sometimes known as corporate connect, uses what is essentially a cellphone plugged directly into a company PABX to route calls to cellphone numbers directly to the cellular networks. Companies have reported savings on their telephone bills ranging from 10% to 40% after implementing LCR because they avoid using the Telkom network for such calls.

The savings mean lost revenue for Telkom, and in August 2000 the company started legal proceedings against MTN, Vodacom, a group of service providers and manufacturers such as Nokia which supply the hardware used for LCR. Telkom asked for an interdict to prevent the use of LCR and sought damages for what it described as an infringement on its exclusive rights.

Despite Telkom`s request that the matter be treated as urgent, the case dragged on with little progress made. Late last year Telkom had to back down from threats to disconnect the telecommunications equipment of companies using LCR after the Independent Cellular Service Providers` Association entered the fray.

The case returned to the Pretoria High Court this week, but in the interim Telkom has reached an out-of-court settlement with Vodacom, of which it owns 50%.

The agreement has raised eyebrows, as it seems to allow Vodacom to continue providing least-cost routing while Telkom at the same time continues to push for the service to be declared illegal. The terms of the agreement between the companies has been kept secret, with Telkom refusing to comment on it and Vodacom`s spokesman unavailable for questions on the issue.

However, the agreement is believed to put no restrictions on Vodacom`s ability to offer LCR while imposing little or no monetary damages in return. At the same time, Telkom is pursuing its case against the remaining companies, including MTN, claiming that LCR is illegal and demanding compensation for the revenues it has lost as a result of the service.

The court action against the remaining companies will not be concluded soon. The High Court is today expected to order Telkom to notify other interested parties of the case to enable them to join in the matter. Only then will the matter proceed, with few willing to speculate on how long it may last.