Cheap call, broadband enabler
|September 7, 2005|
In response to strongly worded statements from government at the weekend on the high cost of telecommunications in South Africa, fixed line incumbent Telkom has warned that forcing it to free up access to the last mile could deter future capital expenditure.
Responding in an emailed statement, Telkom said that while unbundling the local loop – also known as the last mile and referring to the copper that connects homes and offices to the backbone of a telecoms network – would contribute to increased broadband penetration, “we do not believe that it will contribute to an increase of investment in infrastructure.”
The call to make this last mile available to other operators at affordable rates came from director general in the department of communications Lyndall Shope-Mafole, speaking at the Presidential International Advisory Council on Information Society & Development. Shope-Mafole was quoted by Bloomberg as saying the unbundling of the local loop was critical to the introduction of competition and lowering costs. She said the high telecoms costs were one barrier to the country achieving its targeted growth rates of 6%.
Communications Minister Ivy Matsepe-Casaburri also reportedly said recent price cuts by Telkom and Vodacom were not enough, and government could use tighter regulations or issue new licenses to drive down costs.
Speaking on Moneyweb Radio, Africa Analysis telecommunications analyst Dobek Pater described the possible unbundling of the local loop as a “competitive enabler”.
Pater said making Telkom’s access network available affordably to other operators would “certainly liberate the market in a sense; that more competition will now be able to come and probably be able to generate profits and sustainable operations.” But, he warned that a number of new operators would also fail and customers would then go back to the incumbent. Pater used the example of the UK market, where opening it up to competition hasn’t necessarily changed the market structure. Twenty years on, British Telecom still has roughly 80% of the retail market.
Asked what the unbundling thereof would mean to Telkom, Pater said given its monopoly over the local loop – the SNO already has a fibre optic network backbone built by Transnet and Eskom Telecoms, but would still have to build its access network – Telkom would have to level the playing field, making its access network accessible to other service providers to use at a reasonable cost. He said this was likely to be at a wholesale rate, plus some margin to be determined by Icasa in the future.
“To Telkom it would mean they would experience a lot more competition in a space where it plays a very monopolistic role still, particularly in the small business and residential sector and possibly losing some revenue, primarily voice revenue, said Pater.
He said the access network was undoubtedly the most expensive part of building a network from scratch, and as a result, it would probably cost the second network operator (SNO) several billions of rands to do so.
Speaking on Moneyweb Radio when the SNO shareholders finally signed their shareholders agreement in mid-August, CEO Karl Socikwa said although it would not be an entirely greenfields operation, it would still have to invest billions. The SNO plans to begin by offering wholesale-type services to corporates. It has said the consumer offering would be some way off as it would initially have to lease the last mile infrastructure from Telkom and the timing would depend on how accommodating it was. It will also investigate using wireless infrastructure for the last-mile.
Telkom says the telecommunications act already provides the right for the SNO to access Telkom infrastructure for two years from licensing. The act also provided that there wouldn’t be any local loop unbundling for the first two years of operation of the SNO.
But, Pater said in terms of the draft Convergence Bill, the SNO would not be limited to using the local loop for two years. It could take longer to roll out its own access network if it felt this to be more financially prudent.