Broadcasting Digital Migration: update by Ministers Muthambi & Cwele, SAPO, Sentech, USAASA

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Communications and Digital Technologies

15 September 2016
Chairperson: Ms M Kubayi (ANC) Chairperson: Mr C Maxegwana (ANC)
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Meeting Summary

Both Ministers of Communications and Telecommunications and Postal Services, the South African Post Office (SAPO), Sentech and Universal Service and Access Agency of South Africa (USAASA) were present to provide a progress report on Broadcasting Digital Migration.

Minister of Communications, Faith Muthambi, said that with the split of the two departments in 2014, it was not clear which department was responsible for the Broadcasting Digital Migration (BDM) project. The position was clarified by the Presidential Proclamation of 2 December 2014, which stated that the Department of Communications (DoC) was responsible for implementing the BDM project. The project was handed to her Department on 31 January 2015. Her department would update both Committees on progress since March 2015. She noted that a lot had been achieved, including the adoption of the amended BDM policy and installation of set-top boxes (STBs) and registration of consumers in four provinces: Northern Cape, Free State, Mpumalanga and Limpopo. The dual-illumination performance period was declared on 1 February 2016. There were bilateral engagements with SADC neighbouring countries and agreements were signed about the elimination of TV broadcasting frequency interference. These agreements were guided by the SADC Protocol signed in 1996 under President Mandela’s leadership. The implementation of the project was however challenged by financial constraints and litigation.

The Acting Director General of the Department of Communications noted that the Digital Terrestrial Television (DTT) regulations were completed and published and the regulations for digital channel licensing was finalised. He noted that that the DTT South African National Standards (SANS) 862 (DVB-T2) and DTH SANS 1719 were completed and published in 2015 and IDTV SANS 10352 was completed in September 2015. The Integrated Digital Televisions (IDTVs) were the future as per Cabinet’s approved STB Manufacturing Sector Development Strategy. They were available at retailers.

The terrestrial and satellite network was completed. The network was optimised and ready across the country. All 183 analogue transmitters across the country were configured with the DTT network and were in full operation. The phases of digital switch-on and analogue switch-off plan were outlined. Frequency interference analysis was conducted for all neighbouring countries and no inference was reported to date.

For the acquisition of STBs and accessories, a panel of 27 manufacturers was appointed to supply DTT STBs, antennas and satellite dishes. Purchase orders were placed with manufacturers in August 2015 and the production of the STBs and accessories commenced in November 2015 with expectation of their availability in December 2015. Registration commenced in the Square Kilometre Array radio telescope (SKA) area, Northern Cape, Free State and Mpumalanga and Limpopo for the STBs: 32 876 registrations had been recorded of which 30 056 qualified. A total of 13 339 installations had been completed and digital services activated. The number of STBs issued or exchanged was 15 802. The quantity of STBs delivered to the SAPO warehouse was 1 034 579 and their total value was R15 286 621. The distribution of the STBs was targeted to take four years. The manner in which the distribution roll out plan could be re-arranged as the project was implemented was noted. The public and consumer awareness strategy was approved in July 2015 and the campaign was launched in the same year.

Free-to-air broadcasters made their digital content available on the digital platform in December 2015 and the dual-illumination performance period commenced on 1 February 2016 and this meant that the network was deployed across the country. Broadcasters had begun to apply for and launch new channels with ICASA. The DoC was pleased to announce that seven young people completed installer training in the Northern Cape and that there would be training of at least 10 installers per local municipality. At least 2 780 young people would be trained nationally.

The major challenges were highlighted. The implementation of the BDM project was challenged by lack of funds. There was no adequate fund for dual-illumination, STBs and related accessories, public awareness, a contact centre, and warehousing of STB kits. Apart from financial challenges, the legal challenges were acknowledged. eTV challenged clause 5.1.2(B)(a) of the 2015 Digital Migration Policy which stated that “the STB control system for the free-to-air DTT STBs shall not have capabilities to encrypt broadcast signals for the subsided STBs. The High Court ruled in favour of the DoC and eTV appealed the decision in the Supreme Court of Appeal (SCA) which upheld the appeal. The DoC had approached the Constitutional Court for review of the constitutional implications. In the conclusion, it was noted that the success of the project squarely depended on 7C’s. These were cost, conformance, coverage, co-operation, content, communication and consumer support.

Minster of  Telecommunications and Postal Services, Siyabonga Cwele, noted that the BDM was a mass project that needed more funds. Understanding the purpose of the project was essential. Much of the project was transitional and had a significant impact on social transformation given that there was a need to assist the poor to migrate from analogue to digital transmission, especially those who could not afford it. The key to success of the project was cooperation amongst the departments and entities concerned. The main challenge identified as a stumbling block was funding. The absence of infrastructure in the rural areas was also problematic. In addition, many people were not aware of the project due to difficulties in running the awareness campaign. Mass media was crucial in running an awareness campaign. However, it was important to see the project running successfully. In his view, the local manufacturing of the STBs could bring down the total cost of the project and even create jobs.

Members felt that implementation was at a slow pace and delays would lead to wasting the budget on non-budgeted items such as warehousing of the STBs and litigation. Emphasis was placed on increasing the space for the success of the project within a reasonable time. Members asked about STB storage costs and the impact of this on service delivery, the cost of installing a STB per household, when the decision of the Constitutional Court would be delivered since it was holding up BDM implementation, what happened with the inquiry conducted by National Treasury into the procurement process, the training offered to young people to become installers, the switch on date for digital broadcasting, why the deaf community in the Northern Cape was not aware of the BDM project, the financial impact of installing the STB kits if only 13 339 installations have been completed so far, when installation of the five million STB kits would be completed, the ownership of companies authorised to manufacture/supply the STBs, the capacity of SAPO in terms of personnel in rural areas, why some applications were disapproved, and exact shortfalls in funding.
 

Meeting report

The Chairperson welcomed Minister of Communications, Faith Muthambi, and Minister of Telecommunications and Postal Services, Siyabonga Cwele.

Minister of Communications introductory remarks
Minister Faith Muthambi said the BDM project was the flagship of the Department of Communications. With the split of the two departments in 2014, it was not clear which department was responsible for the Broadcasting Digital Migration (BDM) project. The position was clarified by the Presidential Proclamation of 2 December 2014, which stated that the Department of Communications (DoC) was responsible for implementing the BDM project. The project was handed to her Department on 31 January 2015. Her department would update the Committees on progress since March 2015. She noted that a lot had been achieved, including the adoption of the amended BDM policy and installation of set-top boxes (STBs) and registration of consumers in four provinces: Northern Cape, Free State, Mpumalanga and Limpopo. The dual-illumination performance period was declared on 1 February 2016. There were bilateral engagements with SADC neighbouring countries and agreements were signed about the elimination of TV broadcasting frequency interference. These agreements were guided by the SADC Protocol signed in 1996 under President Mandela’s leadership. The implementation of the project was however challenged by financial constraints and litigation.

Broadcasting Digital Migration (BDM) briefing by Department of Communications
The briefing by Mr Ndivhuho Munzhelele, DoC Acting Director General, focussed on progress on the BDM policy framework, DTT regulations, DTT and Direct To Home (DTH) standards, transmission network, radio frequency spectrum harmonisation, set-top-boxes (STB) acquisition and distribution, public and consumer awareness, digital content, viewer migration; and implementation challenges. He noted that in March 2015, Cabinet approved the final amendments to the BDM policy that unlocked the project implementation. The STBs would include a control system. Free STBs and accessories would be provided by government to five million television-owning poor households. The Minister of Communications would announce the digital switch-on and analogue switch-off dates after consultation with Cabinet.

The DTT regulations were completed and published and regulations for digital channel licensing was finalised. He noted that that the DTT South African National Standards (SANS) 862 (DVB-T2) were completed and published, DTH SANS 1719 were completed and published in 2015; IDTV SANS 10352 was completed in September 2015. He remarked that the IDTVs were the future as per Cabinet’s approved STB Manufacturing Sector Development Strategy. They were available at retailers.

The terrestrial and satellite transmission network had been completed. The network was optimised and ready across the country. All 183 analogue transmitters across the country were configured with the DTT network and were in full operation. He noted the phases for digital switch-on and analogue switch-off plan. Frequency interference analysis had been conducted for all neighbouring countries and no inference was reported at the time of briefing the Committee.

For the acquisition of STBs and accessories, a panel of 27 manufacturers was appointed to supply DTT STBs, antennas and satellite dishes. Purchase orders were placed with manufacturers in August 2015 and the production of the STBs and accessories commenced in November 2015 with expectation of their availability in December 2015. Registration commenced in the Square Kilometre Array radio telescope (SKA) area, Northern Cape, Free State and Mpumalanga and Limpopo for the free STB: 32 876 registrations had been recorded of which 30 056 qualified. A total of 13 339 installations had been completed and digital services activated. The number of STBs issued or exchanged was 15 802. The quantity of STBs delivered to the SAPO warehouse was 1 034 579 and their total value was R15 286 621. The distribution of the STBs was targeted to take four years. The distribution roll out plan could be re-arranged as the project was implemented. The public and consumer awareness strategy was approved in July 2015 and the campaign was launched in the same year.

Free-to-air broadcasters made their digital content available on the digital platform in December 2015 and the dual-illumination performance period commenced on 1 February 2016 and this meant that the network was deployed across the country. Broadcasters had begun to apply for and launch new channels with ICASA. With regard to contribution to 9-Point Plan, seven young people completed installer training in the Northern Cape and that there would be training of at least 10 installers per local municipality. At least 2 780 young people would be trained nationally.

Mr Munzhelele noted the main challenge to implement the project was funding. There was no adequate fund for dual-illumination, STBs and related accessories, public awareness, a contact centre, and warehousing of STB kits. Apart from financial challenges, the legal challenges were acknowledged. eTV challenged clause 5.1.2(B)(a) of the 2015 Digital Migration Policy which stated that “the STB control system for the free-to-air DTT STBs shall not have capabilities to encrypt broadcast signals for the subsided STBs. The High Court ruled in favour of the DoC and eTV appealed the decision in the Supreme Court of Appeal (SCA) which upheld the appeal. The DoC had approached the Constitutional Court for review of the constitutional implications. In the conclusion, it was noted that the success of the project squarely depended on 7C’s. These were cost, conformance, coverage, co-operation, content, communication and consumer support.

Minster of  Telecommunications and Postal Services, Siyabonga Cwele, added few remarks to emphasise what Mr Munzhelele had said. He noted that the BDM was a mass project that needed more funds. Understanding the purpose of the project was essential. Much of the project was transitional and had a significant impact on social transformation given that there was a need to assist the poor to migrate from analogue to digital transmission, especially those who could not afford it. The key to success of the project was cooperation amongst the departments and entities concerned. The main challenge identified as a stumbling block was funding. The absence of infrastructure in the rural areas was also problematic. In addition, many people were not aware of the project due to difficulties in running the awareness campaign. Mass media was crucial in running an awareness campaign. However, it was important to see the project running successfully. In his view, the local manufacturing of the STBs could bring down the total cost of the project and even create jobs.

Discussion
Mr C Mackenzie (DA) asked about the costs of storage for the STBs and what impact such a cost had on service delivery and the cost of installing a STB per household.

Ms M Shinn (DA) asked when the decision of the Constitutional Court would be delivered since it was holding up the BDM implementation and what happened with the inquiry conducted by National Treasury into the procurement process. Was there any challenge? Would there be any administrative or civil action? She asked if the STBs were five million or 22 million. Why were there deficiencies in numbers? When would all STBs be delivered? How much the storage of STBs would cost? Do you have an idea of the total cost of the DBM project is if all programmes were to be adequately funded?

Ms W Newhoudt-Druchen (ANC) asked the kind of training offered to young people who would become installers, when would those who have STBs installed switch on to digital and why the deaf community in the Northern Cape area were not aware of the BDM project. Was the awareness campaign also targeting the disabled community?

Ms V van Dyk (DA) asked about the financial impact of installing the STB kits if only 13 339 installations have been completed. When would the whole installation be completed and the five million STB kits be installed? According to the law, STB kits could not be installed if a person did not have a TV licence. How was the Department dealing with poor people who were not paying for TV licences? Did the Cabinet decide on the final date for switching on?

Ms D Tsotetsi (ANC) asked about the ownership of companies authorised to manufacture and/or supply the STBs. Which ones were black-owned companies? Were tenders approved on the basis of the economic transformation policy? Were there any incidents of faults with the STBs? Was the BDM plan talking to the budget available?

Mr R Tseli (ANC) welcomed the presentation and asked about the capacity of SAPO in terms of personnel in  rural areas, on reason why some applications were disapproved, and on the exact shortfalls in funding. How much more should be allocated to the project for a successful implementation?

Ms N Ndongeni (ANC) asked what criteria were applied to recruit installers. She remarked that the installation work needed a high level of expertise and that people with such expertise could be recruited to ensure that the programme was not only a success but sustainable. Did the Department collaborate with other departments to assist with training?

Mr C Maxegwana (ANC) remarked that the BDM was a huge project that spoke to transformation in the access to communications. What could role players do to ensure the project was a success? The project could not be a success without an awareness campaign. He noted that that the key to success was awareness and local government should be engaged in the awareness campaign.

Mr M Kalako (ANC), referring to the financial constraints, asked how much was needed to ensure the BDM was a success and whether the project was suspended subject to the Constitutional Court judgment.


Ms M Matshoba (ANC) welcomed the presentation and expressed her concern over the duration of the project. What was the timeframe of the project? In which province did public and consumer awareness start?

Referring to the budget needed to roll out the project, Minister Cwele responded that he had written a letter to request more budget from National Treasury. That was what he could do. The protocols and laws allowed him to make a request through a letter and he believed that National Treasury would respond to it favourably even though it was facing certain challenges.

Mr Cwele excused himself and remarked that all other questions should be directed to Minister Muthambi.

Mr Mark Barnes, Chief Executive Officer: SAPO responded that the cost of storing the STBs was quite high. Most of the manufactured STBs were delivered to SAPO. SAPO was storing 1.5 million units whose storage was costing R3 million per month. There were warehouses across the country. As he saw the demand growing, he saw SAPO distributing units into the rural areas and such distribution had been approved by the Auditor-General. SAPO had the capability to trace all the entities concerned. A further cost that could be incurred was low and it related to circumstances where the STBs was returned and SAPO had to fetch it for repair. R100 was charged for replacement. SAPO had dedicated its personnel to distribution and the number was gradually growing. SAPO was well positioned to deliver on its mandate. The door-to-door campaign was successful. The people in rural areas were catered for.

Mr Mlamli Booi, Chief Executive Officer: Sentech, responded that the total cost of the BDM could not be provided. However, the total cost for dual-illumination was R616 million for the Medium Term Expenditure Framework (MTEF).

Mr Lumko Mtimde, Chief Executive Officer: USAASA, responded that the cost of installation per household was R1670.11. On the discrepancies between the figure of five million and 22 million STB kits, he explained that Cabinet had approved five million STB kits and they were working from that figure. On the question of ownership of companies, he said that the question would be responded to in writing. On the question of suspension of the project, they would fail in their responsibilities if they continued with the project before the Constitutional Court handed down its judgment on matter. They only suspended supplying the STBs, not the project as whole. There was a lack of funds and they could not continue to order the STBs which the Supreme Court of Appeal decision did not approve. What would happen to the STBs if the Constitutional Court ruled in favour of eTV? All money spent on STBs would be a waste and fruitless expenditure.

On the question of the total cost of the whole project, Mr Munzhelele responded that he had an idea what the public and consumer awareness would cost. There was also costs that would be incurred from moving from 70% subsidy to 100% subsidy. This was the issues that the Minister was engaging on with National Treasury. On the question of catering for the needs of people with disabilities, the STB could enable sub-titling to provide direct interaction. On the requirement of a TV licence, when the project was launched, the licence was a major problem. The Minister took the decision that people with no TV licence should be allowed to register. There were instances where a person was, for example, unemployed and owed a huge amount of money for TV licence arrears. Such a person would not be able to settle the debt. On the question of STB defects, such occurrences were minimal and represented 2%. The Department was collaborating with Public Works on training. On the question of the legal challenge, he responded that the SCA decision did not interdict them from continuing with the project.

On the question of eligibility, Mr Mtimde replied that an applicant had to be in a possession of a green barcoded ID, have proof of residential address, and proof of income. Those eligible had to be earning between R0 and R3200. Initially, a TV licence was one of requirements and this was no longer the case. Suspension of the TV licence requirement led to an increase of qualifying applicants.

Minister Muthambi noted that DDT awareness by the public was an issue that concerned the Committees, and not only the implementing entities. The project needed support from the Committees, especially in assisting the Department to talk to local government. There were mayors who accepted being ambassadors of BDM. This was encouraging. More challenges were the fact that many people in poor rural areas did not have access to TVs. From the beginning, the Department had decided to reach all the borders. There was also discussion with neighbouring countries. However, DoC did not meet the deadline. Mozambique had already migrated to digital. However, they had not switched off analogue because they were waiting for South Africa to switch off, too. The same approach was followed by all neighbouring countries. Namibia would tell us that they had migrated but that migration could neither be touched nor felt. Its migration could not be compared to what South Africa was doing.

Minister Muthambi noted that the judicial decision did not stop them from implementing because they had appealed in the Constitutional Court. The SCA decision had no effect until its decision was confirmed by the Constitutional Court. The SCA’s decision could not lead to suspension of the project as whole, as it dealt with one provision. On the question of training, there was collaboration amongst various entities to equip young people with the necessary knowledge. One of the objectives of the project was to resuscitate the manufacturing industry in the country plus empower young men and women to install the STBs. On qualifying for a STB, there were situations where people had been paying for TV licences but were now unemployed for more than 10 years. It was decided that the TV licence should not be a determining factor. On the question of switching on to digital broadcasting, she recognised that there were dates that had been previously set but which could not be met. There were challenges. The Department was committee to see BDM was a success. On the question of whether there were people who would be disciplined for the mess, she had engaged with the Chief Procurement Officer and it was agreed that people who messed up would face criminal and civil action. On people with disabilities, the Department had translators. The issue raised by Ms Newhoudt-Druchen could be taken for granted. They were paid attention to.

Ms P Van Damme (DA) asked how much was spent on legal consultation and litigation and was the Department of the view that the Constitutional Court would rule in its favour if the Department’s contention was grounded in the separation of power principle? When would the matter be heard by the Court? What relief was the Department seeking? Was the court going to grant access to it?

Mr Mackenzie asked about whether a guarantee/warranty was provided on installed STBs and, because of such guarantee, how much was spent on faulty STBs?

Ms Chinn asked about the STB procurement process.

Mr Tseli remarked that the process of installing the STBs might be abused. Illegal installers might approach people to install false STBs and asked if the Department was ready to deal with illegal installers.

Ms Tsotetsi asked whether it was possible to increase the pace of the public and consumer campaign and what would happen to the young people who were trained to install the STBs after completion of the project.

Ms Ndongeni asked what guidelines were followed in appointing manufacturing companies.

Ms Newhoudt-Druchen asked about all the companies or agencies mentioned on the last slide.

The Chairperson remarked that the project had to move forward and asked about the inquiry into USAASA. She requested the Minister explain why the USAASA management was changed, the impact of the delays on the project, and how much was being paid for warehousing the STBs. She said that the storage costs  was wasteful and fruitless expenditure given that the budget approved by Parliament did not include storage. The SAPO budget did not include storage. The mandate of the SAPO was to distribute the items but not to store them. They could be stored for the purpose of distribution from one point to the other. She asked why USAASA did not state its case in the SCA. And, since it did not, why the matter was taken to the Constitutional Court? Was taking the matter to the Constitutional Court classified under useful expenditure or fruitless expenditure? Was the litigation approach reasonable given that the project was challenged by lack of funds? She said that the entities were failing in meeting their mandates because they were not using the budget in accordance with initial plans. She stressed that there should legal action every time there was a wrongdoing as this would promote accountability. The financial performance of the entities should be audited. This would assist in revealing mistakes being committed. The serious problem lay with the management. She asked about chances of completing the project if National Treasury did not come on board. From where would the additional budget come?

Mr Mtimde replied that the new management of USAASA had few days in office and most of mistakes were committed by previous management. However, this fact could be used an excuse and therefore it was prepared to accept responsibility. He had worked closely with the Auditor-General and had provided all information to him. The report on USAASA would be tabled to Parliament in the due course. The report would point out the challenges and measures that were taken to address those challenges. On the side of USAASA, delays were not caused by the outcome of the SCA decision. There were other challenges that caused delays. The project as whole was not suspended. What was suspended was order purchases of the STBs until the Constitutional Court handed down its decision. The decision was unpredictable. At issue was that USAASA was issuing STBs which did not have encryption capacity and the SCA decided that the STBs should have such capacity. On the question why the matter was not defended in the SCA, it was contended that the previous USAASA management was advised not to state its case. USAASA would be stating its case in the Constitutional Court. In appointing manufacturing companies, certain guidelines were followed. He said the STBs had a two year warranty and the installation had a one year warranty. On the storage of STBs, USAASA was incurring the cost of their storage.

Minister Muthambi replied that BDM started in 2001, perhaps, when she was still undertaking her tertiary studies. There were many mistakes that might have been committed along the way. Should there be mistakes, she should be held to account as head of department. She stressed that one of the major problems was not receiving the required support from other organs of state. The project could not be a success without taking into consideration the poor. There was a problem with appoint manufacturing companies and these companies taking time to deliver. Companies had stated that they were based at a particular physical address and when she went to visit them, she could not find them at those addresses. On these issues, the blame lay with USAASA. She had to visit the companies to ascertain what was wrong.

She also said that it was a pity that Ms Van Damme came late to find that matters on which she was seeking clarity, had been discussed already. The Department was challenging the encroachment on executive power because it was the executive who should decide how much was to be spent on a particular project. There was a precedent holding that the executive had the power to decide on how money would be spent. There was no way that the government would subsidise business in the pursuit of satisfying private business. The BDM policy did not mean to subsidise private business, but to subsidise the poor to have access to communications. The matter was sub judice and was not open to debate until the decision was handed down. On the National Treasury inquiry, the report would be communicated to the Chairperson. The USAASA issue should be treated with sensitivity it deserved. USAASA ought to account when it comes to the manufacturing of the STBs. It had to deliver.

Ms Van Damme said that Ms Muthambi was always reluctant to account for the financial expenditure of her entities in Parliament. Why was she not responding to the question on how much was spent on litigation?

Ms Muthambi replied that she had never refused to account to Parliament and that answers to the questions asked by Ms Van Damme would be found in the Annual Report to be tabled soon. If need be, she could write to Ms Van Damme to answer all her questions. The decision to switch-on digital broadcasting would be taken after 80% had been migrated to digital. The switch-off date for analogue broadcasting would also be determined by the Constitutional Court judgment.

Mr Mtimde replied that the USAASA as an implementing entity was ready to implement any policy or instructions directed to it. On the question of warranty on installations and STBs, the costs of warranty were incurred by the manufacturing companies. This was stipulated in the contractual agreement.

The Chairperson thanked the Minister for her time and engagement. The matters that were still hanging should be sorted out. The CEO should be responsible for addressing these matters. The project ought to move forward. A more serious concern was around the funding of the project. There was issue of spectrum that needed to be freed. The progress update would help the Committee to know which entity to hold to account. The absence of the pronouncement of the switch-off date was also problematic because it contributed to delays in implementing the project as entities had no deadlines.

The meeting was adjourned.


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