Local Loop Unbundling, the regulatory process of allowing multiple telecommunications operators to make use of connections from the telephone exchange’s central office to customers’ premises, has been identified by the International Telecommunications Union and the OECD as one of the key elements for introducing true competition to the broadband and ADSL sectors.
Communications Minister Ivy Matsepe-Casaburri said that “I have also taken the policy decision that, given the complexity of local loop unbundling process on the one hand and the urgency for South Africa to enable all operators appropriately licensed to have access to the local loop on the other, the unbundling process in South Africa should be urgently implemented.”
The time frame laid down for LLU to be completed by the Department of Communications drew criticism from many quarters while others feel that it is an acceptable period considering the complexities involved.
“The Authority should, as appropriate, take advantage of the report of the Local loop unbundling committee [headed by Prof Marwala] and its recommendations on the proposed unbundling models. The unbundling process should be completed by 1 November 2011.”
In her 2006 budget vote speech Matsepe-Casaburri appointed Tshilidzi Marwala to chair the Local Loop Unbundling Committee (LLUC) whose task would be to oversee the development and the implementation of our local loop unbundling process and to make appropriate recommendations.
Matsepe-Casaburri further said that the experience learned from other countries in the implementation of LLU is that most issues were resolved through bilateral negotiations between the regulator, incumbent and the new entrants.
According to Wikipedia “LLU is generally opposed by the Incumbent Operators, which in most cases used to be state monopoly enterprises before the telecommunications sector was liberalised.”
The incumbents further argue that “LLU amounts to a regulatory taking, that they are forced to provide competitors with essential business inputs, that LLU stifles infrastructure-based competition and technical innovation because new entrants prefer to ‘parasitise’ the incumbent’s network instead of building their own and that the regulatory interference required to make LLU work (e.g. to set the price) is detrimental to the market.”
“New entrants, on the other hand, argue that, since they cannot economically duplicate the incumbent’s local loop, they cannot actually provide certain services, such as ADSL, without LLU, thus allowing the incumbent to monopolise the respective market and stifle innovation.”
LLU has been implemented in many countries, including the United Kingdom, Germany and a variety of European Union states.