40 No. 37261 GOVERNMENT GAZETTE, 24 JANUARY 2014 The issue of local loop unbundling and the list of essential facilities were raised by a number of submissions in the Framing Paper responses. The submissions raised the need for a more thorough implementation of the current legislation. Some complained that the potential lessee enters into discussions without any insight into the networks they lease and therefore the need for the dominant player to be held accountable for Quality of Service by way of a measurable Service Level Agreement. Some pointed to the fact that there are inordinate and unnecessary delays in entering into leases and that therefore ICASA should determine the reasonableness of the requests to lease on an urgent basis. The law requires the Authority to prescribe a list of essential facilities that must be subject to facility leasing regulations. Yet the law also limits the definition of essential facilities to those that cannot be duplicated for economic, environmental and technical reasons. The definition places a regulatory burden on the regulator to determine in an objective manner what cannot be economically, environmentally and technically duplicated. As an example, fixed local loops can now be substituted with wireless loops and can therefore in theory be excluded from the list of essential facilities. The law also focuses on copper lines as it exempts broadband infrastructure of operators with SMP so long as the network was built after the Electronic Communications Act of 2005 came into effect. The promotion of facilities leasing should be balanced against the desire for different operators to rollout networks so that there is also effective competition in the infrastructure provision layer. The impact of local loop unbundling as part of facilities leasing has to be weighed in relation to the incentives for the owners of the loop to invest further in fibre and other technologies that make broadband to the home possible. Similarly, facilities leasing and local loop unbundling must be weighed against the desire to encourage the electronic communications network licensees to invest in roll-out of fibre to residential areas and offices. The South African reality is that the only areas with extensive network coverage are in urban areas. The revenues used to construct and maintain networks and local loops in rural areas is dependent on profitable facilities in urban areas. A facilities leasing framework that does not take the reality of cross-subsidisation into account is most likely to affect the investments that must be made to extend networks and services to rural areas. 5.2.4.1.3 Market Concentration and the Significant Market Power (SMP) The Authority is required to prescribe regulations defining the markets and market segments, as well as define what constitutes acts that prevent or lessen competition. The Authority is also required to periodically review markets and market segments to determine if effective competition exists in any given market or segment. The Authority has powers to impose pro- competition conditions, including separation of accounts, price controls and prohibitions against discriminatory behaviour. Notwithstanding attempts to improve competition, the South African communications market is one of the most concentrated in the world taking fourth position after Mexico, Norway and New Zealand. The fixed market is still dominated by Telkom. Since its introduction into the market, Neotel is yet to make substantial inroads to change the market structure in a significant way. While the introduction of Cell-C in 2002 was aimed at opening up the mobile market, the operators who were established at the inception of the mobile market still dominate with significant market power. The assumed SMP regulation model that underpins the above-mentioned definitions and mechanisms is the Static Efficiency Model (SEM), which involves trying to achieve efficient production of existing services by implementing cost-oriented and non-excessive prices, minimising and ensuring fair network access and interconnection conditions and the 36 This gazette is also available free online at www.gpwonline.co.za