Monday, June 20, 2011

South Africa - Regulator will delay local loop unbundling beyond 2011 because of problems at Telkom

[the new age] An intense brawl between telecom operators and The Independent Communications Authority of South Africa (Icasa) is looming as analysts warned this week that the regulator would not meet its November 2011 deadline for local loop unbundling (LLU).

Spiwe Chireka, who is the programme manager for telecoms at the Industrial Development Corporation, said it would be a mammoth task for Icasa to meet the deadline and that operators were “likely to create a stink”.

LLU is a process that covers a series of regulatory measures intended to provide new operators with rights to use the Telkom-owned copper based local loop in a competitive environment.

Unbundling is aimed at increasing innovation, enhancing the quantity and quality of services, and reducing prices paid by end consumers. It will in addition, increase business opportunities.

The LLU is now being used by Telkom to offer telephony and internet services.

According to analysts, unbundling of the loop will offer new players access to Telkom’s network, leading to greater competitiveness and a reduction in prices.

Other networks in the country are paying Telkom a fee to access the loop.

Were it to be opened, Telkom would lose its monopoly over the last mile and would therefore take a cut in its revenue.

“I don’t think the unbundling will be done by November until Telkom’s performance improves. The other operators, like Vodacom and MTN, will certainly complain as they have been promised the November deadline,” Chireka said.

Chireka is of the view that Telkom’s current position will probably be used as a reason for further Icasa delays.

Telkom on Monday acknowledged that LLU would impact on its bottom line.

“The risk that LLU poses to Telkom’s profitability is dependent upon the form and details of implementation that will be imposed by Icasa, neither of which are known at this point in time,” the operator said in a statement.

Telkom went on to say that it was not the same company it was when LLU was first considered and the market had changed significantly, particularly where access to technology was concerned. Chireka agreed with this view.

The regulator, Icasa, however, is adamant that it will proceed with its aim to meet the November deadline.

“According to us we are going ahead, we are publishing a discussion document some time this week which will be passed on to role players for input,” said Maseka Paleka, of media and stakeholder liaison at Icasa.

Telkom CEO, Nombulelo Moholi, said the parastatal had analysed various LLU options and would continue to engage with key stakeholders.

“Telkom has neither the agility to seize market opportunities nor the ability to absorb competitive pressures ad infinitum,” said Moholi.

Moholi warned that if LLU proceeded Telkom would bear the brunt of the process, saying, “Therefore, a step change in the way we invest and operate in this business is vital.

“Firstly, we have to aggressively tackle the cost conundrum. Labour support is vital in this area.

“Secondly, we need to grow our agility in order to increase our resilience.

“Operational agility means designing the right business structures and processes to spot and execute quickly on revenue and cost opportunities,” concluded Moholi.

According to another analyst, Lucien Pierce, who is a partner at Phukubje Pierce Masithela Attorneys, writing about LLU back in 2008, said that whoever owned and controlled the local loop, effectively controlled the provision of voice and broadband services to customers.

With the growth of data services and increase in demand for broadband services, the LLU will be a fiercely contested terrain by South African operators.

Icasa ‘will delay loop unbundling’

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