The Independent Communications Authority of South Africa (ICASA) recently (22 June 2011) unveiled their Local Loop Unbundling (LLU) discussion document, starting the debate on how SA’s copper local loop should be unbundled.
While the prevailing view is that LLU will benefit consumers through increased competition in the fixed line and ADSL market, Telkom made it clear that this regulatory intervention poses a risk to their business.
As the incumbent fixed line operator, Telkom’s reaction to LLU is certainly not unique. LLU is typically opposed by traditional state-owned monopoly enterprises which argue that they are “forced to provide competitors with essential business inputs” (WikiPedia) and that “stifles infrastructure-based competition and technical innovation”.
Telkom also previously said that their copper local loop is not an essential facility as the mobile operators have created wireless local access networks which are far more comprehensive then their fixed line access network.
Telkom is expected to fight LLU – or at least stifle any aspects of LLU which it feels may hurt its business model – but can LLU actually be a blessing in disguise for the operator?
LLU and ADSL growth
It is speculated that just under half of Telkom’s 4,152,000 fixed lines are capable of providing ADSL. According to Telkom’s latest results they have 751,625 ADSL subscribers, translating into an 18% ADSL fixed line penetration rate.
This means that there is a significant opportunity to convert Telkom’s voice-only fixed line subscribers to ADSL users which will not only bring more revenue to Telkom but also stem the continued decline in fixed line subscriber numbers.
If Telkom can double their ADSL subscriber base through other operators boosting subscriber numbers, they stand to gain well over R1 billion per year in revenue. Considering that the infrastructure mostly exists to make this happen it will be a great financial boost for the company.
ICASA says LLU presents ADSL revenue generating opportunity
At the LLU discussion document unveiling today (22 June 2011) ICASA councillor Thabo Makhakhe said that LLU in South Africa presents a revenue generation opportunity which supports job creation and job retention.
“We believe that the ‘size of the pie’ may be increased by over R1 billion, which may be generated in new revenue and shared by the operators every year by just achieving full utilisation of the ADSL ready network,” said Makhakhe.
“This revenue may be used not only to retain jobs, but to fund further network expansions to increase the scope of ADSL capabilities of the network,” said Makhakhe.