The last mile
On balance, we welcome Communications Minister Ivy Matsepe-Casaburri’s announcement last week that the unbundling process should be “urgently implemented”. But at this stage it can be only a very cautious welcome.
Details of how the process will be implemented have yet to be revealed. Nor do we know how effective the Independent Communications Authority of SA (Icasa) will prove in facing down Telkom, which owns the local-loop infrastructure, and introducing real competition into this crucial end of the telecommunications market.
The local loop, or “last mile”, is the final connection between homes and businesses and their relevant exchanges. In a totally unbundled world you would not, for example, have to buy your fixed-line telephone service or ADSL line from Telkom and your internet connection from an internet service provider such as M-Web. Your internet service provider could sell you the whole package, or you could buy fixed-line telephony or broadband facilities from any others operating local loop services. Telkom would no longer have a monopoly over the “last mile” infrastructure of cables switches and so on. It would have to make it available to other service providers, under rules and tariffs set by Icasa.
Unbundling the local loop is one of the simplest and fastest ways to bring competition into the telecoms market, particularly the retail market. It has the potential to bring about significant cuts in costs as well as to increase broadband penetration and boost investment in the sector.
But there are some complex technical and tariff issues involved. And incumbent operators everywhere have tended to fight it, for obvious reasons.
It’s long been talked of here but Telkom has until now been allowed to hold on firmly to its “last mile” monopoly, despite the government’s oft-stated commitment to introduce competition and cut SA’s excessive telecoms costs.
Last year, Matsepe-Casaburri finally appointed a committee to recommend how Telkom’s last mile network should be unbundled. That committee has now reported.
Its full report will be made public only this week, but it has recommended that though Telkom will continue to own the local loop, any licensed operator should have access to it to deliver voice and/or broadband services and customers will be able to choose who they want as their carrier. Icasa will regulate the pricing at which Telkom must make the network available.
The regulator will also have to ensure that Telkom maintains the quality of the local loop. The process, says the committee, “should improve the prospects for better pricing and affordable services and improve the quality of services”.
But the underresourced Icasa still has to put the regulatory framework in place and will have to negotiate thorny tariff and technical issues with Telkom, as well as with new entrants to the market. So we wait to see whether unbundling really does start in earnest next year. In any event, the process is expected to be complete only by November 2011, and even then, we may not be looking at full unbundling.
The communications department emphasises that no country has achieved this in less than four years and it usually takes up to 10 years for unbundling to be completed. That may be so, but SA is a late starter, and it’s cost us dearly in high telecoms costs and low internet usage.
It’s sure too to have held back investment and innovation in the sector. International rating agency Fitch recently described the pace of telecoms liberalisation in SA as “near-glacial”.
The minister’s announcement is a first move in the right direction, but if we want to emerge from the Ice Age, we’d better step on it.
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