Telkom’s access line deficit – the info you want

The future of Local Loop Unbundling (LLU) in South Africa is still uncertain, partly because of Telkom’s access line deficit (ALD).

On 30 November 2011 the Independent Communications Authority of South Africa (ICASA) released their LLU findings which stated that the existence of an access line deficit is a significant obstacle to the introduction of fixed line local loop unbundling.

ICASA has also indicated that naked ADSL is a function of Telkom’s access line deficit, and that it therefore makes no sense to introduce a naked ADSL service at a price which is higher than that which consumers are currently paying.

ICASA plans to convene an industry working group in February 2012 to establish an access line deficit recovery scheme.

It is not clear why the regulator believes an ALD exists, and is even willing to put LLU on the back burner because of this belief, without concrete proof. While Telkom claims a significant ALD, many other operators questioned this claim at the LLU hearings.

One would assume that more details about this issue will emerge from the industry working group, but for now it may be instructional to see what Telkom says about the issue.

MyBroadband is in possession of official Telkom documentation which states that line rental charges are too low to cover the cost of providing these services.

Telkom further bemoans the fact that price controls inhibit them from increasing their line rental charges to limit their losses.

According to the document, which is based on 2009 CCA information, it costs Telkom R256 per month to provide a customer with a fixed line service, far higher than the average monthly rental of R112. According to the document Telkom makes a loss of R144 per month per line.

Telkom further argues that they make virtually no money on their ADSL service either. The document states that their ADSL access cost is R166.98, only slightly lower than their charge of R174.56.

Telkom access line deficit 2010

According to Telkom they have a total annual access line deficit of R8.7 billion.

Telkom was asked for comment on naked ADSL and its views on the LLU findings, but the company would not comment on the matter.