Telkom copper network spin-off

[FNfal]

Telkom copper network spin-off will more than likely just be a separation of entities , copper loop in to a separate company similar to TFMC that Telkom owns.
But that has a direct bearing on LLU and will make LLU easier to achieve depending on the LLU model used.
As for ISPs putting a DSLAM on the end of the copper that is a massive simplification of LLU.
If LLU is not handled carefully many people will never get ADSL and communications in this country could decline from the date of implementation of LLU which will play directly in to the hands of Vodacom and MTN .

 

[Paul Hjul]

It would make LLU on all models easier to implement - it is one of the steps which Telkom can and should take

ISPs being able to install DSLAMs on one end of the copper is the essence of full loop LLU the point is that it is the ability rather than the practice because as soon as the obstacle to a second provider installing DSLAMs at lucrative exchanges exists Telkom has to relook at their pricing model and the game changes. I have quite repeatedly warned that one of the great problems with Telkom's historic approach towards LLU - obstruct, delay and stall - is that if we follow the letter of facilities leasing cherry picking is inevitable so ISPs picking exchanges to support. The point is that LLU is in the ECA.

For ISPs - particularly large ones - to want not only the facilities access provisions of the ECA but also for the state to own and provide access only to licence holders as some sort of special monopoly right is simply disingenuous and dangerous.

 

[Roman4604]

you clearly don't understand what the line access deficit actually is.

It doesn't require a genius to understand the differential between on going opex/capex expenditure vs. income.

your argument is that this facility must simply be bought by government to make available FOR FREE to licence holders

Never said anything of the sort, you're the one who keeps bringing up 'free' and 'government buyout'.

I'm agreeing with the SPV concept, something along the lines of the UK's Openreach, a separate commercial entity.

my guess is that it will be in the region of R150 but that is only from the exchange remember.

I think it will land up being higher, nevertheless that still means at minimum we're exactly where we were from an access pricing point of view.

If so what is the point of the structural separation on its own? Sure it may remove some of the incumbent's inefficiencies, but nowhere enough to make a real difference to market pricing. Hence why I believe government needs to be participant in the SPV in the form of a benefactor subsidizing any differential between costs and income.

This is the only way pricing can be lowered to a level where a meaningful acceleration in penetration can be achieved. Otherwise its just more 'shuffling of the deck chairs' without any real benefit to the industry, market or economy.

 

[Paul Hjul]

If Telkom remains the sole enterprise exposed to risk in copper then it is shuffling of the deck chairs, if the result is that those with a vested and commercial interest spreading risk exposure then the benefits are huge. Government assuming the risk is simply idiotic and manifestly unfair - it would be an abuse of public funds for the benefit of ecs license holders exclusively.

 

[FNfal]

Government may have to step in eventually , if LLU does take place and Telkom starts to cherry pick like Neotel and switches off the exchanges in small towns and areas that are not financially viable.
At the end of the day some one is going to pay more in the short term , be it for DSLAMs in the exchanges and transmission to those DSLAMs/bitstream equipment.
I just hope LLU has been very thoroughly researched and refined for South African , it is not just about cheaper communications for a few people.

 

[Roman4604]

Government assuming the risk is simply idiotic and manifestly unfair - it would be an abuse of public funds for the benefit of ecs license holders exclusively.

I'm sorry, but it your statement that's idiotic.

Firstly its the state's responsibility to do what is the best interests of the market and end users. Secondly who are the beneficiaries of the ECNS license holder's services (that includes Telkom themselves as an equal customer the SPV), the same end users & market.

 

[Paul Hjul]

services which they charge for - invitation to profiteer

a state assumed copper network is very different to a public road - I can put my car on the public road I can't carry traffic on the copper network. Vodacom could and they would sell this ability to me and make a profit. Do you want copper to go the way of spectrum?

 

[Roman4604]

services which they charge for - invitation to profiteer

This part of the market it sufficient competitive to make profiteering highly unlikely if everyone incl Telkom are on an equal footing wrt to copper access, wholesale pricing and as I propose, government subsidy. Using a commercial (audited) SPV should also ensure financial transparency for all see.

 

[Paul Hjul]

so which player do you have shares in?

 

[Roman4604]

so which player do you have shares in?

None, I just think we deserve a fix line broadband market that's as cost effective and dynamic as those in other similar countries (go check the OECD reports).

 

[Paul Hjul]

which other countries? Australia - where there government wholesale program has been a disaster
The UK where the government has divested ownership of access. The London Internet Exchange is not a government project

You want a government handout for an industry that doesn't need it, this is at the expense of taxpayers for the benefit of the participants in the industry it a bloody stupid idea.

 

[Roman4604]

You want a government handout for an industry that doesn't need it, this is at the expense of taxpayers for the benefit of the participants in the industry it a bloody stupid idea.

Then we sit with the market and pricing we have for the foreseeable future. Now that's real progressive.

 

[DJ...]

This part of the market it sufficient competitive to make profiteering highly unlikely if everyone incl Telkom are on an equal footing wrt to copper access, wholesale pricing and as I propose, government subsidy. Using a commercial (audited) SPV should also ensure financial transparency for all see.

Single asset spread across multiple players is profiteering jungle-juice.

WRT to the commercial, audited SPV, it's not quite as transparent as you might think. A private company is not subject to government audits of any type apart from tax, really. There is absolutely no way that a deal of this magnitude will in any way have financial transparency to the extent I think you're suggesting it should. They'd be audited, sure, but within the requirements of the Companies Act which is anything but transparent to any external observer...

 

[Paul Hjul]

You've bought the dangerous myth that government intervention leads to progress. Public initiatives can act as a catalyst but there is no suggestion of that here.

If the argument were to be advanced that government should have a portion of its existing shareholding in Telkom moved over to the SPV this would be a different discussion but your position advocates crowding out. Bottom line the ISPs must put their money where their mouth has been or face heavy criticism and if we then decide to go for government intervention it will be on the basis that they failed the industry.

 

[Roman4604]

WRT to the commercial, audited SPV, it's not quite as transparent as you might think.

Sure, not expecting panacea, but it has to be better than what we got. At least there will be little room for hidden cross-subsidation and any kind of price gouging at the wholesale level. The incentive for that will be removed.

 

[Paul Hjul]

Sure, not expecting panacea, but it has to be better than what we got. At least there will be little room for hidden cross-subsidation and any kind of price gouging at the wholesale level. The incentive for that will be removed.

Both benefits arise from the exercise regardless of ownership, the only subsidization will occur if government buys the asset and leases at below value. This will be a subsidy for ISPs (including Telkom) funded by the public.

 

[Roman4604]

Bottom line the ISPs must put their money where their mouth has been

The reality is the ISPs and other fixed network operators do not have the kind of money or resources required to build a fixed line network to rival Telkom's. Do you understand the size disparity between Telkom and all the other fixed line operators/providers put together?

 

[Paul Hjul]

And how does said disparity - which is limited to fixed line - in anyway make a case for the general public to subsidies ISPs - including Telkom. Lets think for a moment of the pockets of Naspers ....

 

[Roman4604]

the only subsidization will occur if government buys the asset and leases at below value.

You're the only one that keeps bringing that up. I certainly don't advocate the government buys anything.

The copper assets should remain the property of the SPV. All I'm suggesting is that the government funds some portion of the on-going operating expenditure to enable competitive pricing. This will be done from the perspective of investment in economic development.

 

[Paul Hjul]

You're deluded.

So who else is going to pay for the shortfall between the network maintenance/expansion costs and the income should our local access pricing be reduced to globally competitive rates (say < R100 for voice/data local loop access)?

Yes you did - right here
Back paddling much?