Too little, too late?

By Nicola Mawson for Telkom
Johannesburg, 23 Jan 2007

Government has set up a task team to investigate the local loop unbundling process, even as the second national operator plans to roll-out without it.

The Department of Communications confirms an advisory committee has been set up with the aim of developing a strategy to unbundle the local loop.

The committee should deliver a preliminary report on the matter to communications minister Ivy Matsepe-Casaburri within six months, it says.

However, a Neotel spokesman says the operator is not waiting around for the local loop to be unbundled. "We have plans for alternative access networks, including wireless and fixed-line access."

Diverse skills

The local loop unbundling advisory committee, chaired by Dr Chilisi Mawala, consists of eight members who have expertise in various fields such as telecommunications, legal, engineering, auditing and economics, says communications department spokesman Albi Modise.

"The reason there is a spread of expertise in the committee is because the issue of unbundling the local loop is not just about making it easier for telecoms stakeholders to provide services, it's also about the affordability of those service," Modise says.

Following its first meeting in December, the committee is reviewing potential models that could be applied to the South African telecoms environment, he notes.

The committee will consider issues such as models that may be appropriate for SA, suitable time frames as well as the potential impact on telecoms stakeholders.

The concept of a committee was first mooted at a colloquium in July 2005.

Mike Silber, a consultant with Michalson Attorneys, says the legislation is unclear regarding time frames for unbundling the local loop and is dependent on the Independent Communications Authority of SA's (ICASA's) decision on interconnection and facilities leasing.

He adds wireless technologies make local loop unbundling less critical than 10 years ago, as it allows suppliers to "provide local loop infrastructures more cost-effectively".

"To be honest, I think some people have pretty much given up on local loop unbundling happening soon, and are looking at wireless options, which creates a scenario where we may not have to wait for government to unbundle the local loop," he says.

Complex process

Unbundling the last mile between the exchange and the end-user is a complicated process, says Communications Users Authority of SA spokesman Ray Webber. "It's easy to stand on the sidelines and say yes, let's unbundle the local loop, but in reality it is a very difficult thing to implement."

If progress is made in government's move to unbundle the local loop, that is to be welcomed, says Webber. However, he cautions stakeholders not to expect giant steps to be taken, as unbundling the local loop is a complex matter.

Neotel says a "free" last mile will aid competition in the sector and it is supporting ICASA to unbundle the local loop. "Hence, while anticipating the availability of competitive local loops, we are not relying on this alone. We have plans for alternative access networks, including wireless and fixed-line access."

In December, Neotel MD Ajay Pandey noted that while there was no clarity with regard to local loop unbundling, he hoped some light would be shed on the matter this year. "Until then, we won't use Telkom's last mile," said Pandey. He added that the second national operator would launch despite the lack of access to the last mile.

Neotel's Web site states it intends "delivering basic voice and Internet services using various last-mile technologies, depending on the requirements of the customer". It says it has "already started planning and deploying last mile infrastructure," but will, subject to regulations, leverage local loop unbundling to reach customers "who prefer using over their existing connections".

Telkom's argument

Towards the end of 2005, Telkom indicated it was opposed to the unbundling of the last mile. Gabriele Celli, then acting group executive of regulatory and public relations, said unbundling the loop would be economically unviable.

"Currently, the rental that Telkom charges to its customers for using the local loop is below the cost of providing and maintaining it.... Hence, either Telkom would have to make the loop available to competitors at below cost, which would be economically very unsound and unreasonable, or it would make it available at a cost-based price higher that what it charges customers, which would defeat the purpose of unbundling the loop."

In addition, Telkom contended unbundling the local loop would do little to increase fixed-line penetration, and managing a shared resource is complex, and may result in disputes among the operators, and reduced service levels.

"In general, unbundling of the local loop has some advantages in a mature market, where additional network roll-out is not an issue, and tariffs are balanced so that the incumbent can recover its economic costs," Celli said at the time.

However, Webber argues that while the infrastructure may belong to Telkom, SA's taxpayers paid for it when the operator was still a fully-fledged state entity.