The Independent Communications Authority of South Africa (ICASA) released their findings of the inquiry into the ICASA framework for introducing Local Loop Unbundling (LLU) on 30 November 2011, but naked ADSL did not feature in their findings.
When quizzed about naked ADSL, ICASA said that it believes that naked ADSL is a function of Telkom’s access line deficit, and that it therefore makes no sense to introduce a naked ADSL service at a price which is higher than that which consumers are currently paying.
It is curious to note that this statement is a step away from the regulator’s previous view that Telkom should offer consumers naked ADSL.
When questioned about LLU and naked ADSL on 22 June 2011, ICASA councillor William Stucke said that the regulation 10(3) of the Electronic Communications Facilities Leasing Regulations clearly states that:
“Charges for electronic communications facilities must be sufficiently unbundled so that an electronic communications facilities seeker does not have to pay for anything it does not require for the requested electronics communications facility or facilities”.
Stucke added that ICASA sees Telkom’s copper local loop as an electronic communications facility, which means that ISPs should not have to pay for Telkom’s bundled voice and ADSL service.
It is not clear why ICASA has not pushed for a naked ADSL service considering that most telecoms players indicated that they are willing to contribute to an access line deficit recovery scheme.
ICASA plans to convene an industry working group to establish an access line deficit recovery scheme in February 2012, which may determine the future of a potential naked ADSL service in South Africa.
MWEB ISP CEO Derek Hershaw said that ICASA has indicated that there is an ‘access deficit’ and that this can only based on information provided to them by Telkom at the hearings.
“We would have preferred that they held off on this decision until a proper market study has been conducted to determine the true cost model for an efficient operator. If and when that study does happen then we are still optimistic that there will be a strong case for naked ADSL,” said Hershaw.
Hershaw added that Telkom’s recent interim financials show that they have 675,000 pre-paid phone (voice) customers. This is out of a total of 4,073,000 installed and active fixed lines.
“The base cost for the pre-paid service is about R72 (according to the price list on Telkom’s website – I stand under correction here because that price list is so vast that it’s not easy figuring out what the various services actually are!). The line rental charge for a residential post-paid service is about R140. So a post-paid voice customer pays R68-00 a month more for the line rental,” said Hershaw.
“If there really is an under-recovery on their fixed lines why would Telkom even offer a pre-paid service?” Hershaw asked.
“In effect the post-paid customers are cross-subsidising the pre-paid customers to the tune of at least R45.8 million per month (675,000 X R68) or R550 million per annum. Why should the pre-paid base (16.6% of total base) be subsidised to this extent?”
“Alternatively, why does Telkom not allow the pre-paid base to get ADSL? The additional money you make off the ADSL line rental will surely go some way to wiping out their so called ‘access deficit.’”