South Africa may force state-controlled phone firm Telkom to cut the price it charges rivals to link homes and offices to the local telephone exchange, a government official said on Wednesday.

The government would consider the so-called unbundling of the local telephone loop as it tries to slash the prices of phone calls and Internet access in South Africa, which President Thabo Mbeki has said are too steep.

"We are looking at unbundling the local loop and we are looking at other ways to cut the cost of telephony and develop broadband (Internet)," said Mthobeli Tengimfene, head of Internet access and software development at the department of communications.

He said the government and sector players would meet in October for a conference on telecoms pricing to draw up a final strategy on tackling high tariffs.

"We need to look at how feasible unbundling the local loop is, and if so how and when we do it," Tengimfene said on the sidelines of an Internet conference.

Communications regulator ICASA has slapped tougher price caps on Telkom's voice services and is investigating the high cost of Internet access, but Mbeki has said more must be done.

Industry executives and consultants at the conference in Johannesburg said unbundling the local loop and allowing Internet Service Providers to build their own infrastructure were crucial to bring down the cost of communications.

Rudolph Muller, IT lecturer at the University of Johannesburg and founder of MyADSL online broadband community, said 0.3 percent of South Africans had access to high-speed Internet services and prices were 1,000 percent higher than other countries in the Organisation for Economic Co-operation and Development (OECD).

A second national operator is due to be licensed before the end of the year after delays due to shareholder wrangling and red tape, but Muller said the government should relax regulation to allow as many phone carriers as wanted to operate.

Lack of competition hampered innovation and was to blame for slower speeds and smaller capacity in South Africa compared to other countries, he added.

"We are falling behind at a rapid rate, our developers cannot use the Internet as it is used internationally."

Tebogo Khaas, head of South Africa's small and medium enterprise forum, also urged the industry to pile pressure on the government and Telkom to allow more competition and bring down prices.

He said there were no ADSL installations in Soweto -- South Africa's biggest black township and one of its most developed -- acccording to a survey conducted by his organisation.

No officials at Telkom were immediately available to comment, but according to the company's website the exchange covering numbers in Orlando, one of Soweto's smartest areas, "does not support DSL and is not on the roll-out plan for the immediate future".

"If Soweto does not even have ADSL than imagine what it's like in poorer townships and rural areas," said Khaas.