Telkom to make local-loop investment despite unbundling risk
Despite rising pressure to unbundle the local loop in a bid to increase domestic fixed-lined telecoms competition once the second network operator (SNO) is licensed, incumbent monopoly Telkom is moving ahead with plans to shorten the distance from exchange-to-customer as part of efforts to improve the ADSL user experience.
Owing to geographical and legacy-installation factors, South Africa has a relatively long local loop of about 5,5 km, which compares unfavourably to a number countries in Europe, for instance, where the copper-wire loop from the exchange to the end user is closer to 2 km.
The overlay investment to deliver broadband-over-copper is, therefore, less effective, leading to lower-quality ADSL delivery and greater customer dissatisfaction.
Chief Operating Officer Reuben September tells Engineering News that Telkom is well aware of this shortcoming and is finalising a shortlist of contractors to support its loop-shortening ambitions using fibre and other technologies.
“We are in the process of selecting suppliers for the concept, and, as is normally the case, we are likely to select more than one supplier as part of our risk-mitigation policy. When we select the suppliers, it will not be on price alone, but also on their record elsewhere in the world,” September reveals, adding that the tender has been developed for the concept as a whole rather than for a specific project.
No specific budget has been set aside for the initiative, with projects to be evaluated on a case-by-case basis, and delivered in line with customer demand.
It is likely that high-density-demand areas will be the first beneficiaries, as Telkom is likely to build the investment case around what it calls 'centres of gravity', where lease-line facilities or data networks are already deployed.
September admits that proposals to accelerate the unbundling of the local loop raises the associated risks, but points out that current legislation only provides for local-loop unbundling two years after the SNO has been licensed. There is mounting pressure, though, to bring that liberalisation forward.
“Nonetheless, we have taken the decision to move ahead for the sake of our customers and our shareholders. We have decided not to be distracted by the fact that we might be creating a greater opportunity for competition in the future as we have to do what we have to do for the business,” September avers.
Should this capital investment be made, users can anticipate higher-speed and higher-quality ADSL delivery, while Telkom hopes to accelerate broadband penetration and reduce customer dissatisfaction.
The company has set an internal target of 15% to 20% broadband penetration, which is lower than developed-economy norms of 25%, but well up on the current two-per-cent level.
It is also seeking to lessen its revenue dependence on voice as new fixed and mobile solutions eat into that market and has set its sights on an expanded share of the data market.
ADSL will be at the forefront of these efforts, with Telkom considering a range of options to lower the costs of the offering.
CEO Papi Molotsane indicates that the company has noted that the ADSL market is highly 'price elastic', and that it will, therefore, continue to pursue competitively-priced offerings, one of these being a lower-cost self-install package. In the six months to September 30, ADSL services surged by 161% to 95 290, and the utility has set a target of 750 000 to 1-million ADSL installations within the next three years.
Despite rising pressure to unbundle the local loop in a bid to increase domestic fixed-lined telecoms competition once the second network operator (SNO) is licensed, incumbent monopoly Telkom is moving ahead with plans to shorten the distance from exchange-to-customer as part of efforts to improve the ADSL user experience.
Owing to geographical and legacy-installation factors, South Africa has a relatively long local loop of about 5,5 km, which compares unfavourably to a number countries in Europe, for instance, where the copper-wire loop from the exchange to the end user is closer to 2 km.
The overlay investment to deliver broadband-over-copper is, therefore, less effective, leading to lower-quality ADSL delivery and greater customer dissatisfaction.
Chief Operating Officer Reuben September tells Engineering News that Telkom is well aware of this shortcoming and is finalising a shortlist of contractors to support its loop-shortening ambitions using fibre and other technologies.
“We are in the process of selecting suppliers for the concept, and, as is normally the case, we are likely to select more than one supplier as part of our risk-mitigation policy. When we select the suppliers, it will not be on price alone, but also on their record elsewhere in the world,” September reveals, adding that the tender has been developed for the concept as a whole rather than for a specific project.
No specific budget has been set aside for the initiative, with projects to be evaluated on a case-by-case basis, and delivered in line with customer demand.
It is likely that high-density-demand areas will be the first beneficiaries, as Telkom is likely to build the investment case around what it calls 'centres of gravity', where lease-line facilities or data networks are already deployed.
September admits that proposals to accelerate the unbundling of the local loop raises the associated risks, but points out that current legislation only provides for local-loop unbundling two years after the SNO has been licensed. There is mounting pressure, though, to bring that liberalisation forward.
“Nonetheless, we have taken the decision to move ahead for the sake of our customers and our shareholders. We have decided not to be distracted by the fact that we might be creating a greater opportunity for competition in the future as we have to do what we have to do for the business,” September avers.
Should this capital investment be made, users can anticipate higher-speed and higher-quality ADSL delivery, while Telkom hopes to accelerate broadband penetration and reduce customer dissatisfaction.
The company has set an internal target of 15% to 20% broadband penetration, which is lower than developed-economy norms of 25%, but well up on the current two-per-cent level.
It is also seeking to lessen its revenue dependence on voice as new fixed and mobile solutions eat into that market and has set its sights on an expanded share of the data market.
ADSL will be at the forefront of these efforts, with Telkom considering a range of options to lower the costs of the offering.
CEO Papi Molotsane indicates that the company has noted that the ADSL market is highly 'price elastic', and that it will, therefore, continue to pursue competitively-priced offerings, one of these being a lower-cost self-install package. In the six months to September 30, ADSL services surged by 161% to 95 290, and the utility has set a target of 750 000 to 1-million ADSL installations within the next three years.
