Former Telkom manager reveals Naked ADSL challenges

Ancalagon

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Feb 23, 2010
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It will be irrelevant soon.

Telkom tried to keep the goose that lays the golden egg, and in response, initiatives like LTE and fiber have become far more popular. Fiber is only going to spread and then Telkom won't be able to monopolize it.

If it really was about a fair rate, then why not do exactly that? Raise the price of DSL line rental and decrease the price of landline rental. Make the cost that you charge to the consumer reflective of how much it actually costs Telkom to provide the service. Then this would not be an issue.
 

MickeyD

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Oct 4, 2010
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139,117
It will be irrelevant soon.

Telkom tried to keep the goose that lays the golden egg, and in response, initiatives like LTE and fiber have become far more popular. Fiber is only going to spread and then Telkom won't be able to monopolize it.

If it really was about a fair rate, then why not do exactly that? Raise the price of DSL line rental and decrease the price of landline rental. Make the cost that you charge to the consumer reflective of how much it actually costs Telkom to provide the service. Then this would not be an issue.
They can only do that once they have reduced their operating costs.
 

ToxicBunny

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Couldn't care less really.

Consumers want X... you either provide X in the long run at a price that the consumer is prepared to pay or consumers will go elsewhere if there are other options.

The fact that the organisation is/was very inefficient when it came to providing the service is not really the consumers problem if they have viable alternatives.

I am on a really amazing deal for LTE at R599 per month for uncapped, but even at R899 per month(the normal price) it is faster and cheaper than a slower speed ADSL solution would have cost, so for me it was a no-brainer to drop the ADSL
 

Ancalagon

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They can only do that once they have reduced their operating costs.
I don't mean reducing the cost, I mean charging customers what it really should cost.

Example:
Assume that a DSL line costs Telkom R500 per month and they are currently charging R450 for it, only making a profit when the landline rental is included.
Solution: Charge R550 per month for the DSL line rental and adjust the landline rental down.

Then you can unbundle the products and still make a profit.
 

deweyzeph

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Apr 17, 2009
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7,334
Bottom line is that naked ADSL simply isn't going to result in a lower ADSL costs. Either ADSL line rental stays the same and you pay for the voice line rental, or you get naked ADSL at an increased price. No doubt the increase in price for naked ADSL will be exactly what the voice line rental would have been. So really, there's no point in asking for naked ADSL. We might as well just stick with the status quo.
 

MickeyD

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I don't mean reducing the cost, I mean charging customers what it really should cost.

Example:
Assume that a DSL line costs Telkom R500 per month and they are currently charging R450 for it, only making a profit when the landline rental is included.
Solution: Charge R550 per month for the DSL line rental and adjust the landline rental down.

Then you can unbundle the products and still make a profit.
Per the Telkom LLU presentations, they make a loss on the total DSL package (landline rental + DSL rental) --- what they call the access line deficit. Obviously all the other roleplayers scoffed at this, but none of them could either disprove it or are willing to invest in building their own copper last mile networks. (ignore the FTTH for now).

While I do support LLU (and by definition naked DSL), the bigger savings to me as a customer will not be derived from naked DSL but from using a service provider who is not reliant on Telkom's IPC. This will mean that other SP's have to establish POPs in more towns and cities so that they can break out of Telkom's network. Then we will see savings!!

If the latter does not happen, we will still see a slight saving as Telkom no longer have to route our connection via a Switch. And that's where it gets tricky... your billing is linked to a landline number and that number is allocated by the Switch (in each exchange). AFAIK they only way around that would be for Telkom to move every single customer onto Softswitches (eg. 1 for the whole of PE). Cutting out that piece of network will impact the costing of the product - in this case it will be in our favour. So that is from your modem to the splitter (MDF to Switch / DSLAM, etc).

But once your connection terminates at the DSLAM / IMAX / MSAN /ISAM that portion of the DSL rental remains the same.

Now you see why I say that Telkom has to reduce its operating costs for there to be a meaningful product price adjustment...
 

access

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Per the Telkom LLU presentations, they make a loss on the total DSL package (landline rental + DSL rental) --- what they call the access line deficit. Obviously all the other roleplayers scoffed at this, but none of them could either disprove it or are willing to invest in building their own copper last mile networks. (ignore the FTTH for now).

While I do support LLU (and by definition naked DSL), the bigger savings to me as a customer will not be derived from naked DSL but from using a service provider who is not reliant on Telkom's IPC. This will mean that other SP's have to establish POPs in more towns and cities so that they can break out of Telkom's network. Then we will see savings!!

If the latter does not happen, we will still see a slight saving as Telkom no longer have to route our connection via a Switch. And that's where it gets tricky... your billing is linked to a landline number and that number is allocated by the Switch (in each exchange). AFAIK they only way around that would be for Telkom to move every single customer onto Softswitches (eg. 1 for the whole of PE). Cutting out that piece of network will impact the costing of the product - in this case it will be in our favour. So that is from your modem to the splitter (MDF to Switch / DSLAM, etc).

But once your connection terminates at the DSLAM / IMAX / MSAN /ISAM that portion of the DSL rental remains the same.

Now you see why I say that Telkom has to reduce its operating costs for there to be a meaningful product price adjustment...
that access line deficit sounds like a bluff, its too much effort to falsify their claim. weeellll then again, south africa has copper pirates yar..

they could share the access line deficit when unbundling, i dont see how that should be an excuse. who knows, maybe it wouldn't be a deficit for much longer after that.
 

Paul Hjul

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Sadly there remains a situation where certain industry participants (who also happen to belong to entities operating the countries most obscene cartel) refuse to recognize the considerable investments made by Telkom and the need for Telkom infrastructure to be paid for. The response from Telkom is to adopt a laager approach and only see its challenges and not seek solutions. And so while the regulatory landscape and necessity of properly costed LLU has been known since at least 2009 it remains unimplemented. ICASA have been a massive barrier and their constant failure to actually follow the law and the massively daunting consequences of their continuous failings often takes the form of a court order that rattles the entire industry.

[in case anybody is wondering EVERY litigating party moving to block the acquisition of Neotel has been adversely affected by the courts finding which Neotel is taking up on challenge - and this finding is the natural consequence of the argument they made to the court]

The solution really is for Telkom to realize that they need to devise a wholesale platform that covers various parts of the market. A decent multi-stakeholder strategic planning meeting over the future of the South African Internet Exchange as a business unit of Telkom and ensuring that the IPConnect product suit is properly costed and available. Rather than having grossly over-remunerated and underperforming individuals complain about the price of IPC all day discussions about addressing Telkom's core network's challenges need to be had. The extent to which Telkom's access network is underutilized while their "middle mile" services are becoming increasingly strained must be a massive point of discussion. However - and this remains the key issue in why LLU matters - the best way to ensure that these discussion take place is by having the facilities leasing structures in place and forcing everybody (especially Telkom and those ISPs that are seeking a free ride on Telkom's infrastructure) to do their costings correctly.

I've got this lovely beach town where everybody can rock up to and sit around, work out the finer details and maybe sing kumbya :)
 

Wall

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It will be irrelevant soon.

Telkom tried to keep the goose that lays the golden egg, and in response, initiatives like LTE and fiber have become far more popular. Fiber is only going to spread and then Telkom won't be able to monopolize it.

If it really was about a fair rate, then why not do exactly that? Raise the price of DSL line rental and decrease the price of landline rental. Make the cost that you charge to the consumer reflective of how much it actually costs Telkom to provide the service. Then this would not be an issue.
*Fibre.
 

Swa

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Too bad Telkom isn't exactly thinking out of the box, or even just applying basic economic principles. Reducing the price of a line through naked dsl will have an increase in uptake.

that access line deficit sounds like a bluff, its too much effort to falsify their claim. weeellll then again, south africa has copper pirates yar..

they could share the access line deficit when unbundling, i dont see how that should be an excuse. who knows, maybe it wouldn't be a deficit for much longer after that.
Many see it as that. Telkom has never actually released the true figures of how they get to the cost of providing the service and it's entirely likely they're employing some kind of Chinese maths like including the same costs when calculating line rental and dsl rental.
 

MickeyD

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Too bad Telkom isn't exactly thinking out of the box, or even just applying basic economic principles. Reducing the price of a line through naked dsl will have an increase in uptake.


Many see it as that. Telkom has never actually released the true figures of how they get to the cost of providing the service and it's entirely likely they're employing some kind of Chinese maths like including the same costs when calculating line rental and dsl rental.
Actually they have.

ICASA has had them for at least 7 years already...
 

Paul Hjul

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Actually they have.

ICASA has had them for at least 7 years already...
Yep moreover ICASA have all of the information necessary to run a whole lot of computations and Telkom have had to conform to various accounting requirements due to the Comp Tribunal settlement and their JSE listing.

Basically the end scenario is that the last mile circuit maintenance costing works down to about R400 per circuit per month from premises to MSAN when taken over the entire country and factoring in cable theft and being an inefficient operator. Once you move off the circuit though you still need to deal with the "middle mile" (the fact that an exchange in a backwards dorpie like Humansdorp and that MSANs are quite close to customer premises somehow has to have its traffic in a backwards spill like Uitenhage) and so on. Of course the middle mile is capacity orientated and should be getting cheaper quickly over time.
 

Paul Hjul

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did icasa then instruct telkom to have llu ready by 2011?
ICASA were "instructed" to have LLU regulations ready to impose on Telkom by 2011. We are still waiting.

Unfortunately Telkom haven't decided to have a sit down with people who genuinely understand what proper implementation of LLU means and then move to implement it notwithstanding ICASAs failings.
 

MickeyD

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did icasa then instruct telkom to have llu ready by 2011?
Not so much ICASA as Minister Ivy and then Minister Roy. ICASA actually dropped the ball by allowing Telkom to tie them up in a regulatory mess. IIRC it had to do with essential services?
 
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