Local Loop Unbundling

1. Local Loop Unbundling PRESENTATION TO THE PORTFOLIO COMMITTEE 6th JUNE 2007

2. Agenda Introduction What is Local Loop? What is Local Loop Unbundling? What does it Achieve? Recommendations

3. Introduction LLU report is a response to the mandate by the Minister for the Local Loop Unbundling Committee (LLUC) to recommend how Telkom’s last mile network should be unbundled The report has been finalised and was presented to the Minister on the 25th May 2007.

4. What is Local Loop? • The local loop is • that portion of the telecommunication network that is situated between the end of subscriber’s telephone connection and the MDF (Main Distribution Frame), where all the user lines come together before being connected to the telephone exchange. • The physical wire connection between the customers and owned by the telecommunication company

5. Local Loop Diagrammatically

6. What is Local Loop Unbundling? Is a regulatory process of allowing multiple locally- and national telecommunications operators to make use of connections from the telephone exchange central office to the customer’s premises. (Wikipedia definition). Is a process that covers a series of regulatory offers that is aimed at fairly providing newly entrant operators with access to the local loop in a competitive environment.

7. What does it achieve? Lower the prices paid by customers Increase quantity and quality of services Increase the number of available business opportunities Increase innovation Provide affordable access to national telecommunication infrastructure for ICT growth and participation

8. Achievement - Customers Perspective

9. LLU Topologies Slide 1/7 • Full unbundling • Line sharing • Bitstream access – wholesale access • Bitstream with collocation • Bitstream without collocation • Resale of local traffic services • Resale of access services • Sub-loop unbundling

10. LLU Topologies Slide 2/7 • Full unbundling • The entire copper loop is assigned to the leasing operator

11. LLU Topologies Slide 3/7 • Line sharing • This takes place when the incumbent retains use of the loop for its baseband, PSTN service, but unbundles the higher frequency part of the spectrum for use by another DSL operator.

12. LLU Topologies Slide 4/7 • Bitstream access – wholesale access • the incumbents are supposed to provide a whole data service for ISPs to service the fast growing Internet market. • Bitstream access topology is automatically set when the process of LLU is done while the incumbent has rolled the broadband network.

13. LLU Topologies Slide 5/7 Bitstream access – wholesale access

14. LLU Topologies Slide 6/7 • Bitstream access – wholesale access • Bitstream with collocation • access from the incumbent’s premises - collocation included. • Bitstream without collocation • access at a point of interconnection outside the incumbent’s premises - collocation is excluded. • Resale of local traffic services • access where by the incumbent sells traffic services to new entrants at a wholesale price for the new entrants to resale at a retail price. • Resale of access services • access where by the incumbent sells access services to new entrants at a again a wholesale price.

15. Issues on Implementation • For the case of South Africa, Telkom is the incumbent operator in the country. There are three issues that may need to be considered with respect to Telkom in restructuring for the benefits of LLU process. • Telkom is kept away from LLU. • Leave the local loop with Telkom and regulate its use. • Telkom share the local loop with other players.

16. Incumbent’s AttitudeForeign Experience • Incumbent wishes to prevent or delay for as long as possible for arrival of LLU and DSL within its own or anyone else’s product ranges. • Incumbent acceptance of the technology, though with a determination that it will dominate and control the market for DSL based broadband products. • Incumbents will resist to the maximum possible not the technology but competition and unbundling. • Incumbent recognizes the new market • view competition as a means of growing the market to the common benefit, and co-operate in encouraging it.

17. Strategic Issues Slide 1/3 • Incumbent has deployed ADSL services to residential and business customers • New entrant can • Install cables, ducts to an exchange building • Has right to obtain information on where to place cables/ducts and technical standards for connection • All lines must be made available for leasing to all new entrants • Lines must meet any technical specifications imposed by ICASA • Charges for subscriber lines must be published • ICASA can issue orders on charging principles and calculation of costs

18. Strategic Issues Slide 2/3 • Provision of service can be restricted or interrupted for safety or public order purposes • Must be a minimum period of notice for technical changes, terminating contract to other operators and users • Areas of controversy • Price – different prices for residential and business customers • Timescale – uncertainty about whether the loop can be obtained makes it very difficult for the new entrants to market services on the basis of unbundled loops • Capacity – uncertainty about whether an existing line or a new line can obtained

19. Conclusion • The report covers issues on • Technical aspects of LLU • Legal/Regulation settings • Economics of LLU • Recommendations • Policy concerns on implementation period by regulators

20. Recommendations regarding policy decisions and directions • Three unbundling structures be implemented to allow innovation and through the competitive environment • Requirement for immediate implementation and to be in the advance stage at the 2011 • Immediate finalisation of the guidelines by the regulator

21. THANK YOU