Too late for local-loop unbundling in South Africa

In a policy paper published this week, national treasury devoted considerable space to the telecommunications sector and the role it could play in getting South Africa’s economy onto a stronger growth footing.

Though many of the proposals make sense, including fast-tracking the auctioning off of broadband spectrum, an anachronism stuck out: treasury wants communications regulator Icasa to implement local-loop unbundling.

Specifically, the discussion document says: “Immediate enforcement of local-loop unbundling, as per the ICT policy, would enable multiple providers to have access to the local loop, enhance competition and reduce unnecessary infrastructure duplication.”

The document’s executive summary says: “Competition should be allowed in Telkom’s infrastructure that connects the local exchange to residential homes and businesses.”

LLU is a specific regulatory intervention, introduced in some developed markets, to break the monopoly choke-hold of the former monopoly fixed-line telecoms incumbent. Typically, it involves opening up the local loop of copper cables between customers’ premises and the local telephone exchange to other licensed operators, including Internet service providers.

LLU does not typically extend to fibre infrastructure; in fact, doing so could threaten investment by Telkom and its rivals in building alternative infrastructure.

Not a bad thing

I have argued in this column many times that infrastructure competition and even duplication is not a necessarily bad thing — rather than leaving it up to the regulator to decide, the market should be left to determine when to share and when not to share infrastructure on pure economic grounds.

The irony of treasury’s call for immediate implementation of LLU is that Telkom has announced it is in the process of decommissioning its legacy copper network. Copper-based digital subscriber lines will be phased out in the coming years in favour of home fibre and fixed-LTE connections. Not only does the company oppose the idea of LLU, but there may soon be no network left on which to impose such regulations.

And LLU should not be extended to new fibre networks, including Telkom’s. Vibrant competition has emerged between fibre network operators (FNOs), with companies such as Telkom’s Openserve, Vumatel, Octotel and Frogfoot racing to wire up cities and even smaller towns to modern, high-speed fixed broadband.

The author, Duncan McLeod, argues that it’s too late to be considering local-loop unbundling

Allowing all-comers access to that infrastructure through some sort of unbundling runs the very real risk of disincentivising FNOs from continuing with this roll-out. LLU has always been meant as a regulatory intervention to deal with the market power of an incumbent. Ironically, the fact that LLU has never been implemented in South Africa is probably the very reason Telkom’s competitors rushed to build alternative last-mile infrastructure as quickly as they did. They saw a market gap and they took it.

So, while national treasury makes some good proposals in its policy document — including limiting the amount of spectrum to be allocated to a planned wholesale open-access network and agitating for the publication of regulations dealing with the rapid deployment of infrastructure — in the case of LLU, the horse has already bolted. Frankly, it’s no longer needed — if, indeed, it ever was.  — (c) 2019 NewsCentral Media

  • Duncan McLeod is editor of TechCentral

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