ADSL cost breakdown: where to cut prices

MickeyD

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IThe LLU carrot and stick? If I was Telkom I'd simply wait for such an immense Capex spend to take place and then open up the last mile, making their infrastructure somewhat redundant. Or is this too simplistic an analysis?
It's moot now that the writing is on the wall for the nationalisation of Telkom.
 

chrisc

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ICASA, Telkom, Sentech are all part of the dysfunctional Department of Communications, who have proved over and over that they cannot get it right, and just talk about what ought to be done, but do not have the balls to carry it out
 

Tick

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If it was so profitable why have the other network operators and/or ISPs (including neotel) not started rolling out their own ADSL networks?
FFS, the reasons have been hammered out ad nauseum on these forums.
 

abandonallhope

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I'm not going to pen a wiki entry here.

Here's a link posted by kilos a while back that explains it quite simply: http://www.kitz.co.uk/adsl/equip.htm

Note that it is pre-IMAX and Metro-Ethernet ... but it will suffice for illustrative purposes.
What part of that graph represents the physical ADSL part ? Which, as far as I can see, would involve the insane logistical effort to roll out, and is the bone of contention in the LLU.

There wouldn't be a need for an essay, it can be described quite shortly in general terms. Cool graph though, thx.
 

MickeyD

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What part of that graph represents the physical ADSL part ? Which, as far as I can see, would involve the insane logistical effort to roll out, and is the bone of contention in the LLU.

There wouldn't be a need for an essay, it can be described quite shortly in general terms. Cool graph though, thx.
That is the contentious issue raised at the LLU hearings and the stumbling block to naked ADSL.

iirc the ISPs would prefer access at the DSLAM level, with the cable access side residing in a single entity that will lease it to the various network operator at a regulated tariff.

Telkom, it would appear, rather want to offer their IPStream product that some ISPs are willing to use as a short term, temporary solution pending full LLU. Here's another interesting kilos' find: http://www.iweek.org.za/wp-content/uploads/2009/09/14.Richard.Majoor1.pdf
 

Fishzn

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Who said anything about profitability in relation to other SPs? I was mentioning the stranglehold which Telkom has had over the market - fair enough - the ADSL network has been built and maintained by them but surely the pricing which they've charged over the years for both end-users and ISPs to utilise the network have been exorbitant! I'm not entirely sure(as I don't have access to the figures) but was it neccesary for Telkom to charge such heavy prices for access to ADSL over the years? Have they not exploited us?

You can rest assured that if Seacom had not been built - we'd all still be on SAT/3 paying huge amounts for data. That was an area that Telkom had a strangehold on for years until Afrihost, Seacom etc. changed the market.

As for access to the copper I have no access to the figures relating to provisioning of the line but one can only assume that we are paying a fair amount of money for ADSL access - a figure that Telkom is not dropping but actually raising!

It may not be feasible for other network operators do roll out their own ADSL networks due to the relatively limited population coupled with the fact that the wireless alternatives thin the market out even further but that does not mean that Telkom should strangle the market. Telecoms is about profit but it is also a core service in a country - and Telkom has limited this country for years due to their pricing and stance in the market. It hurts more especially in a country that has limited fixed line providers!
 

Paul Hjul

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But LLU shouldn't be exclusively about ADSL but rather about seeing the physical components which make up a local loop being made available to competition to see electronic communication network builders assembling networks using each others physical equipment.

The truth is that Telkom has built a network composed of various physical facilities which it almost universally owns. In terms of the ECA as the owner of network infrastructure it is compelled to act as a landlord leasing that infrastructure to other network operators. The emphasis here is on lease (facilities leasing) not giving, the guys have to pay. The fact is that Telkom as a corporate entity has pretty much funded its own infrastructure we can haggle about the true value of the infrastructure at the time of corporatization and the true scope of liabilities but the basic principle remains as does the extent to which they have reinvested billions in infrastructure.

My guess is that LLU through mandatory facilities leasing would result in four "ADSL networks" - (1) Telkom, (2) a branded network of either Vodacom or MTN, (3) a Naspers group ADSL network (probably MWeb branded), (4) either Neotel or an ISP consortium. The main lessor would be Telkom who would have to look from a business point of view how best to operate as a backend of the network and may end up forming a wholesale/openreach entity (to a greater extent than they already have). The pressure to deliver products for providers on their network would see Telkom roll out bitstream products.
In the medium term planning for sub-loop unbundling which is subject to the same rules will probably act to see Telkom acting as lessee of facilities. So if Vodacom decides to roll out infrastructure within a gated community, Telkom is able to secure access and rents a rackspace of whatever form to plug into the network, consumers can choose which network operator to use (and by extension whose network they are on). The rolling out of MSANs by Telkom will make them quite a powerful operator. All of the operators will probably account for approximately 70% of the monthly cost of ADSL based access (with 3G that figure is currently 100% no?) from consumers. The point though is that ISPs will make their money by offering internet services - hosting services, data backup etc ... The IPC costs are where the travesty lies at this stage and the fact that ISPs are not able to leverage the market - and aren't being used to maximize facility use.

The Line Access Deficit and cost of maintenance on the last mile of copper will mean that Naked DSL will have an entry price of at least R350 per month. Whether Telkom will ultimately split its wholesale operations and to what extent copper will be depreciated or replaced by networks with fibre or other technology doesn't change the fact that unbundling the local loop is mandated by our law. ISPs will decide who to buy connectivity to end users from and how close to the local loop they should roll out infrastructure and there can be competition for the best model. Apart from any reductions following efficiency there will be an entry level for using ADSL in terms of an access price, but local line owners (Telkom mostly) will lease out lines between an exchange point and a customer premises to licence holder and imaginative ways will emerge to fund the line.
At the moment ISPs have little incentive to compete in the local infrastructure setup and it is easy to simply blame Telkom's monopoly.

What also comes into the equation is that the networks (built using each others network facilities) will have traffic needing to enter each others networks and settlement free peering will make business sense and it will be in Telkom's interests to open the facilities at which Telkom networks can share traffic as a South African Internet Exchange.
 

abandonallhope

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That is the contentious issue raised at the LLU hearings and the stumbling block to naked ADSL.

iirc the ISPs would prefer access at the DSLAM level, with the cable access side residing in a single entity that will lease it to the various network operator at a regulated tariff.

Telkom, it would appear, rather want to offer their IPStream product that some ISPs are willing to use as a short term, temporary solution pending full LLU. Here's another interesting kilos' find: http://www.iweek.org.za/wp-content/uploads/2009/09/14.Richard.Majoor1.pdf
And I was simply saying that for ISP's to roll out their own "ADSL network" IE the physical ADSL access part, would be a basically insurmountable project. BTW you still haven't pointed out exactly what you understand in the term "ADSL network".

And since Telkom used to be 100% government owned, and a government doesn't make any money, my conclusion is that Telkom's network was built with tax payer's money, and it wasn't built in a day. Can you imagine the Telkom of today being tasked with building an ADSL network from scratch ?
 

MickeyD

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And I was simply saying that for ISP's to roll out their own "ADSL network" IE the physical ADSL access part, would be a basically insurmountable project. BTW you still haven't pointed out exactly what you understand in the term "ADSL network".
Ok.. see your point. In those terms it will only mean the DSLAM/IMAX and splitter required at the MDF. All transport (backhaul) and aggregation devices would be required regardless if there was a DSLAM or not, as there would still be a technology in place to service customers' data needs, e.g. VDSL via MSAN/ISAM devices. It excludes the copper network.

And since Telkom used to be 100% government owned, and a government doesn't make any money, my conclusion is that Telkom's network was built with tax payer's money, and it wasn't built in a day. Can you imagine the Telkom of today being tasked with building an ADSL network from scratch ?
Telkom (or the P in P&T) has always made money and has always been a nett contributor to the national Treasury. In earlier years they were self funded, although they had to submit their Capex/Opex budgets to Parliament for approval (pre-1991). ADSL was rolled out after 1991... and was self funded. The benefit was that they had state guaranteed loans and bonds.
 

Paul Hjul

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Telkom (or the P in P&T) has always made money and has always been a nett contributor to the national Treasury. In earlier years they were self funded, although they had to submit their Capex/Opex budgets to Parliament for approval (pre-1991). ADSL was rolled out after 1991... and was self funded. The benefit was that they had state guaranteed loans and bonds.
Unfortunately the view that Telkom's network was built by and belongs to the government is widely held both by Telkom's opponents and by government.

As I have said before to argue that Telkom's network was taxpayer funded and should belong to the taxpayer is nonsense. The SA government has never been keen to spend money on anything that doesn't come with gravy. Although IIRC MPs get discounted rates on their additional landlines.

The real benefit Telkom has had at the expense of the South African person is that they had a state enforced monopoly and the ability to dig up trenches and so on. This monopoly was largely protected in exchange for Telkom voilating best business practice but looking at things from a purely business point of view being able to derive profit from a monopoly and have certain inefficiencies and have to do little stupid things (like BEE compliance). If it were not so everybody would abandon their patents.

To a large extent Telkom is little different from De Beers except that De Beers performance is measured on tax revenue and so it could do a lot better.

All ECN licence holders have a state licence and benefit particularly the individual licence holders. In exchange for the ability to dig trenches, to lay cables, to use the radio spectrum to the exclusion of others etc ... they choose to operate in a regulatory framework which imposes facilities leasing between themselves. It would be exactly the same as designating a town where there is compulsory non-discriminatory leasing at market rates to anybody who meets the potential landlords credit checks. You will find institutional investors choosing whether to invest or not and nobody can complain that their investment is incumbered by the requirement that the lease it out.

Unfortunately Telkom is not wanting to make the local loop facilities open to leasing despite the regulations and for the most part the other players are happier to adopt the low risk approach of letting everybody else fight for LLU and of deriving marketing for themselves from Telkom's mis-steps than to force the issue through the CCC and the courts.

However even if Telkom did play nice and everything on LLU and facilities leasing and open peering in general came to pass it would still occur that the bulk of revenue from internet access on a Telkom owned network would land up in Telkom's hands, it would still occur that the basic access costs for an internet connection - be it 384kbs or 10Gbs on a fixed line system would have major costs incurred in the last mile. Currently on a 3G service the operators generate 100% of the revenue getting Telkom down to making 85% of the revenue on ADSL would be a major accomplishment.
 
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