Local loop unbundling: South Africa’s SNO keeps the pressure on

Telecoms

Telecoms provider Neotel has called on the market to continue putting pressure on the Independent Communications Authority of SA (Icasa) to implement local loop unbundling (LLU), arguing that it is a key enabler to true competition in the market.

LLU refers to the process of operators other than Telkom gaining access to Telkom's wires that link its exchanges to its customers' premises.

"Let's not take the pressure off (the regulator to implement LLU). LLU will make a substantial difference to competition, and if we wait too long it will be too late and irrelevant. One or two players will end up owning the space if LLU doesn't happen soon," Angus Hay, Neotel's chief technology officer, said yesterday.

The deadline to force Telkom to share its telephone exchanges is November next year.

Lack of access to Telkom's exchanges has become one of the biggest constraints to competition and substantial price reduction. Without direct access to Telkom's copper cable, consumers will not experience the full benefits of the recent price reductions in broadband as internet service providers still rely on Telkom for connections to the lines.

Commenting on the recent ADSL price reductions by internet service providers such as MWeb and Afrihost, Hay said the move was not sustainable without proper access to Telkom's telephone exchanges.

"Everyone is reselling (Telkom) ADSL at ridiculously low prices, but it is not sustainable. As a result, there is one player holding all the cards and making all the money," he said.

It is not clear what progress has been made by Icasa since the announcement by the Department of Communications more than three years ago that LLU should be implemented by November next year.

But the department's director- general, Mamodupi Mohlala, told Business Day about two weeks ago that the department would issue policy directives with timelines to ensure that Icasa meets the 2011 deadline. "We are already working on it," she said.

Although Neotel's business will also benefit from LLU, it is in the meantime speedily rolling out its optic fibre and wireless networks to ensure wider coverage not only in urban areas, including townships, with 300 new wireless base stations expected to be installed this year.

Neotel also plans to introduce prepaid products and other services to consumers and small and medium enterprises in areas such as Bloemfontein, Port Elizabeth, East London and Stellenbosch. Neotel has almost 50000 customers. In the 2009 financial year it reported R1bn in revenue.

"The consumer market has been challenging. But we are not surprised, we knew it would take time," said Wandile Zote, the executive head of corporate communications at Neotel. About 9-million consumers are covered by Neotel's wireless network.

Hay said the group's intention was to offer value for money to customers and to differentiate the company from its competitors by providing compelling services. "We will bring real broadband to consumers," he said.

Neotel would not respond to the latest move by internet service providers to cut bandwidth prices, Hay said, reiterating that Neotel's entry into the market resulted in price cuts of up to 40%.

Business Day