Local Loop Unbundling Committee recommendations on LLU

which is meant to guide South Africa's implementation of LLU, is widely known to have been plagiarised from a 2003 OECD report (OECD, 'Developments in Local Loop Unbundling', published September 2003). It is very clumsily written, as if its authors were writing about a topic they'd heard of but weren't particularly familiar with. Phrases like: “In spite of the telecommunication services to be offered, the main difference between the incumbent and the new entrant is that the incumbent already has a very widespread fixed line infrastructure for both national and international connectivity, while the new entrants do not have any” (Local Loop

Unbundling Committee, 2007: p2), is indicative of both the stilted writing

style and very basic understanding of the matter.

The real difference is that the incumbent has had years, and a monopoly environment, in which to build a network and a customer base while the entrant hasn't had either. LLU intends to stimulate competition by

redressing this imbalance through enabling other players to use incumbents' infrastructure rather than building their own (Baranes &

Bourreau, 2005; Local Loop Unbundling Committee, 2007; OECD, 2003;

Sutherland 2007).

The report's writers appear to discount entirely the impact mobile network operators have had on the sector. For example, they state that Telkom's customer base is 47 percent business and 53 percent residential and that, as business customers account for 75 percent of its revenue, opportunities for growth exist in the SME and government sectors. But, they say: “Other segments like residential and the top business customer have been

experiencing decreasing growth compelling Telkom South Africa to seriously market ADSL and be prepared to put forward WIMAX and Internet based television” (Local Loop Unbundling Committee, 2007: p4), without considering what the reasons for the decreasing growth are, and that aggressive marketing or introducing new products and services may not solve the problem.

The report asserts that unbundling the local loop will place “strong

downward pressure on tariffs for high speed voice and data services and diminish significantly the cost of Internet access” (Local Loop Unbundling Committee, 2007: p4) without providing comment on how this will happen or data to support this assertion.

The authors admit that the report was written based on information derived from desktop research and case studies from the US and Europe. Little primary research appears to have been done and few experts consulted, at local, regional or international level though South Africa has access to

experts in country, in SADC, and internationally at the ITU.

The authors repeatedly refer to the ICT market in contexts which make it clear they do not understand the significance of the I and the T in the acronym. For example, “The introduction of the SNO and the freeing up of the ICT market” (Local Loop Unbundling Committee, 2007: p4). The IT market has never been subject to capture, not in the sense the authors seem to mean in any event. Such basic errors are common throughout the report and make the reader question just how much research the writers did, and what level of academic rigour was applied to that research.

The report refers to the legalisation of “the international VOIP” (Local Loop Unbundling Committee, 2007: p5), and states that this is a ground for competition between Telkom and the SNO and the basis for a duopoly between them, neglecting entirely to mention the VANS providers (some 500 of them), which can and do provide VoIP services, both locally, nationally and internationally, and have done since 2005.

Puzzlingly, the report makes the assumption that the local loop

infrastructure will be split into a separate organisation ala BT Openreach (Local Loop Unbundling Committee, 2007: p39), which has been

functionally separated from the larger BT organisation, without supplying any detail on what led it to make that assumption or why it recommends this approach.

The report does provide a comprehensive outline of the technologies involved, the complexities of co-location, the role of the regulator and the expected impact on the incumbent.

The report mentions only three types of LLU – full unbundling, line-sharing and bitstream – and does not consider sub-loop unbundling (Local Loop Unbundling Committee, 2007: pix) in its introduction, but mentions sub loop as a subset of bitstream in its explanation of each type (Local Loop

Unbundling Committee, 2007: p21).

The LLU Committee's stated rationales for LLU are:

[to] facilitate telecommunication providers to innovate and differentiate their product offerings; promote competition in the provision of broadband services; offer opportunities for innovation to drive product and price differentiation; permit providers to give a better choice of applications and improved service levels; allow customer to have alternatives in terms of telecommunication services and price; speed up national economic growth and increase competitiveness in the global market; and support ICT in the country and hence promote economic and social growth in addition to employment opportunities (Local Loop Unbundling Committee, 2007: p3).

The report does not delve specifically into the types of competition that could result from each type of unbundling. It states that: “new entrants would like to compete in this space to provide data communications services and broadband access to customers” (Local Loop Unbundling Committee, 2007: p2), which is retail competition. The competition scenario illustrated further on in the report (Local Loop Unbundling Committee, 2007: p5) again specifies consumer market – retail – competition. The report's authors clearly have not considered that platform, facilities-based or wholesale competition could result from an unbundling exercise.