Telkom says the deadline for unbundling the local loop, the “last mile” of copper cables that connects consumers to its network, is “unrealistic”.
Telkom’s chief of corporate governance, Ouma Rasethaba, says there are too many variables to consider for the November 2011 deadline to be met.
Communications Minister Roy Padayachie has told the partially state-owned company — government directly holds 39,8% of its equity — that it must provide access to its copper network to competitors by that date.
Padayachie says the department will work with Telkom and the Independent Communications Authority of South Africa (Icasa) to make it happen in time.
Unbundling the local loop has been hailed by Telkom rival Neotel as the last step to making South Africa’s telecommunications landscape fully competitive.
Telkom’s competitors say providing access to the physical cable infrastructure is the best way of boosting competition in the broadband market.
However, Telkom appears to be resisting the process. “The regulatory process which Icasa must follow to unbundle the local loop is uncertain and debatable,” says Rasethaba.
‘Essential facilities’
However, she says that if the process does go ahead, several issues must be settled first.
First up, Icasa must re-examine “essential facilities” — key national infrastructure such as undersea cables and the local loop are listed in the Electronic Communications Act as examples of such facilities. In many markets, incumbent operators like Telkom have used their control of this infrastructure to squeeze out competition by charging high prices for access.
However, Rasethaba says Telkom is not convinced the local loop should be considered an essential facility since it does not meet the definition in law.
Telkom’s says an essential facility “cannot feasibly be substituted”. “It is Telkom’s contention that the wireless local loop these days is more than a substitute for both voice and broadband communications,” she says. By wireless local loop, Rasethaba is referring to the mobile networks, which provide an alternative to Telkom’s fixed lines.
Even if Telkom concedes that the local loop is an essential facility, Rasethaba says Icasa still has to conduct a market review to check whether the company has significant market power.
Unbundling
Market reviews often take months or even years to complete, which is one of the reasons why Telkom is concerned the November deadline will not be met.
Other factors also need to be taken into account, says Rasethaba, including a review of whether unbundling will have any impact on the market.
“There is much uncertainty in the regulatory process that should or could be followed to deliver local-loop unbundling, assuming that a legitimate process exists in the first place,” she says.
Aside from regulation, Telkom will have to review its products and services and will have to redevelop them to suit a new environment.
Rasethaba says issues such as who has access to Telkom’s exchanges and who is responsible for network maintenance must still be addressed. “Naturally, these will take time and there are many variables in this regard,” she says.
Though Telkom has not said it will actively challenge local-loop unbundling, it is likely that it will take up these issues with Icasa, which in turn could delay unbundling beyond 2011. — TechCentral