Local loop unbundling versus encouraging the growth of wireless local loops: lessons for South Africa from other countries

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Nov 12, 2013 (4 years and 1 month ago)

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1


1


Local loop unbundling versus encouraging the growth of
wireless local loops: lessons for South Africa from other
countries


Ryan Hawthorne
1




Draft


not for citation



Abstract


The Department of Communications has proposed that Local Loop Unbundling be implemented in South
Africa by 2011. Furthermore, ADSL line prices have been regulated by the Independent Communications
Authority of South Africa (ICASA) since 2007. Both of these

interventions are premised on the lack of
available alternatives to the fixed line local loop for broadband internet sold to consumers and small office
/ home office customers. There is a large and growing body of evidence that suggests that mobile
-
wirele
ss and fixed
-
wireless broadband products are providing an alternative to fixed line broadband
solutions. Provided that radio frequency spectrum is allocated in a way that ensures the greatest amount
of competition possible, wireless alternatives will in al
l likelihood result in competitive broadband
outcomes in South Africa. At the same time, local loop unbundling has met with limited success in other
countries. This suggests that policymakers should focus their attention on radio frequency spectrum
allocat
ion and regulation rather than on unbundling the local loop and ADSL price regulation.
These
policy issues are particularly relevant in light of government identifying electronic communications and
business process outsourcing as priority areas in the acce
lerated and shared growth initiative (ASGISA).


Keywords: Telecommunications; Market definition; Local Loop Unbundling

JEL classification: L86, L96



1.

Introduction


The electronic communications sector in South Africa and in other jurisdictions is govern
ed by
sector specific regulation. This is premised on the fact that, at least historically, there are
economies of scale and network effects in the electronic communications sector such that
effective competition may be compromised i
n some parts of the val
ue chain.
There is emerging
evidence that the sector may need less regulation in the form of retail price regulation

and local
loop unbundling
, and better policy making

and regulation

in respect of spectrum allocation, in
South Africa, at least in respect of
the supply of broadband internet access services to
residential

and small office / home office (SOHO) customers.


There is at least some initial evidence that wireless technologi
es offer an alternative to fixed
lines for residential and SOHO customers. While these products may not be perfect substitutes,
and may not be in the same market for anti
-
trust purposes, the products probably are sufficiently
substitutable to warrant lifti
ng price regulations of these services. The evidence certainly
suggests that scarce regulatory resources ought to be allocated to radio frequency spectrum
allocation rather than cumbersome local loop unbundling and price regulation processes.




1

Ryan Hawthorne is a senior analyst at the Competition Commission of South Africa. The views
expressed here are his own and do not necessarily reflect those of the Competition Commission of South
Africa.

2


2



South
African policymakers have once before misjudged

technology change and adoption in the

telecommunications

sector

and imposed substantial costs on the economy by forcing Telkom to
extend its fixed line network to previously un
-
served or under
-
served areas
, w
hile customers in
these areas were about to adopt mobile telephones in large numbers
.
2

The key question is
whether
existing price regulation of ADSL access lines and
proposed regulations in respect of,
for example, local loop unbundling, make sense in the
context of emerging wireless broadband
alternatives. This is particularly important in view of the substantial costs and limited success of
local loop unbundling policies in other jurisdictions, such as the US, where rules for unbundling
incumbent network
elements until 2005 had three different versions that were overturned by
various courts over the course of almost a decade (since the passage of the
Telecommunications Act in 1996)
, resulting in substantial business uncertainty and large wasted
investments
.
3


2.

Current and proposed regulation of South African telecommunications services


The Independent Communications Authority of South Africa (ICASA) regulates the prices of a
number of fixed line telecommunications products in South Africa provided by Telko
m, including
the price of Asymmetric Digital Subscriber Lines (ADSL) and leased lines (dedicated capacity
links used largely by businesses) less than 2Mbps. The mobile operators (MTN, Vodacom and
Cell C) also have their retail voice prices indirectly regul
ated, in that the mobile operators may
not in terms of their licences increase their voice tariffs by more than the rate of increase of the
Consumer Price Index (CPI).


ICASA has been widely criticised for its lack of success in regulating for efficient o
utcomes in
the sector. Specifically, the independence of ICASA was for a long period curtailed by the
Minister of Communications
4
, Telkom was able to
delay regulatory interventions by ICASA
5
, and
Telkom has been allowed to limit the effectiveness of its co
mpetitors
6
. These effects are not
specific to South Africa: telecommunications regulators in many developing countries face
capture by incumbents or suffer from a lack of skills.
7

The key question is whether, in the
context of this lack of success, it is w
orth pursuing further regulatory interventions in respect of
local loop unbundling

and continuing to regulate

ADSL access line

prices.


The Department of Communications issued a policy paper for Local Loop Unbundling in May
2007, which advocated for the m
andatory unbundling of the copper local loop in South Africa by
Telkom.
8

The view adopted by the Local Loop Unbundling Committee in that report is that South
Africa should follow the same process as that adopted by the European Commission, which is
to unbu
ndle the local loop to encourage greater competition particularly in the supply of



2

See Hodge (2003: 45), who estimat
es that the costs of Telkom’s rollout of 2 million additional lines and
subsequently disconnecting them was approximately R17 billion, most of which was wasted.

3

See
separate statement of Chairman Michael K. Powell, FCC 04
-
290.

4

See
Gillwald
, A, and
Kane, S, (2003: 34). See also Melody (2002: 10).

5

Makhaya, G., &
Roberts
, S (2003: 57).

6

Currie
, W., Horwitz, R., (2007).

7

See, for example,
Samara
jiva, R (2006).

8

The Electronic Communications Act, no. 36 of 2005 (the ECA), in section 43(8)(a), requir
es that ICASA
prepare a list of essential facilities, which includes ‘local loops, sub
-
loops and associated electronic
communications facilities for accessing subscribers and provisioning services’. The ECA sets out, in
Chapter 8, that electronic communica
tions facilities must be leased by providers in a non
-
discriminatory
manner to any other person licenced in terms of the ECA, unless the request for facilities leasing is
unreasonable.

3


3


broadband services. Local loop unbundling essentially warrants the creation of a range of
regulatory ‘products’ to achieve this end, including full
-
unbundling, whereby the e
ntire copper
last mile is leased to competitor providers, part
-
line unbundling, which provides access to the
high frequency portion of the copper last mile to competitors to provide broadband over, and
bitstream access, which provides competitors access to

customers to offer broadband services
but does not require significant investment in infrastructure for them to do so.
9

The local loop
unbundling initiative is premised on the fact that there is insufficient competition to the wireline
local loop for the
purposes of broadband internet access.


The key distinction that needs to be drawn here is between whether
fixed and wireless

services
are substitutes from a competition law perspective (which is the standard used in Electronic
Communications Act, no. 36
of 2005 (ECA)
)
, or whether indeed they are sufficiently
substitutable for the purposes of bringing about the desired outcome of
the efficient expansion
of
broadband access in South Africa.
T
he ECA process of defining markets and regulating
products is expensive, time consuming, and
is subject to substantial delays in implementation
.
10

Furthermore, these interventions must be reviewed regulatory.
If indeed there is sufficient
substitutability b
etween fixed and wireless services, the regulator might more productively invest
its scarce resources in other activities, such as the allocation of
and regulation of radio
frequency
spectrum, than investing resources into local loop unbundling and retail
price
regulation of ADSL lines provided by one of the operators, Telkom.


3.

What roles do wireless and fixed line services play in internet access?


Fixed and wireless substitution in other jurisdictions


Wireless broadband for residential and SOHO customers

is a relatively new development in
many developed countries, and has not reached the same proportion of the population as in
South Africa.
This is because t
raditional fixed line networks and cable networks in developed
countries tends to cover a large pro
portion of households
11
, which
has meant less opportunity
for

wireless broadband development

there than in developing countries where the fixed line
network is not as comprehensive in coverage and where cable networks often do not exist
. It is
therefore dif
ficult to draw conclusions about fixed and wireless substitutability from
developed
country

jurisdictions for South Africa. Nonetheless, a few important regulatory decisions
certainly have not ruled out fixed and wireless broadband substitutability.





9

See
Department of Communications,
Local Loop Unbundling Com
mittee rep
ort (2007), section 1.

10

For example, ICASA’s initial document on market definition in respect of end to end leased lines was
issued in May 2007 (see ICASA, 2007,
notice of intention to define
relevant

end to end leased lines and
other wholesale markets i
n terms of Section 67(4) of the Electronic Communications Act 36 of 2005 on
the 3
rd

of May, 2007).
Hearings were held later that year. To date, ICASA has not issued a findings report
relating to markets for end to end leased lines. Similarly, in January 20
07, ICASA issued a notice to
define relevant

call termination markets. (
See ICASA, 2007, ‘
N
otice of intention to define
relevant

wholesale call termination markets in terms of section 37(4) of the Electronic Communications Act 36 of
2005
’.) While a
findings report was released in November 2007 (see ICASA, 2007, ‘Publication of the
findings pursuant to section 4C of the Independent Communications Authority of South Africa Act no. 13
of 2000 as amended of an enquiry conducted in terms of section 4B of
the ICASA Act’), there are no clear
indications of what regulation, if any, will be imposed on operators in the sector to date, almost three
years since the beginning of the process.

11

See, for example, Sidak, J.G. & Hausman, J.A., (2005).

4


4


In pa
rticular, the European Commission in its recent margin squeeze decision in
Telefonica

did
not rule out competition from wireless broadband as an alternative to fixed
-
line broadband.
12

Since wireless local loop broadband links accounted for less than 0.1% of

all broadband lines in
Spain

(where the incumbent complained about, Telefonica, competes)
, wireless was considered
to be in a nascent stage of development and therefore an insufficient alternative to ADSL at the
time of the EC’s decision.


In the more re
cent United States Supreme Court decision in
Linkline

(which, like
Telefonica
,
concerned margin squeeze in markets for ADSL services)
,
13

the court held, referring to a
Federal Communications Commission ruling, that:


‘... it seems quite unlikely that AT&T
would have an antitrust duty to deal with the
plaintiffs. Such a duty requires a showing of monopoly power, but
-
as the FCC has
recognised, 20 FCC Rcd., at 14879
-
14887
-
the market for high
-
speed Internet service is
now quite competitive; DSL providers fact s
tiff competition from cable companies and
wireless and satellite providers’.


While the FCC and the Court would have been referring more to competition from cable
companies than to wireless providers, the role of wireless as a competitor to fixed line DSL
broadband is clearly recognised.
14



In New Zealand, the Commerce Commission held in 2003 that competition from fixed
-
wireless
networks would likely ‘evolve and reduce the extent of [Telecom’s] bottleneck over time’.
15

Indeed, the Commerce Commission include
d fixed
-
wireless in the same relevant market as the
fixed line local loop.
16


Fixed and wireless residential and SOHO services available in South Africa


The key debate in local loop unbundling in South Africa is the extent to which the wireless local
loop
is a substitute for the copper
-
based fixed line local loop (high bandwidth fibre local loops
are not the subject of this paper). There are a range of wireless broadband alternatives in South
Africa, including fixed
-
wireless solutions based on the CDMA
-
2000

standard offered by Neotel,
fixed
-
wireless solutions based on Wi
-
Max offered by Neotel, Iburst and Vodacom, and mobile
wireless based on UMTS (3G) and EDGE technologies offered by MTN, Vodacom and Cell C.
That wireless broadband has been growing dramatica
lly in South Africa is not in question (see
Table 1); the number of wireless and fixed line broadband subscriptions was almost equal in
2007, and wireless subscriptions are predicted to have overtaken fixed line subscriptions.
Vodacom alone reports that in

the first half of 2009, it had 527,000 broadband connectivity
packages. This is almost as many as the 584,015 ADSL subscriptions reported by Telkom,
reported as at March 2009.
17

This is in spite of dramatic reductions and ADSL prices and
improvements in sp
eed over time (see Table 2).





12

See European C
ommission decision in
Case COMP/38.784


Wanadoo España vs. Telefónica.

13

See Supreme Court of the United States decision in Pacific Bell Telephone Co. & others vs. Linkline
Communications, no 07
-
512.

14

See, for example, Hausman & Sidak (2005: 197); betwee
n December 1999 and June 2003, fixed
wireless connections increased from 50,000 to 300,000, although these connections only account for
1.3% of total high speed connections in the US.

15

Cited in Hausman & Sidak, (2005: 218).

16

Ibid.

17

See Telkom SA Limited
, Provisional results presentation for the year ended 31 March 2009.

5


5




Table
1
: Fixed vs. Wireless broadband connections growth: 2003


2008




2004

2005

2006

2007

2008

ADSL subscribers

20,145

58,278

143,509

255,633

412,190

Wireless Subscribers

1,400

12,700

79,900

223,000

812,000

Total broadband
subscribers

21,545

70,978

223,409

478,633

1,224,190

ADSL as % of total

93.5%

82.1%

64.2%

53.4%

33.7%


Source: Internet Access in South Africa, 2007, World Wide Worx, p. 34, and Telkom annual reports

Note: 2008 wireless
subscribers is a World Wide Worx estimate


Table
2
: Prices for ADSL access lines: 2004


2007 (Rands per unit of speed)



384 kbps

512kbps
(Residential)

512kbps
(Business)

1
-
4Mbps

Mar 04



680

800



Mar 05

449

599

699



Aug 05

359

477

477

680

Aug 06

245

362

362

516

Aug 07

152

326

326

413


Source: Internet Access in South Africa, 2007; World Wide Worx, p. 22



The growth of mobile broadband is driven by significant increases in broadband network
coverage. MTN has 3G services
available to 35% of South Africa’s population
18
??DQG?9RGDFRP¶V?
3G network covers 27% of the population, largely urban areas.
19

Vodacom’s EDGE network
covers 26% of South Africa’s population, and covers both urban and rural areas.

Both MTN and
Vodacom are con
tinuously investing in their rollout of wireless broadband infrastructure, and
therefore mobile wireless broadband coverage can be expected to grow.

This must be
contrasted with Telkom’s fixed line network over which ADSL can be offered: In terms of
networ
k coverage, Telkom’s ADSL network is available at 92% of Telkom’s network.
20

There is
therefore little scope for greater fixed line broadband network coverage in South Africa. Fixed
-
wireless operators will likely expand the wireless broadband market even mo
re. Neotel’s fixed
-
wireless CDMA
-
2000 based solution is currently being rolled out,
and is

estimated to be
attracting customers at a rate of 150 per day.
21

Neotel, controlled by Tata Communications, a
global tier
-
1 internet services provider, is a committed

entrant with a large amount of capital
committed to the company and a substantial infrastructure build plan.
22

IBurst, alongside its
consumer wireless solution, has begun to offer Wi
-
Max at relatively competitive prices.
23






18

See MTN annual results

presentation for the year ended 31 December 2008.

19

See Vodacom annual
report 2009.

20

See Telkom annual results, 2008.

21

MyBroadband, 5 July 2009, ‘Neotel not
another Sentech’
.

22

Neotel, 10 December 2008,

‘Neotel in groundbreaking finance deal’, and
Neotel, 15 January 2009,
‘MTN, Neotel fibre
network gets underway’.

23

See

Iburst
Wi
-
Max pricing and
offers
available at MyBroadband.

6


6


While it may well be the case that Telkom’s prices for ADSL access lines are significantly above
competitive levels, and therefore significant increases in wireless subscriptions may be driven
by excessively priced ADSL products, wireless offerings provide

a competitive alternative at
least to some extent, which has meant
reductions in

ADSL access line prices

over time

(see
Table 2 above). Furthermore, at current ADSL speeds deployed by Telkom

(384kbps, 512kbps
and 1
-
4Mbps)
, wireless speeds are competitive:

Neotel’s ‘NeoConnect Prime’ product offers
access speeds of up to 2.4Mbps
, priced at R279 per month for 1GB. Iburst
’s

512kbps 5GB
shaped product is priced at R690 per month. While these prices and speeds are relatively high
by international standards (in
the US, for example, Verizon offers a 768 kbps DSL service for
R145 per month for a service with no explicit cap
24
), at least some proportion of this price
difference is accounted for not b
y

differences in local loop prices but the
high prices for
national
long distance

leased lines

within South Africa and international private leased circuit
s

which
have hitherto been supplied exclusively by Telkom. This is about to change
significantly

with the
construction by Neotel and MTN of a 5,000 kilometre national fi
bre network, due to be
completed in April 2011, and with the recently lit Seacom cable and EASSY cables currently
being built.

Indeed, Telkom has recently reduced its prices for national high bandwidth end to
end leased lines

significantly.
This should res
ult in prices for high speed internet declining at
least somewhat and for download caps to be relaxed.


If Telkom rolls out ADSL 2+ or local loop unbundling provided access to the local loop for rivals
to roll out ADSL 2+, which offers speeds of up to 20 M
bps, wireless alternatives currently
available would impose less of a competitive constraint. However, ADSL speed varies
depending on the distance of the user to the local Telkom exchange. Furthermore, by the time
Telkom or a competitor making use of LLU r
olls out ADSL 2+,
(LLU is only
planned for 2011
25
)
,
the next GSM mobile broadband standard, Long Term Evolution (LTE), which promises
maximum download speeds of 172Mbps, and average speeds that consumers can expect of
between 2 and 10 Mbps, will in all like
lihood be available.
26

Therefore, any future improvements
in fixed line broadband product quality are likely to be met with competition from future
improvements in wireless broadband technology.


4.

Local loop unbundling vs. wireless internet access providers
for South Africa


Experience with local loop unbundling in other jurisdictions


Local loop unbundling in general worldwide, despite its pursuit in, for example, European Union
countries, has largely not achieved the facilities based competition, investment

by the
incumbent operator, low prices and innovation in retail markets, and competition in wholesale
access that the policy is designed to achieve.
27


Furthermore, the lack of success of local loop unbundling elsewhere was one of the reasons the
New Zealan
d Commerce Commission decided not to implement local loop unbundling in 2003.
28




24

See, for example,

Verizon’s USA website, as at 16 August 2009.

Exchange rate of R8 per dollar was
used.

25

This is set out in a policy directive from the Minister of Communications in government gazette no.
29923, 25 May 2007, ‘Electronic Communications Act (36/2005): Noti
ce inviting comments on proposed
policies and policy directions’.

26

This technology was recently demonstrated in South Africa by Nokia Siemens Networks. LTE devices
are only expected to become widely available in South Africa in 2011 and 2012. See MyBroadb
and, ‘160
Mbps realistic on LTE’, 12 August 2009.

27

See, for example, Hausman & Sidak, (2005), Atkinson (2009: 16), and Sutherland, (2007).

28

Cited in Hausman & Sidak, (2005: 219).

7


7


Facilities based entrants argued in New Zealand that mandatory local loop unbundling would
undermine their incentives to invest in competitive local loops.
29


The US experience w
ith local loop unbundling saw a series of FCC policies overturned by
courts, which resulted in billions of dollars of wasted investments during a decade of legal
uncertainty.
30

The LLU obligations on fixed line incumbents have since then been significantly
curtailed.
31


The European Commission has been more successful in unbundling the local loop, although the
regulatory system is highly complex and changes continuously.
32



In general, it appears as though local loop unbundling has met with limited or at best

mixed
success

internationally
.


The role of wireless access in other countries and the need for efficient spectrum allocation


The alternative to regulatory focus on local loop unbundling is ensuring that radio frequency
spectrum is efficiently allocated

and that the regulatory environment is favourable to new
entrants. In a number of Latin American countries, wireless networks

based on Wi
-
FI (IEEE
standard 802.11)

set up by communities, municipalities, and NGOs have brought about service
where the incumb
ent operator did not find it profitable to do so.
33



Wireless

Wi
-
Fi

competition need not be provided by the public or NGO sector entirely however.
Wireless, localised competition was achieved in the US by allowing un
-
licenced use of radio
frequency spectru
m of over 550 Mhz of spectrum.
34

There are an estimated 6,000 wireless
internet service providers (WISPs) in the USA.


This suggests that the minimum efficient scale for operators at the local loop level has declined
dramatically.
35

However, regulatory limitations in respect of radio frequency allocation has led to
business uncertainty and limited incentives to invest in many developing countries. For
example, in India, interconnection charges and licence fees were first focused on i
n the
conversion of fixed and wireless licences to technology neutral licences, instead of issuing the
appropriate frequencies.
36


In many Latin American countries, a significant proportion of spectrum is being allocated for un
-
licenced use in the 2.4GHz ba
nd.
37

Further spectrum is being allocated in the 5.725


5.850MHz
spectrum for unlicenced use in many of these countries, and some spectrum in the lower portion
of the 5 GHz band (5150


5350 MHz) is being allocated for unlicenced use.
However, the key



29

Cited in
Ibid,
223.

30

D
issenting statement of Commissioner Michael J. Cop
ps, FCC 04
-
290.

31

See FCC (2005), 04
-
290.

32

Sutherland (2007: 15).

33

For example, in Argentina, co
-
operatives originally formed out of agricultural co
-
operatives service 6%
of all telephony lines.
See Galperin, H., Bar, F., (
2006

: 13).

An NGO in Peru linked 12 villages together
using a Wi
-
Fi network sharing a single 512kbps link.
Ibid.
, (
p.

14).

A municipality in Brazil in Pirai
established a Wireless Local Area Network (WLAN) to connect all public buildings, 21 schools, two
telecentres
and a community centre to broadband services.
Ibid.
, (
p.

16).

34

See Galperin, H., Bar, F., (
2006:
footnote 5).

35

See Galperin, H., Bar, F., (
2006
:
8
).

36

See Samarajiva, R (200
6
: 65).

37

See Galperin, H., Bar, F., (
2006
: 21).

8


8


issu
e is the regulation of unlicenced spectrum. For example, out of 25 Latin American countries
surveyed in the study, a significant proportion of the countries limited the power of Wi
-
Fi
transmitters to 1W (the US Federal Communications Commission standard),
which limits the
signal to reach only a few hundred metres.
38

Furthermore, a significant number of countries
require operators to register public access points, which further increases the costs of entry.


In the mean time, many small wireless operators op
erate in a regulatory ‘grey
-
zone’, which
reduces certainty and limits incentives to invest.


The role of frequency spectrum allocation is not limited to providing for unlicenced use of
frequency spectrum for Wi
-
Fi (IEEE 802.11 standard) use. According to S
amarajiva (2007: 66),
the key is to focus on spectra in which technology providers have achieved economies of scale
and can provide equipment and handsets cheaply. This has occurred particularly in the GSM
900 and GSM 1800 bands. Samarajiva (2007: 66) sugg
ests that three operators could operate
in the CDMA 800 band, four operators can operate in the GSM 900 band, and further services
can be offered in the GSM 1800 and CDMA 1900 bands.


This suggests that, if wireless spectrum was properly managed, there wou
ld be significant
scope for wireless competition to fixed line networks.


The role for wireless competition in South Africa


The recent
Altech

judgement has meant that hundreds of Value
-
Added Network Services
licencees are now able to provide their own tel
ecommunications network facilities.
39

While this
has not led to new announcements of substantial new national networks, wireless or otherwise,
it has afforded wireless access providers largely using the Wi
-
Fi standard (IEEE 802.11) to offer
network services

to their customers. In South Africa, unlicenced frequency has been allocated in
the 2.4 GHz and 5.4


5.8 GHz bands.
40

Off the shelf equipment is available for the 5.4 GHz
band. However, the maximum power allowed for this band is 100mW, which allows for a
distance of only 100 metres outdoors. When directional antennae are used, this power can be
increased dramatically. However, this means that the legal limit for power in this frequency band
is exceeded. The maximum allowable power in the 5.8GHz band is 1W,

which allows for 10
times the distance being achieved.


The Wireless Access Providers’ Association estimates that there are 700 wireless application
providers in South Africa providing internet access to 60,000 customers. In a November 2008
survey, WAPA f
ound that the 23 respondents to their survey indicated they had 12,841
customers (57% growth),

and have

860 high sites (10% growth). 62% of customers were
consumers and 38% were businesses.
41

Annual revenue amounted to R55m (4% growth). In
order to resolve the problems associated with the lack of coverage due to power limitations in



38

See Galperin, H., Bar, F., (
2006
: 21).

39

Until the Altech decision regulatory uncertainty meant that VANS operators were not in a position to
build their own networks. The legal uncertainty which existed for almost 3 years (i.e. during the period of
the complaint) related to the Mini
sterial directive on self
-
provision which was subsequently retracted,
albeit through a press release. This regulatory uncertainty was resolved only late in 2008. Altech
Autopage Cellular (Pty) Ltd v the Chairperson of the Independent Communications Authori
ty of South
Africa
et al
, case No. 20002/08. The Minister decided not to pursue the appeal. See
Department of
Communications, November 2008,

Minister of Communications not to petition the Supreme Court in the
Altech matter’
.

40

See, for example, MyBroadban
d, 10 May 2009, ‘Are you breaking the law with your Wi
-
Fi antennae?’.

41

See Wireless Access Providers’ Association,

17 April 2009,

‘Wapa Industry Survey Results’.

9


9


the unlicenced frequency bands, WAPA and the Internet Services Providers Association (ISPA)
proposes a lite
-
lice
ncing (shared) spectrum management framework.
42


In respect of wireless access technologies that have wider coverage, such as Wi
-
Max, the
frequency available is
more
scarce. Wireless business solutions (Iburst), Neotel and Telkom
have all been allocated Wi
-
Max frequency. Vodacom uses Iburst’s Wi
-
Max frequency in what
appears to be a joint venture. Neotel has rolled out a residential solution based on CDMA
-
2000
technology, which indicates that it has received a frequency allocation in the 2 GHz spectrum.


The
re is therefore substantial scope for greater competition from wireless offerings in South
Africa, provided that radio frequency spectrum is properly allocated and regulated.


5.

Conclusions


Fixed and wireless inter
-
platform competition appears to be the bes
t solution for the expansi
on
of broadband in South Africa. As a result of competition from mobile wireless and fixed
-
wireless
alternatives, the role of local loop unbundling appears to be limited.

There are a growing number
of small entrants into the provi
sion of fixed
-
wireless alternatives in South Africa, alongside the
more established mobile
-
wireless providers (MTN, Vodacom and Cell C) and large new entrants
such as Neotel and Iburst. While the success of wireless at the expense of fixed alternatives
may

be due to Telkom’s slow introduction of relatively slow ADSL speeds at relatively high
prices, it is clear that wireless broadband is used by far more residential and small
-
office / home
office consumers in South Africa than fixed line broadband.


ICASA s
hould focus its regulatory efforts on better radio frequency spectrum allocation and
ensuring that a reasonable solution is found to small
-
scale Wi
-
Fi providers, rather than on local
loop unbundling, which promises to be expensive, and offers little in ret
urn in the context of
competition from wireless alternatives.


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42

See

MyBroadband, 23 July 2009,

‘Hand out spectrum
, says ISPA’
.

Similar proposals are made b
y
WAPA, see Wireless Access Providers’ Association, 9 July 2009, ‘WAPA encourages co
-
operation and
transparency in spectrum management’.

10


10


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FEDERAL COMMUNICATIONS COMMISSION,
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-
290
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11


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