Does LLU stand a chance?
Local Loop Unbundling (LLU) is seen as one of the measures to bring about competition in a fixed line market where a single company (typically the incumbent operator) controls the country’s local loop.
In South Africa LLU is under the spotlight after the Independent Communications Authority of South Africa (ICASA) unveiled its Local Loop Unbundling (LLU) discussion document on 22 June 2011.
This document followed Communications Minister Roy Padayachie’s statement made after taking office late in 2010 that “the unbundling of the local loop remains a critical and important intervention. In this regard we will work closely with ICASA to ensure that the local loop is unbundled by November 2011.”
Despite the Department of Communications’ (DoC) initial drive behind LLU, Telkom is not rolling over when it comes to giving their competitors access to its last mile infrastructure.
At the recent South African Communications Forum (SACF) LLU workshop, Telkom’s head of regulatory affairs, Andrew Barendse, questioned whether LLU will achieve the objectives set out in ICASA’s LLU document.
Barendse said that LLU is a complicated and costly process, and will be counterproductive in South Africa.
Barendse’s statement sends a clear message to the industry that they will fight LLU, and that people should not expect the company to be soft when it comes giving competitors access to its copper.
There are also rumours that Telkom is lobbying parliament and the Department of Communications (DoC) to not throw their weight behind LLU as it will not help to achieve government’s objectives, like universal broadband access and lower communications costs.
If this is in fact true, Telkom will have to convince government that it is actively driving broadband access in the country and lowering the communications costs to consumers and businesses.
It is interesting to note that Telkom is already on a drive to make ADSL more attractive and increase penetration rates, and have also reduced call rates in its latest pricing announcement.
If Telkom can convince government that LLU is not the way to go the process may be doomed. Without the backing of the DoC and parliament, the LLU process is unlikely to get off the ground soon and may even be stuck in regulatory and legal battles for years.
However, if the DoC (Telkom’s largest shareholder) and parliament backs the LLU process we may see the same success as with mobile termination rates.
One solution, which will make Telkom happy and allow the Minister of Communications to claim LLU success before the November 2011 deadline is if local loop unbundling is implemented in a phased approach.
This means that Telkom will be required to offer bit stream access first, and if this intervention is not sufficient, other forms of LLU can be implemented.
Considering that Telkom already has a bit stream product called IPStream – which the company has been trialling for over a year already – this scenario cannot be discounted.
It should be kept in mind that Telkom is only one LLU role-player, and that many other influential telecoms companies will battle Telkom for full access to their copper network.
With billions of Rands at stake, stakeholders can expect a fierce battle to surround the LLU process until ICASA publishes their regulations in November.
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