Independent Communications Authority of South Africa Strategic Plan 2013: continuation

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17 April 2013
Chairperson: Mr E Kholwane (ANC)
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Meeting Summary

The Independent Communications Authority of South Africa continued with responses to the questions asked by Members of the Committee during the briefing on the strategic plan and budget of the Authority on 16 April 2013.  Responses were provided to questions concerning the implementation of the broadband policy; the policy on and the allocation of frequency spectrum, the white space framework and the spectrum policy management model; non-compliance by licensed operators; the findings of the Auditor-General; unspent funds; outstanding debtors; skills capacity; local loop unbundling; industry forecasts, regulatory impact assessments and the South African Post Office.

Other questions concerned the procurement of broadcasting monitoring equipment; the amount spent on consulting services; weaknesses in the financial management systems and controls; the capturing and maintenance of licensee data; the closure of regional offices and the role of the Department of Communications.

The areas of concern to the Committee included divisiveness amongst Councillors; the need to document the decisions taken by the Council; the provision of minutes of Council meetings to the Committee; prior approval by the Department for documents submitted to the Committee; the failure to conduct a skills audit; the feasibility of the strategic plan and the setting of priorities; the planned restructuring of the Authority; internal processes and procedures and the outstanding ministerial policy directives.  A detailed report on the closure of regional offices and the plans to improve universal access to communications services (particularly in rural areas) was requested.

The Committee requested that the strategic plan be reviewed and resubmitted.

With regard to the third quarter 2012/13 performance report, Members asked questions about responsibility for the failure to achieve targets; the penalties imposed on non-compliant licensees; the discrepancy in the number of targets; the broadband maps provided by operators and changes in the framework for local loop unbundling.

Meeting report

Responses to questions asked during the briefing on 16 April 2013 by the Independent Communications Authority of South Africa (ICASA) on its strategic plan and budget
ICASA had briefed the Committee on the strategic plan and budget for the 2013/14 financial year on 16 April 2013.  Responses to Members’ questions were continued.

Mr William Currie, Councillor, ICASA responded to the questions on the implementation of the policy on broadband services.  The broadband targets were set by the Ministry for Communications and the role of ICASA was to provide support for the achievement of these targets.  ICASA had compiled a document that set out the guidelines for the rapid deployment of broadband infrastructure and clarified the processes that needed to be followed to obtain the necessary approval from the various government authorities.

Mr Philemon Molefe, Acting General Manager: Engineering, ICASA replied to questions on spectrum allocation and policy, the implementation of the white space framework, the approval of a management model and the quarterly World Radio-communication Conference (WRC) targets.  The policy directive on the high demand frequencies had not been issued by the Minister.  Consequently, ICASA was unable to license the high demand frequencies.  A memorandum of understanding had been signed with the Council for Scientific and Industrial Research (CSIR) on research in white space technologies.  ICASA had facilitated the conducting of trials during 2013.  The trials were expected to be concluded in 2014/15 and the results would determine the white space framework.  Contracts were signed with the Universities of Pretoria and Witwatersrand for the development of the management model.  The quarterly targets set by the various WRC study groups differed according to the priorities of each study group.

Ms Clarinda Simpson, Chief Financial Officer, ICASA responded to the questions concerning non-compliant operators, the findings of the Auditor-General and unspent funds.  Spectrum debtors and ECN/ECNS licensees were categorised separately for the collection of license fees.  Invoices for the ECN/ECNS license fees were issued by an automated licensing system.  However, the data for spectrum debtors involved a manual download from the financial system.  The human intervention in the process had resulted in errors, which was the cause of the audit qualification.  ICASA was in the process of acquiring new accounting software that would interface with the existing financial systems and ensure complete and accurate debtor information.  A total of R25 million in ring-fenced funding had not been spent in the 2012/13 fiscal year.  R15 million related to the acquisition of broadcasting monitoring equipment.  The contract was concluded at the end of 2012 and was currently in the process of being implemented.  The remaining R10 million was intended for equipment that could not be provided by local suppliers.  Ministerial permission to source the equipment from foreign suppliers was awaited.  Cash deposits totaled R100 million and was invested in fixed investment instruments.  The credit balances in the bank accounts were reported on a monthly basis.  ICASA had been successful in acquiring additional funding for specific projects in previous years but the request in June 2012 for additional funding for the acquisition of equipment was denied by the National Treasury.  Additional funding was approved for AFCON and the establishment of the Complaints and Compliance Committee (CCC).

Revenue collection had improved.  The majority of outstanding license fees had been collected from spectrum licensees.  The Department of Defence had not budgeted for the R189 million owed to ICASA and the unpaid license fees remained outstanding.  Certain outstanding amounts were under dispute as a result of the revised regulations coming into effect during 2012/13.  The remaining outstanding amounts were for small customers owing between R100 and R1500.  The challenge was that certain license fees were billed by the engineering department and not by the financial department of ICASA.

Mr Sipho Tsotetse, General Manager: Licensing and Compliance advised that ICASA had written to licensees to extend the licensing agreements.  However, certain licensees could not be found and it might be necessary to write off the outstanding debt.  There were currently 740 operational licensees, who were required to submit audited financial statements to ICASA.  The request for the submission of the financial statements would be published in the Government Gazette.  ICASA would be in a position to accurately determine which licensees were operational and to collect the licensing fees due more effectively in future.

Mr Themba Dlamini, Chief Executive Officer, ICASA responded to questions concerning skills development.  He conceded that ICASA suffered from a lack of skills but targets had been set for a skills development programme.  ICASA intended to establish a platform to discuss the issue of skills development with the stakeholders in the industry.

Mr Currie explained that ICASA had experienced difficulties in obtaining information from licensees that was required for preparing forecasts.  The information was eventually obtained two weeks earlier and ICASA was now in a position to use historical data as the basis for assessing future growth potential in the industry.  With regard to questions concerning local loop unbundling (LLU), he advised that the target was March 2014.  Draft regulations had been compiled and would be released in the near future.  ICASA had conducted extensive consultations before the draft regulations were compiled.  The regulations were aligned with the broadband policy and with the Broadband Act.  A Regulatory Impact Assessment (RIA) was not undertaken as a stand-alone activity but was a part of the development and formulation of regulations.  Questionnaires were sent to licensees to determine what impact the regulations would have on their operations and the responses received were taken into consideration.  A discussion document was issued, followed by further formal consultation with stakeholders and public hearings.  ICASA had undertaken a cost/benefit study as part of the development of local content regulations.  The impact on the sector resulting from the change from analog to digital broadcasting was being assessed.

With regard to the South African post Office (SAPO), ICASA played a dual role.  The focus was on the provision of basic mail services (e.g. letters, small parcels) and ensuring universal access to basic portal services at post offices.  ICASA was not concerned with SAPO’s courier services business.  ICASA would be advising the Minister on the proposed amendments to the Postal Services Act.  The financial difficulties experienced by SAPO would be taken into account.

Mr Dlamini said that a number of small licensees had closed down.  ICASA took the financial challenges experienced by the smaller operators into account.

The Chairperson said that skills development should be one of the key elements of the strategic plan.

Ms M Shinn (DA) asked when the broadcasting monitoring equipment would be installed and operational.  She asked when the accounting software for the invoicing of ECN/ECNS license fees would be installed.  She wanted to know the total amount owing to ICASA that was under dispute.  She asked if ICASA had considered suspending the licenses of operators that failed to respond to requests for information.  She asked for details of the notice in the Government Gazette.

The Chairperson asked how often licensee records were updated.

Ms S Tsebe (ANC) suggested that ICASA conducted a skills audit and submitted a report to the Committee.  The lack of technical capacity needed to be addressed as it was not acceptable that ICASA had to monitor customer compliance whilst borrowing equipment from customers.  She asked for details of the utilisation of external service providers and consultants.  She wanted to know how much was spent on consultants and what action had been taken to reduce the dependence on consultants.  ICASA had suffered a lack of financial management capacity in particular and the Auditor-General had commented on weak financial control measures.

Mr B Steyn (DA) noted that the managing and monitoring of the spectrum was currently a manual process.  ICASA had indicated that the process would be automated but the data would have to be entered manually.  He was concerned that the data that was captured would not be verified.  It was not desirable that invoices to licensees were issued by the engineering department whilst the finance department was responsible for license fee collection.

Ms R Lesoma (ANC) said that the ICASA strategic plan was disjointed and that a lack of coordination was apparent.  The Committee should consider amending the ICASA Act to specify formal qualification criteria for Councillors.  She asked why the issue concerning the lack of skills capacity at not been addressed earlier.  ICASA should have been aware that certain items could not be supplied by a local supplier.  She pointed out that Treasury regulations allowed for dual tenders to be issued to local and foreign suppliers in order to avoid delays in the procurement process.  ICASA displayed a lack of understanding of the urgency of the matter.

The Chairperson recalled previous undertakings given to the Committee by ICASA.  The Authority appeared to be back-pedaling on the promises that had been made.

The Chairperson and Ms Tsebe were critical of the manner in which the CEO had directed ICASA Councillors to respond to questions during the proceedings.  The Councillors were not responsible to the CEO.

Dr Stephen Mncube, Chairperson of the ICASA Council noted the objections of the Committee.

Mr Dlamini admitted that a recent skills audit had not been done.  However, the skills capacity in the revenue collection section had been assessed and recommendations had been made to address the matter.  ICASA had decided to appoint an external service provider to review the skills requirement for the entire ICASA organisation.  He undertook to provide the Committee with a more detailed report on ICASA’s skills development plan.  The contract to supply the broadcasting monitoring equipment had been signed.  Delivery of the equipment should have been before the end of the 2012/13 financial year but the target date was not met by the supplier.  The procurement process to acquire the accounting software for the ECN/ECNS licensing was under way.  He agreed that ICASA needed to have an implementation procedure in place.  He agreed that the requirements for a RIA needed to be reviewed as a market review was more suitable in certain instances.

Ms Simpson advised that the total amount under dispute was R120 million.  She provided some information on the action taken to recover the outstanding amounts but Ms Shinn requested that a detailed breakdown of the amounts owed by each licensee was provided to the Committee.

Mr Tsotetse advised that a service level agreement had been signed with the supplier to train the ICASA personnel on the new equipment.  He expected that the benefit of the training would only be seen in 2014/15.  Operational licensees were required to comply with regulations.  The printers of the Government Gazette had been instructed to place the notice and it was expected to appear during the following week.  ICASA did not update the data on licensees at set intervals but expected licensees to inform the Authority of any changes in contact details.  The CCC was currently engaged in identifying which licensees were currently operational.

Ms Lesoma asked what credit control procedures were implemented to ensure that license fees were paid timeously.  She wanted to know how ICASA planned to provide services to the more remote areas of the country after the provincial offices were closed down.

Mr Dlamini had informed the Committee during the previous day’s proceedings that ICASA was currently considering the interim measures and budgetary provisions relating to the closure of the provincial offices.  ICASA was of the opinion that there were more feasible alternatives, for example sharing the premises of the Government Communications and Information Services (GCIS) offices in the regions.  The regional manager was responsible for dealing with all issues arising from the regions and provinces.  A final decision had not been taken.

The Chairperson pointed out that ICASA’s mandate included improving access to services.  Government objectives included the provision of universal access to communication services.  However, the Authority was considering closing regional offices and had failed to spend its budget and ICASA’s priorities were being questioned.

Ms Tsebe said that it was clear that ICASA did not have a well-considered plan regarding the regional offices.  The Committee wanted to know if any studies were undertaken and what the rationale was for the closure of the offices.

Ms Shinn asked the CEO to provide the Committee with a detailed, written schedule of all outstanding debtors.  Mr Dlamini agreed to provide the information.

Mr Phosa Mashangoane, General Manager: Consumer Affairs, ICASA responded to previous questions regarding the strategy for improving access to services for the disabled community.  ICASA had led the South African delegation to the 2012 telecommunication conference held in Dubai and had raised awareness of the need to promote universal access to services.  Memoranda of understanding had been signed with various service providers.  Education officers were deployed to promote improved consumer protection and access to services, particularly in rural areas.  ICASA was currently developing a new model for the provision of services to consumers.

The Chairperson reminded ICASA that the Committee undertook oversight visits and had found that one person was responsible for the entire Free State and Northern Cape provinces.  The Committee had been informed that the Council had not approved the visits of education officers to the regions.  He was not convinced by the responses provided by ICASA to Members’ questions and wanted more information on how the education officers operated.  More clarity on what was done by ICASA to provide universal access to communication services was required.

Ms Tsebe was of the opinion that the current system of operations was ineffective.  Discussions with the education officers had revealed a great deal of frustration.  Operations were centralised in Sandton (Gauteng) but it was not clear what the various activities of the Authority entailed.  It would appear that the proposed new model for consumer services merely involved changing the targets for previous models.  The Committee wanted to hear what specific time frames had been set for the targets.

Ms Lesoma wanted more clarity on the role played by the Ministry and the Department of Communications (DOC) with regard to ICASA.  She wanted to see that ICASA followed a more integrated approach.  She asked for a detailed, written report on what services needed to be provided by regional officers and what resources were required to provide the services.  She felt that the responses to Members’ questions were inadequate.

Dr Mncube conceded that the points made by the Committee were valid.  There was good reason for closing the regional offices, which had been problematic in the past.  The Council would review the matter within a week and would provide a written response to the Committee.  The sharing of GCIS or Universal Services and Access Agency of South Africa (USAASA) premises was being considered as a more cost-effective alternative.  The implementation of new models was constrained by the lack of available funding.  ICASA was concerned over the adverse audit outcomes but much had been done to achieve clean audit status.  He conceded that the management of licensee data had been haphazard.  An IT committee had been established but ICASA still lacked the necessary data architecture.  The needs of each division were being determined so that an integrated system could be developed.  ICASA had commissioned KPMG and other IT specialists to provide assistance.  A memorandum of understanding had been signed with the CSIR to improve access to services and the prototype exercise conducted in a remote rural area of the country had been successful.  He agreed that progress had been slow.  The policy was to consider local service providers in the first instance but in certain cases, equipment needed to be sourced from foreign suppliers.

The finance department was severely affected by a lack of skills and the weaknesses in this area had resulted in adverse audit comment.  Eight vacant positions were recently filled and the problems experienced were being resolved.  The General Manager: Human Resources position was currently vacant.  He agreed that impact assessment studies were important and were long overdue but ICASA suffered from a lack of funding and technical skill in this regard.  A more detailed briefing on the various problem areas could be provided to the Committee if necessary.

The Chairperson suggested that ICASA approached the Department and academic institutions to assist with RIA.  The development of regulations needed to be more scientific.  The Committee had studied the various documents provided by ICASA but was not convinced that the strategic plan was achievable.  The allocation of funding depended on the priorities that had been set.

The Chairperson summarised the major areas of concern to the Committee.  The Council appeared to be divided and incoherent, with Councillors acting on their own initiative and giving unauthorised interviews with the media.  Councillors were urged to use the existing structures (i.e. the Ministry of Communication and the Portfolio Committee) to resolve disputes.  It was necessary to formally document the decisions taken by the Council.  Copies of the minutes of Council meetings heeded to be made available to the Committee.  Documents submitted to the Committee needed to be approved by the DOC before submission.  The Committee was empowered to take action if necessary and would not wait for the Authority to collapse.  Representatives had avoided responding to Members’ questions concerning skills and had only admitted that no skills audit had been undertaken during the current proceedings.  It was essential to determine what skills were available, where the gaps were and what action needed to be taken.

The Committee was not convinced that a viable strategic plan was in place.  ICASA was requested to prepare a comprehensive plan and to provide clear and detailed information on what action would be taken to implement the plan.  Funding constraints demanded a more creative approach and it was necessary to consider priorities and cost/benefit criteria.  For example, the reduction of the cost to communicate was a high priority and the Committee wanted to see a clearer focus and a coordinated effort to address the issue.  The planned restructuring of ICASA needed to be finalised.  The restructuring plan would provide more clarity on how the strategic plans would be implemented.  The Committee needed to be informed where action needed to be taken by the DOC and by the Ministry.  A detailed response to the issue of the closure of ICASA’s regional offices was required.  The WSB matter was badly handled and did not reflect well on ICASA.  It might be necessary to investigate the matter further and address the allegations that Councillors were “in the pockets of operators”.  ICASA needed to review internal processes and procedures.  The Committee noted that certain improvements had been made and believed that further progress would be made.

Ms Tsebe asked the DOC to provide a written response to the Committee on the delay in the issuing of policy directives that prevented ICASA from doing its work.  The Committee was concerned over the number of outstanding ministerial policy directives.

The Chairperson pointed out that the DOC would be held accountable for the performance of ICASA.  The Department needed to have the necessary capacity to implement the Committee’s recommendations as well.

The Committee welcomed Mr Z Nkosi, who was appointed CEO of USAASA with effect from 1 April 2013.  Mr Nkosi was requested to liaise with ICASA on the possibility of sharing USAASA premises with ICASA.

Responses to questions on the third quarter 2012/13 performance report
Ms J Killian (COPE) asked if ICASA, the DOC, licensees or another party was responsible for the failure to achieve the objectives that had been set.  She understood that licenses were granted for one year and asked if the renewal of the license was affected if the licensee was non-compliant.

Mr Steyn asked who was responsible for ensuring that compliance information was provided by licensees and if any penalties were imposed if operators were not compliant.

Ms Shinn referred to the summarised report provided to the Committee by ICASA.  ICASA originally had 43 targets for 2012/13.  The report indicated that 7 targets were achieved and 33 targets were not achieved.  She asked what had happened to the remaining three targets.

Mr Tsotetse advised that ICASA had issued a compliance procedure manual to assist operators.  The requirement to submit details of the status of shareholders was a new requirement (since June 2012).  ICASA would only be in a position to report on the shareholding of operators at the end of 2013/14.  Instances of non-compliance were referred to the CCC, which would recommend a penalty.  The onus was on licensees to provide the information to ICASA.  ICASA interacted with the licensee if there was a problem.  However the intention was not to “babysit” operators and the licensees should suffer the consequences if they failed to comply with the licensing conditions or failed to keep the Authority informed of changes.

Ms Killian observed that ICASA appeared to have achievable quarterly targets.  She agreed that licensees should not be allowed to get away with non-compliance as this affected the performance and credibility of ICASA.  She urged ICASA to implement more stringent measures to ensure compliance by the licensees.

Mr Steyn commented that the compliance information required from operators included data other than equity ownership.

Ms Tsebe remarked that ICASA processes took too long.  She noted that a report on the promotion of an efficient postal sector was due at the end of March 2013.  She asked if the report had been completed.

Ms Shinn noted that Telkom had submitted a broadband map.  She asked if the other broadband suppliers had submitted maps.

Mr Tsotetse explained that ICASA had not initially required licensees to keep the Authority informed of changes.  More information was required from operators since 2008, which allowed ICASA to track changes in the industry, to identify where interventions were necessary, to identify growth points and to predict future developments.  ICASA had developed a framework and issued a manual to assist operators in providing the required data.

Mr Molefe confirmed that the target for the development of the draft broadcasting frequency plan had not been met.  The plan was impacted by other plans.  ICASA had appointed a service provider to assist with the development of the plan.

Ms Killian asked if all the target dates were met.  The Committee needed to ascertain that there was no impact on consequential targets.

Mr Dlamini advised that certain targets were achieved only in the fourth quarter of 2012/13.

The Chairperson asked ICASA to provide the reasons for the failure to meet the targets.

Mr Dlamini offered to prepare a separate briefing on the targets that were not met.

Mr Currie advised that the other broadband operators had provided maps during the first and second quarters of the year.  The Telkom map was only received during the third quarter.  The quarterly report excluded retrospective information.  A pilot broadband map had been drawn up but was not yet available to the public.  The guidelines for the rapid deployment of broadband infrastructure were not completed and further engagement was necessary.  A progress report was submitted to the ICASA Council for consideration.  The LLU target was not achieved.  Telkom claimed that the cost involved was R3.4 billion.  ICASA had requested more information, which was not received.  The CCC recommended a different approach by ICASA to LLU in August 2012, which required Council approval.

The Chairperson noted that ICASA had presented a framework for LLU to the Committee.  The CCC subsequently imposed changes to the approach to LLU.  It was not clear if the CCC was instructing the ICASA Council on what needed to be done with regard to LLU.

Ms Nomvuyiso Batyi, ICASA Councillor advised that ICASA had a plan in place.  However, Neotel had lodged a complaint against Telkom.  ICASA was not involved in the dispute.  The CCC had considered the legal requirements and the policy directive and arrived at the conclusion that a different section of the Act was applicable.  Neotel, Telkom and ICASA were all bound to the CCC decision.

The Chairperson asked if the existing LLU framework was still applicable or if it would be necessary to undergo another lengthy and costly public participation process.

Ms Batyi replied that ICASA had considered the CCC ruling and was currently implementing it.  Draft regulations were being developed but had not been published for comment.  Certain items in the framework might not be implemented and the framework needed to be reviewed.  A plan of action had been developed and would be presented to the Council at its next meeting.

Ms Killian understood that Telkom had an extensive copper-based network.  It was not clear how useful the copper network would be in the broadband fibre-optic environment.  She wondered if LLU should be regarded as a high priority.

Mr Currie explained that the copper network was competition for the high-speed fibre-optic network.  The European Union obliged operators to maintain the copper network.  Telkom planned to improve the equipment connected to the copper network and it was expected to remain for a considerable period in the future.

Mr Molefe advised that the frequency migration plan and the broadcasting frequency plan had been published.  The licensing of the available spectrum had been postponed to the following year.  The ministerial policy directive was awaited.  The available funding would be carried over to the following year.  The policy directive for the open access model was delayed and was not issued by the end of the third quarter.  ICASA needed to ensure that the type approval framework was not in conflict with applicable legislation.  The type approval framework made it easier to introduce new equipment arising from technological developments.  The framework was reviewed on an annual basis.

The Chairperson said that the issue was whether or not the Committee should consider the third quarter 2012/13 report when the 2013/14 strategic plans had not been finalised.  The Committee expected the DOC to follow a common, uniform approach to the documentation provided by all entities.  The documents provided by ICASA could be accepted but care needed to be taken that the content was accurate and complete.  The practice of merely copying and amending previous documents was discouraged.

Dr Mncube thanked the Committee for the input provided, which would assist ICASA to improve.  He agreed that a uniform approach to documentation would assist the entities.  The regulatory element of the ICASA mandate needed to be supported by a concern for consumers.  The issue of regional representation would be reconsidered by ICASA.  The Committee had raised concerns over the conduct of Councillors and the apparent division within the Council.  The conduct of Councillors needed to be ethical and the confidentiality of Council proceedings had to be respected.  The Council and the management of ICASA needed to work together.  He asked the Committee to allow him the opportunity to resolve the matter.  Access to ICT should be a basic right and ICASA had a significant role to play in ensuring universal access to communication by all.

The meeting was adjourned.


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