Local Loop Unbundling (LLU) is on everyone’s lips after the Independent Communications Authority of South Africa (ICASA) unveiled the long awaited Local Loop Unbundling (LLU) discussion document on 22 June 2011.
To start the debate and share information on local loop unbundling, the South African Communications Forum (SACF) organized a Local Loop Unbundling (LLU) workshop which took place on 14 July 2011 in Johannesburg.
During Telkom’s presentation it quickly became clear that the incumbent operator is not in favour of LLU. Telkom questioned the effectiveness of LLU and argued that the cost and complexity of the process far outweighs the benefits.
Fixed line costs
Telkom’s regulatory affairs executive Izaak Coetzee told delegates at the SACF LLU workshop that Telkom’s current line rental is well below their cost price.
According to Coetzee, the actual cost of providing a subscriber with a fixed line is well above R250. The difference – also known as the access deficit – is recovered through cross subsidization from voice revenue on that line.
Coetzee explained that Telkom’s current access deficit will have to be recovered in the event of LLU, which means that other providers may well have to pay a far higher price than current retail rates.
Coetzee further said that many people assume that Telkom’s fixed line network is paid off and does not require significant investments, but this is a fallacy.
Apart from the continued investments in Telkom’s fixed line access network, Coetzee said the company spends a large amount of money on operational and upkeep costs.
Telkom’s competitors asking for fair pricing
As a listed company Telkom will have a strong case that it must be allowed to recover the cost of its access network, but its competitors are not sympathetic to the company’s access deficit.
Angus Hay
Neotel’s Angus Hay said that LLU is a necessary component to bring about competition in the fixed line market, adding that LLU internationally meant cheaper broadband and better services to consumers.
Hay said that access to Telkom’s fixed lines should be done right, where wholesale costs are well below retail pricing. “If pricing is done where wholesale is more expensive than retail, it is a problem,” said Hay.
Hay added that just because LLU is a challenging process does not mean that it should not be implemented.
One of the delegates at the SACF LLU workshop was even less sympathetic than Hay, saying that we should not forget that taxpayers’ money paid for Telkom’s copper network.
Another delegate questioned Telkom’s accounting methods, citing the company’s SAT-3/SAFE cable costing where Telkom used a five year period to recover costs despite the fact that the cable’s life span was expected to be a minimum of 25 years.
Discuss local fixed line pricing in the forums
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