Local-loop unbundling

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Local-loop unbundling is a phrase that most people never hear, and if they do are unlikely to understand, nor care. And yet, this highly technical process (and its LLU acronym) have been bandied about in the last few weeks with greater and greater excitement by geeks and telecoms wonks.

The reason is simple. It’s the last great hold Telkom has over its luckless customers, the literal, physical connection that wires homes and businesses up to Telkom’s network. Often called the last-mile, it is that all-important copper cable connecting us to the those blue exchange boxes in our neighbourhoods.

Local-loop unbundling is back in the news because last week the regulator, the Independent Communications Authority of South Africa (Icasa), published long-awaited guidelines on how LLU should unfold. Icasa is arguably not as independent as its name suggests, getting its funding from the Department of Communications, which contributes too much oversight and interference than the original enabling legislation had in mind.

Icasa’s problems also stem from the sad fact that the telecoms companies – historically Telkom’s high aggressive, protectionist lawyers – have bigger legal departments than the regulator’s; and know how to use them.

The plain English translation of that is: delaying tactics. Telkom, and the mobile operators too, are masters at pursuing legal strategies that result in nothing happening fast. Or, most often, just nothing happening.

Non-techies, or those outside of the telecoms industry, could be forgiven for yawning at the intricacies of this long-running, much-delayed process.

Opening up the last-mile is a key technical necessity to bring about better broadband access and cheaper costs.

The plain English translation of that is: competition.

Because Telkom has had monopolistic control of the last-mile, it has effectively owned access to the customer. But, not for very much longer.

It’s hard to tell if Icasa is demonstrating its independence, or asserting this independence as a new communications minister comes in, or just gatvol about how long this process has taken.

Telkom appears to have new impetus to behave like a real, listed company with actual targets like profitability and growth since the new management team of CEO Sipho Maseko and COO Brian Armstrong took over this year. Settling an unwinnable case with the competition authorities (instead of the previous tactics of stalling), admitting its technical and financial difficulties, going after the participants in the scandalously ill-advised Multi-Links purchase in Nigeria (that wiped R20bn off the books) are all signs of life at Telkom.

For too long Telkom has been a defeatist, obstructionist and legally aggressive monopolist – all at the expense of its customers, the citizens of South Africa. Before this heartening change of Telkom has a been a political football, a key national asset that should be run as a lean, effective, profit-focussed utility. Instead its 90 000-odd staff are a core union voting block that the ruling ANC can’t fire/retrench/outsource or otherwise for fear of upsetting alliance partner Cosatu. Years of protectionist legislation and a department that seems more intent on protecting the state’s roughly 40% shareholding, while reaping dividends and income. This antiquated reasoning appears to be coming to an end, hopefully, as Icasa asserts its independence.

For the telecoms market in South Africa to grown, for consumers to get decent internet speeds, for the associated knowledge economy to prosper, South Africa needs proper, cheap broadband.

By opening up the local-loop, competitors other than Telkom (and the strangely ineffective Neotel) can provide fixed-line broadband. Copper wires are long extinct in this age of fibre-optics. South Africa needs competition, fibre, and a Telkom that thinks like a business and not a state-protected monopoly. Local-loop unbundling will start this much needed process.

This column first appeared on Financial Mail.

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