The Independent Communications Authority of South Africa (Icasa) this week said the access-line deficit (ALD) – the gap between the insufficient revenue generated from line rental against the cost of building and maintaining the access network – was of “no relevance” in determining access to local-loop unbundling (LLU).

The authority, in a gazetted explanatory note to accompany the September 11 draft Bitstream and Shared/Full Loop regulations, disagreed with Telkom’s views on the scope and scale of the impact of the ALD, noting that the incumbent fixed-line operator needed to rein in its costs.

Telkom has previously stated that LLU could be a threat to revenues and the group’s financial viability, which were already under pressure in the increasingly competitive telecommunications market.

The telecommunications group used the profits from voice and data services to partially offset the losses it made on line rentals.

In November 2011, Icasa found that the existence of an ALD was a significant obstacle to the introduction of fixed-line LLU, but since examining the "scale and scope", as well as its necessity in the industry, Icasa had determined that the principal costs of  ALD related to the cost of employees and other labour-related costs.

While acknowledging the recent impairment costs of assets and the difficulties faced in employment sustainability, the authority stated that it was “not justification for preventing the provision of access to any form of local loop”.

The document noted that Telkom had been unsuccessful in maintaining operational costs and that it was “evident” that the group’s business model and approach to service provision needed to be adapted.

“It is imperative that Telkom manage its labour costs in line with an efficient provision of services. A key measure of this is the number of employees per active fixed line,” Icasa stated.

Despite cutting its workforce by more than half and the number of active fixed lines per employee increasing from 125 in 2002 to 191 by 2012, Telkom’s employee costs per line increased 2%.

Further, Telkom experienced a loss of 1.7-million fixed copper line customers – a 31% decline over 12 years.

Meanwhile, Icasa reinforced its views that LLU would not only be applied to copper and would extend to “all forms” of local loop.

Telkom would not be the only Electronic Communications Network Service licensee expected to make its facilities available to other licensees, as the scope of the draft regulations was “considerably” wider than simply the copper twisted pair local loop.

“This changes the emphasis and the dynamics of the discussion on the subject significantly,” Icasa pointed out, adding that any form of local loop extended to fibre or wireless access.

The framework was not intended to financially harm any operator and the network owner had the right to set the price to ensure the sustainability of their networks and future investment commitments.

However, the pricing structure needed to be reasonable and any operator could dispute high charges with the authority.

Licensees had 30 working days from December 6 to comment on the explanatory document, with public hearings set to be held from February 17 to 19.