Cost to Communicate: public hearings day 1

Telecommunications and Postal Services

20 September 2016
Chairperson: Ms M Kubayi (ANC)
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Meeting Summary

The Telecommunications and Postal Services Portfolio Committee received a wide range of inputs on the impact of the cost of internet access from six organisations, all of which stressed the benefits which would accrue from paying less for voice and data services.

Officials from the Department of Telecommunications and Postal Services (DTPS) described the factors causing high data prices. Ineffective competition in the telecommunications sector was a major contributing factor to the high prices facing consumers. The high cost of building communications infrastructure and low levels of infrastructure-sharing by established players also led to high communication costs. Information presented showed that Vodacom was charging significantly higher tariffs compared to other mobile operators. For postal services, Postnet was also charging much higher rates than its competitors. The Minister had issued a policy directive to ICASA on the reduction of data costs. The Department had a number of measures in place to address the problem of high communication costs. The first was in the national integrated ICT policy white paper that was currently before Cabinet, which sets out different initiatives to further access to ICT. Furthermore, the Department had initiated projects that aimed to enhance competition in the telecommunications sector.  The Department had also published regulations on price transparency among telecommunications operators. Furthermore, the rollout of free Wi-Fi throughout South Africa was being continued.

ICASA said the price of data in South Africa had gone down by 45% in the last five years, as consumers were increasingly using data services, and it was expected that this downward trend would continue. Mobile operators had witnessed a decline in their revenue from voice and an increase in revenue from data services. The four key cost drivers in the cost to communicate included the evolution of customer demand, new innovative technologies, the quality of service standards and the regulatory framework. Availability of spectrum was also a key factor in the cost of communication, as it impeded operators’ ability to reduce communication costs. ICASA’s regulatory interventions directed at the cost of communication for the 2016/17 financial year, included responding to the Minister’s policy direction on broadband by identifying specific markets that needed regulation, conducting a call termination market review and the collection of industry indicators to ensure that ICASA had up-to-date information on which to base its regulatory interventions. The problems of unexpected data depletion and data expiry were being addressed by ICASA, in collaboration with the National Consumer Commission.

The CSIR said new approaches to spectrum management offered much potential to optimize the use of broadband to enhance connectivity in general, but especially in rural areas.  On dynamic spectrum access, while operators had raised concerns about spectrum crunch driven by increasing broadband consumption, most usage of spectrum was centred in urban areas, while rural areas had plenty of spectrum available. The current regulatory scheme did not efficiently use spectrum allocated to operators, because exclusive use licences were granted to particular frequencies. It recommended that there be continued support for new spectrum management regimes, such as dynamic spectrum access on a licence exempt, or occasionally light licence and licence-shared access basis in appropriate cases, supporting the entrance of new operators into the market.

The University of the Western Cape (UWC) highlighted the problems that university students faced in accessing data. Internet access was crucial to students as it facilitated different parts of the academic experience such as research, information sharing and communication with lecturers. While students could access free Wi-Fi on campus, students who did not live on campus were at a disadvantage, as they had to pay high data costs while not on campus. Students also faced the challenge of the high costs of ICT devices and software.

The Internet Service Providers Association (IPSA) said the focus in the cost to communicate debate should shift to data casts from voice costs. Consumers were using OTT services increasingly, and these required affordable broadband access. Call origination rates offered by mobile operators needed to be reviewed by regulators because the current rates being charged were exorbitant. The regulator should also introduce measures that enhanced competition in the market. There should also be separation between the wholesale and retail offerings of broadband service providers, as was done by Telkom. This would help to stimulate competition in the market.

On-line radio station Touch Central said its viability was being compromised by high data prices. South Africa’s data prices were high compared to other BRICS members, as well as other African countries. High data prices also posed an obstacle to entrepreneurship in South Africa, as well as governmental initiatives such as e-learning. Those who could not afford data were also at a disadvantage on the job market, as most job opportunities were advertised on-line.  Data prices should therefore be reduced in order to empower disadvantaged people and to help small businesses that were dependent on consumers having affordable internet access. 

Meeting report

Department of Telecommunications and Postal Services (DTPS)
Mr Joe Mjwara, Acting Director General: DTPS said that the government was committed to increasing access to information and communications technology (ICT), particularly broadband. High costs of communication deepened the digital divide in South Africa. High data costs by telecommunications operators were intended to maintain revenues and margins, since operators’ revenue from voice and sms had gone down considerably in the last few years, as consumers were increasingly utilising data services. After carrying out intensive consultations with stakeholders (including consumers and service providers), the Department realised that the market structure of the telecommunications sector market was problematic and resulted in ineffective competition. Additionally, there was insufficient sharing of infrastructure by established market players. All of these factors were the cause of the pricing problems being faced by consumers of telecommunications services. More regulatory interventions were needed to address these problems.

Mr Willie Vukela: Deputy Director General: ICT Policy Development, DTPS, outlined some of the interventions that the Department was making to address the high cost of communication. Firstly, it had made regulations on transparency by telecommunications operators on the price of communications. Measures had also been implemented to improve competitiveness in broadband markets, including market reviews and market definition exercises, and enhancing competition among market players with significant market power. Furthermore, Cabinet was considering a national integrated information communication technology (ICT) policy white paper that outlined more specific interventions, including an open access policy. If Cabinet approved the white paper, it would be implemented by legislation and regulations to govern the different matters covered by the white paper.

Following this, Mr Vukela presented information on telecommunications operators’ tariffs and charges for different types of communication. The information showed that Vodacom was generally charging significantly more than other operators, which indicated market power and therefore ineffective competition in this market. He highlighted the rollout of free wi-fi at selected sites in metropolitan areas as part of the Department’s initiatives to reduce the cost of communication. The National Consumer Council and the Independent Communications Authority of SA (ICASA) were working together to resolve the problems of unexpected data depletion and the expiry of data. The Department had also analysed postal tariffs, which showed that Postnet’s services cost significantly more than the South African Post Office’s (SAPO’s). For the 2016/17 financial year, the Department was planning to carry out thorough research on issues related to over the top (OTT) content and zero-rated services offered by telecommunications operators.

Ms M Shinn (DA) asked about the regulatory issues in the white paper on the pricing of fixed line infrastructure. Nothing had been said about this in the Department’s presentation, but fixed line infrastructure pricing was part of the costs that had to be factored in. What interventions were in line with local loop unbundling? This had been an issue for ten years, and not everyone would have fibre Internet access in their home. Telkom was the main user/supplier of the local loop, and this should have been resolved a long time ago. Would the G-rate apply to all government e-mails, or only to those where citizens interacted with the government? The government’s Internet bill was significant, and she was not convinced that all of it needed to be G-rated -- perhaps only the citizens’ interaction with government should be G-rated. Would there be proper resourcing of ICASA for it to fulfil its mandate, since it had a lot of work to do according to the interventions being planned by the Department, and would there be support for the structural reforms needed to make ICASA more efficient? She expressed concern about the zero-rating of services, as this may limit user experiences on the internet to what operators chose for them to see, hence there was need to be careful with these services.

Mr Vukela answered that fixed line infrastructure was fundamental, and the white paper — in the section on the open access policy — addressed all segments of fixed line infrastructure as the backbone of internet access.  The Department was moving away from the understanding that was it only the local loop that had to be opened up. All the elements of a fixed line had to be opened up. The Department was mindful of the fact that it was wasteful for a new entrant into this sector to roll out infrastructure when infrastructure already existed, therefore the emphasis was on sharing existing infrastructure, because it was uneconomical for each operator to develop such infrastructure. The best way of reducing the massive infrastructure gap which existed was through the open access policy. Network effects had to be factored in, and part of that included infrastructure sharing, which would drive down costs.

On open loop unbundling, he said unbundling was not limited to unbundling just the local loop, but also involved all elements of the value chain. He was aware that Telkom had opened many of its loops for other operators to access. The G-rate targeted public services where the public was contacting government. Leading up to the introduction of the white paper, there had been debate around how to structure ICASA to ensure its effectiveness as a regulator. One of these debates was whether functions in ICASA should be split according to the different sectors (broadcasting, telecommunications, postal) being regulated. This came out of the realisation that the postal sector in particular had not been well regulated. Another proposal related to creating a new regulator to focus on the competition aspects of the telecommunications and ICT sector. This would go hand in hand with creating a new regulator to focus on content and rationalising regulatory issues around content. These were the discussions which were in front of Cabinet in the form of the white paper, and to which Cabinet should apply its mind.

The financing of ICASA was also being scrutinised. One suggestion that had been made was that some of ICASA’s regulatory activities should be charged, to cover the costs of carrying out regulation. Also, it had been proposed that more of the licence fees be directed to ICASA. Reviews cost a lot of money -- the average cost was about R10 million. To have reviews done to determine the competitiveness of market segments over a period of time required a lot of resources, so adequate funding would have to be found for ICASA to do its work effectively. He shared Ms Shinn’s concerns about zero-rating. The Internet by its nature was an open system, and no one should be walled off.

Mr C Mackenzie (DA) asked whether the Department’s goal of universal broadband access by 2020 was realistic, and what progress had been made in this regard so far. He was not entirely confident of government’s role as a driver of ICT access. For example, the ICT white paper had been before Cabinet for many months without progress. The private sector seemed to have better capacity to move speedily in this area by rolling out the necessary infrastructure for broadband access. The government was concerned with regulating competition, rather than encouraging the private sector to continue rolling out services.

He asked why consumers preferred using Postnet, as opposed to SAPO, despite the fact that Postnet charged almost double the price for the same services. He suggested that this was because Postnet offered better service to consumers. In the Department’s analysis of the tariffs charged by cell phone operators, Vodacom had been portrayed as the most expensive of all.  However, many variables had not been considered in this analysis, such as contract bundles and devices bought. The conclusion drawn had been made on a very superficial analysis.

Mr Vukelwa responded that the goal of universal access by 2020 was not just a departmental goal, but was also set out in the National Development Plan (NDP).  There may be challenges to achieving this goal, but it was still a worthwhile vision because there was need to close the digital divide and infrastructure gaps in South Africa. A lot had been done and was being done to achieve this goal, despite challenging economic conditions. The white paper appeared to have been delayed due to the extensive consultation process that was undertaken before it was drafted. The integration of ICT policy to Economic Development had been another cause for the delay. The issue of the roles of the sectoral regulator and that of the Competition Commission had also caused a delay — it had to be established how to find a way for the two to work in tandem, to reinforce each other’s duties.

The private sector could not be given free rein, as it operated in a regulated environment. Policy by the government should set in place a facilitating environment for the private sector to do its work, and this was what government was trying to do. Regulation was important to avoid abuses of dominance by private sector players. 

Postnet was more profitable than SAPO, because it charged significantly more than SAPO. Postnet also had the ability to ‘cherry pick’ profitable locations, unlike SAPO, which was obliged by law to have an extensive network serving all locations. It was not fair to compare the two, because they operated in fundamentally different ways to meet different needs. The issue that the Department was trying to address was whether these prices were affordable to all South Africans. Other postal service operators used SAPO’s infrastructure, yet they charged high prices while using SAPO’s infrastructure at SAPO’s relatively low prices.

The Chairperson clarified that the question on Postnet was on why people preferred to pay more for postal services from Postnet, rather than SAPO. What needed to be done for consumers to go back to using SAPO’s affordable prices?

Ms D Tsotetsi (ANC) thanked the Department for highlighted the vicious nature of the pricing used by some telecommunications operators. Was the Competition Commission doing anything about Vodacom’s pricing? She asked how transparent Vodacom's advertisements were, and if they highlighted to the public that Vodacom charged far more than other service providers. On the issue of Postnet, there had been calls for the privatisation of SAPO, but Postnet’s pricing showed what could happen if SAPO was privatised. 

My Vukelwa answered that the Department was mindful that ICASA did not regulate prices, but used competition as a proxy to ensure that people were charged reasonable prices. The Competition Commission had capacity that the sector regulator did not have with regard to market reviews and the determination of markets. The Department would like to tap into this expertise, to ensure proper regulation of the sector. The Competition Commission, however, acted post facto, whereas the sector regulator should act ex ante. Therefore, the Department would like to combine the roles of the two for effective regulation of the sector. He left the question of whether Vodacom’s advertising was transparent to the regulator. The Post Office’s tariffs were regulated by ICASA, so the Post Office could not charge above a certain level.

Ms L Maseko (ANC) asked for the Department to define what they meant by the term 'affordable' broadband. She was concerned about Vodacom's pricing and the impact this had on access to ICT in South Africa and South Africa’s role as a leader in this area on the African continent. The cost of communications was much lower in countries such as Kenya, Tanzania and Ghana.  Had a study been done to benchmark communication costs in South Africa with those in other African countries, and globally? Regarding the rollout of the Wi-Fi project, she asked when the Department intended to finish the rollout to outstanding sites. Regarding the intended 2016/17 financial year research on OTT content and zero-rated services, it was important for the Department to work with established research organisations such as the Council for Scientific and Industrial Research (CSIR) and to engage the Department of Science and Technology. 

Ms V Ketabahle (EFF) said that the price of Vodacom’s 2GB bundle was R249, not R169, as shown in the Department’s presentation document,. She asked why people preferred to use Postnet’s services despite the fact that they cost considerably more than those offered by SAPO.

The Chairperson said it was important to acknowledge that the Department had made progress, especially around the issue of price transparency and the data cost reduction instruction. She sought clarity on the sources of the information presented on the tariffs charged by cell phone companies. Had there been engagement between the Department and the telecommunications sector on the issue of cost to communicate and the impact on society, and what had been the outcome? She asked the Department to answer, based on its participation in the International Telecommunication Union (ITU), where South Africa stands in comparison to other countries in terms of ICT access, competitiveness and costs. What other factors were impeding the reduction of data costs in South Africa? She raised the issue of roaming costs in the Southern African Development Community (SADC), which had been discussed by the SADC Parliamentary Forum. Other SADC countries had blamed South Africa for high roaming costs in the region.

Mr Vukelwa replied that other pertinent factors contributing to high data costs included competition issues. An example was the matter of on-net and off-net -- the locking up of customers within networks which resulted in lower rates on-net as compared to off-net. The Department discussed these issues with ICASA on a regular basis. There had also been discussion with ICASA on the issue of roaming costs in Southern Africa. ICASA had indicated to the Department the limitations it faced in terms of the law on roaming charges. There must be a broader discussion on the legal empowerment of ICASA to do this. 

An official from the Department said that South Africa ranked 88th out of 167 countries in the ITU’s rankings. Among African countries, South Africa ranked third. World Economic Forum (WEF) statistics also showed that South Africa had improved its ranking by ten notches. Additionally, surveys done by StatsSA had shown that ICT access was better among people with higher educational qualifications, urban dwellers and previously advantaged South Africans. The information used in the presentation was based on the analysis report by ICASA on prepaid voice and data tariffs and from Mybroadband’s website, where they had analysed mobile data prices.
Mr Andreas le Roux, Principal Consultant: DG Murray Trust commented that he did not think that the target of 2,5% of income being spent on broadband was affordable for most South Africans. Did this open the door for zero-rating of access for public benefit organisations? Would the G-rate apply only to fixed lines or would it apply also to mobile phones — this went to the accessibility of people whose main point of connection to the Internet was through their phones.

Professor Alison Gillwald, Executive Director of Research: ICT Africa, said she thought the WEF index and its methodologies were highly problematic. All the World Bank and WEF indices were underpinned by ITU data. This was very problematic and out of date for prepaid mobile environments, which changed very quickly and had enormous methodological problems around the measurement of broadband, subscribers and prices (among others). The organisation was engaging in the ICT Expert Indicator Forum and with the ITU on developing alternative indicators. It was unfortunate that benchmarking exercises that were being undertaken were not being publicly referenced here. These benchmarks could be found in the researchICTafrica and University of Cape Town (UCT) submission. They showed that South Africa’s position remained in the middle range of the 50 African countries being evaluated. The methodological engagement with the ITU showed that these measures were for mature markets, where subscribers could be billed and what they were doing could be measured. In the prepaid mobile market, especially now with free public access to Wi-Fi, assessing usage patterns was very different. Old measures did not understand the substitution that took place with OTT services, the transition of services to voice.  What needed to be understood was the real prices that people were paying. Operators would be correct in saying that the figures presented based on old static measures did not accurately represent how consumers were using data. This was not to say that the pricing was cost based, or that more effective regulation was unnecessary. There should be market reviews around determining the price, and possibly regulating prices, particularly wholesale prices, as was done with mobile termination rates.

She urged that the comparatives of the African prepaid mobile index and the ramp index be looked at for benchmarking purposes. The bundle value index showed that Vodacom performed well in terms of the packages it offered. The cost to communicate issue should not be examined only from the perspective of pricing. For example, Telkom and Cell C offered extraordinarily low prices, yet people were not moving in large numbers to their services. Other factors, such as quality of network, needed to be considered.

Mr Vukelwa acknowledged the limitations in the indices used, and that there was a lot of substitution taking place, hence the need to measure value.

Independent Communications Authority of South Africa (ICASA)
Mr Willington Ngwepe, Chief Operating Officer, ICASA, said that voice revenues were declining as data was consumed more. Smartphone and tablet penetration was growing by about 30% per annum, and there had been an increase in data consumption by consumers. Overall, price per megabyte had decreased, while data revenue had gone up because of the increased volume of data being used. The availability of spectrum was a key factor in the cost of communication. Between 2010 and 2015 data prices per megabyte had gone down by around 45%. Vodacom was more expensive in terms of headline tariffs, but these tariffs did not take promotions and discounts into account.

The four key cost drivers in the cost to communicate included the evolution of customer demand, which caused changes in consumption patterns, new innovative technologies, which had implications for the industry's cost of capital, the quality of service standards, as consumers had become more discerning, and the regulatory framework. The regulatory framework affected spectrum availability, rights of way, infrastructure sharing and other economic costs, such as energy.

One of the projects for the 2016/17 financial year was the identification of specific markets needing regulation in the future. Through this project, ICASA would respond to the Minister's policy direction on broadband. Another project was the collection of industry indicators to ensure that ICASA had up-to-date data to inform the necessary policy interventions. A third project was the call termination market review. ICASA was now in a phase where the final year of current regulation was ending, so it was undertaking cost modelling to inform the next set of regulations that would be published. ICASA also had a number of consumer protection initiatives, such as a report on retail tariff analysis, that had been published, and enforcement of amended end user and subscriber service regulations.

Other key considerations were the issue of international call termination rates, which was to be assessed as part of the review of call termination matters. On data expiry and usage rules,transparency obligations had been imposed on operators in order for consumers to be well informed. The Consumer Protection Act was the best way to deal with the expiry of data issue, so ICASA was engaging with the National Consumer Commission in order to address this problem. ICASA had undertaken a consultative process and was considering representations made on infrastructure sharing by telecommunications service providers. The availability of spectrum was a key consideration and restrained operators’ ability to reduce communication costs.

Ms N Ndongeni (ANC), referring asked what ICASA was doing about the fact that out-of-bundle data tariffs were perceived as being higher than in-bundle. What was ICASA doing as a regulator about OTT trends? 
Mr Ngwepe responded that in the Committee’s last sitting on OTTs, ICASA had stated that it would take guidance from the Department on whether there was need for regulatory intervention in the provision of OTT services. ICASA’s perspective was that this was an innovative market, and at this point it was not clear that there was a need for regulatory intervention, as this may stifle the market.
Ms Shinn asked whether ICASA had a way of verifying the accuracy of the information presented, since the information came from operators. Did ICASA have any way of establishing what data was used for by consumers, and whether this varied by location? Was there any way of determining how much prepaid data was lost through expiry, and could ICASA succinctly explain why data expired? Had ICASA considered the impact of the pending economic ratings downgrade on infrastructure investment, and the knock-on effects on the cost to communicate?

Mr Ngwepe answered that ICASA did not know how much prepaid data was lost due to expiry, but should be able to answer after engaging with the National Consumer Commission. The information on tariffs that had been given to ICASA represented the maximum tariffs charged by operators. Operators offered promotions which often resulted in significant tariff reductions. ICASA had not received complaints from consumers on the accuracy of the information filed with ICASA by operators. It did not have information on the usage of data by consumers, but information on operators’ websites reflected that a major driver of data services was the use of OTT services. ICASA had received complaints from consumers on the issue of disappearing data in the last few months, and was engaging operators in an effort to understand why this had happened.

Ms Tsotetsi said that ICASA’s main mandate was to protect the public. How many consumers knew that they could counter-balance high voice costs with data promotions? She urged ICASA to consider how consumers who could not read could access their reports. She suggested radio advertisements of these publications.  

Mr Ngwepe agreed that more needed to be done by ICASA in terms of public engagement with illiterate consumers. In this financial year and the one before it, ICASA had tried to attend government imbizos to engage with the public about its work. 

Mr Mackenzie said that the previous day, Wireless Business Solutions (WBS) had announced the launch of a new four-and-a-half Long-Term Evolution (LTE) broadband. Did ICASA consider this to be a positively disruptive force in the market and if so, what could the government do to encourage this kind of innovation?

Mr Ngwepe stated that the announcement by WBS on the rollout of its LTE network was a positive development. The more players in the market, the better it was for competition purposes. The government could enable operators to deploy networks rapidly and enable new entrants to leverage existing network resources. 

Mr Le Roux (DG Murray Trust) was concerned that the presentation had not mentioned a great deal of action towards addressing the high costs of mobile data. The presentation had showed that consumers who could afford to buy large quantities of data paid less than those who could not buy per megabyte. Was this fair?  It had been said that ICASA’s consumer protection mandate was the most important one, and the Telecommunications Act of 2005 provided for a consumer advisory panel to be constituted, yet this had still not been done. What progress had been made on this matter? 

Mr Ngwepe replied that the consumer advisory panel had been established, but there were challenges on how it functioned, so regulations on its establishment would be published by the end of October.

Professor Gillwald asked ICASA to speak about its tracking of costs, the decline in costs in 2010, the flattening out of data prices which had been static for six quarters, significant investment in next generation networks and the impact of higher regulatory transaction costs in terms of spectrum and licensing costs. She was specifically concerned with the proposed prices for the high demand spectrum, which was attractive to Treasury but would affect the cost of communications, and how this would be used to service the poor. She flagged a submission which identified real challenges faced by rural communities, because most rural communities did not have competitive service providers and paid a premium for airtime. She urged ICASA to look at this, because the figures masked the inequalities that existed in rural areas. On the threat of OTTs, could ICASA comment on the fact that there was increasing evidence that OTTs offered relief to consumers. At the same time, there were synergies stimulating demand for data. Evidence from more mature markets showed the dangers of static efficiency competition regulation in these highly dynamic disruptive markets, as this could hinder investment and innovation.

Mr Ngwepe replied that there was no doubt that from a consumer perspective, OTTs had introduced many benefits. The point on OTTs being a threat came from the angle that traditional services offered by telecommunications operators were now being marginalised, and so operator revenues from traditional services were declining.

Dr David Johnson, Principal Researcher: CSIR, said that average values tended to obscure issues. It was useful to have a more nuanced view on access to communications and affordability, especially for rural areas. The spectrum crunch issue applied more to metropolitan areas than rural areas. ICASA should study a full map of South Africa to see how different types of spectrum were used and where, because in some areas there was no spectrum crunch at all. 

The Chairperson stated that the limited information provided was of concern to her. For example, when ICASA stated that there was a declining trend in data prices, what benchmark was being used? It was hard to have a true sense of what consumers were paying for, as it was difficult to compare properly. How could ICASA explain the fact that consumers were complaining about high data costs, while it was saying that data prices had gone down considerably? There needed to be a better breakdown of the nature of the information presented, such as what the respective costs for contract and prepaid packages were, and which was cheaper. The argument had been made that operators who charged lower costs during the night showed that they have the capability to charge lower costs at all times. She was concerned about why ICASA was not going to do anything in the 2016/17 financial year in terms of implementing the Minister’s policy directives that had been made earlier this year.

Mr Ngwepe answered that the nature of the work that ICASA had to do to implement the Minister’s policy directive was detailed. Some of it was currently in the initial stages, but outcomes would only be manifest in the 2016/17 financial year. While there was definitely room for data prices to go down, statistics showed that these prices were indeed on a downward trend. Intervention was necessary for this downward trend to accelerate. Telecommunications operators were better placed to answer why they charged cheaper tariffs at night, but in his opinion the lower costs at odd hours were because there was more congestion during peak hours, hence costs could be lowered to encourage people to use networks at less congested times.

Council for Scientific and Industrial Research (CSIR)
Dr David Johnson, Principal Researcher: CSIR, highlighted the potential that new approaches to spectrum management had to optimize use of broadband to enhance connectivity in general, but especially in rural and other marginalised areas. Mobile phone subscriptions and Wi-Fi networks had grown considerably in the last ten years. Communication costs had also gone down significantly.

On dynamic spectrum access, he said that while operators had raised concerns about spectrum crunch driven by increasing broadband consumption, most usage of spectrum was centred in urban areas, while rural areas had plenty of spectrum available. The current regulatory scheme did not efficiently use spectrum allocated to operators, because exclusive use licences were granted to particular frequencies. He recommended that there be continued support for new spectrum management regimes such as dynamic spectrum access on a licence exempt, or occasionally light licence and licence shared access basis in appropriate cases, supporting the entrance of new operators into the market, especially those who could serve under-serviced areas. Also, the concept of spectrum sharing should be expanded to infrastructure sharing and to supporting open access models for all infrastructure. The connection of open access telecommunications infrastructure to hubs such as public facilities — for example schools, libraries, and clinics — in poorly serviced areas, which new operators could use to lower the cost of their backhaul connectivity, should also be promoted. 

A representative from Right2know asked how spectral space could be shared, and if were there other spectral bands where the white space concept could be used.

Dr Johnson replied that in Mexico there was a network whereby smaller players were allowed to use Global System for Mobile (GSM) bands in areas where there was not good cellular connectivity. The sharing of spectral space could be done on a licence-shared access model, where a small GSM operator in a rural area could purchase exclusive use to that spectrum when it was not used. This could also be done through a duplicated spectrum database. Researchers at Berkeley were working on a model which sensed when GSM was being used and how to use it in areas where it was unused with the knowledge of the operator to ensure that there was no interference. The re-use of TV bands with dynamic spectrum access was the beginning of a longer plan to re-use spectrum more efficiently in other bands, including the GSM band.

University of the Western Cape Students’ Representative Council
Ms Lukhanyiso Makebese, acting president of the University of the Western Cape’s Students’ Representative Council (SRC), spoke of the challenges faced by students with the cost to communicate. ICT access was important to students. The generation they lived in was digital and young people conducted many of their activities online. Young people used ICT to access different types of information. Students generally used ICT for research purposes, taking part in assessments, dynamic feedback systems, e-mailing lecturers, sharing information and electronic learning. The high cost of hardware, software and data was a problem for students.

She agreed with the previous speaker that the problem was not access, but was rather to do with affordability. Universities used public or shared sites such as libraries, but these were difficult to access for people who did not have their own personal access to laptops and ICT. Students faced issues of privacy, qualitative issues, safety as well as convenience to users. Above all, the users of shared facilities were individuals who already had access to ICT-related tools. Shared facilities should be improved, to allow more time to access these facilities, and they should be affordable. For students who did not live on campus and did not have access to Wi-Fi, it was important to ensure that such students had access to Wi-Fi and data. For a smooth academic programme, students needed access to available and affordable ICT.

Ms Shinn asked whether there had been any discussions with university management towards improving access to Wi-Fi, and also to get help with subsidised hardware purchases. Was Wi-Fi access on campus capped?

Ms Makebese replied that universities claimed that they could not afford extra hardware for students, because there were not enough resources. Wi-Fi access on campus was not capped, but due to the high number of users, the network did not always function well.

Mr Mackenzie asked the presenter to rate, on a scale of one to ten, access to hardware and data facilities at the University of the Western Cape. Much of the presentation had been directed at access to equipment, rather than high data costs. He pointed out that Microsoft, for example, had subsidised software for students. Were there facilities available for the funding of technology hardware by students?

Ms Makebese answered that the University of the Western Cape had Wi-Fi on campus, but this was not accessible to students who lived off campus. Only 10% of the student body lived in campus residences, so this meant that students who lived off campus faced the challenge of having to buy data which was extremely expensive.

Ms Tsotetsi asked about the situation in computer labs. How many students were accessing computers per hour? It could not be assumed that everyone had a tablet or a smartphone. Did the National Student Financial Aid Scheme (NSFAS) provide any financial help for ICT materials? Were there any campaigns to get funding for data access by students?

Ms Makebese replied that there have been campaigns, but they had not been effective because there were many competing needs which had had to be prioritised. NSFAS did not cover ICT costs or gadgets, and without a gadget one was automatically at a disadvantage. Sixty per cent of undergraduates on were on NSFAS, which showed that they were indigent and could not afford ICT hardware.

The Chairperson asked about the impact on a student’s work and life if they did not have data or were unable to make a phone call.  Could students utilise the facilities at universities if they did not have gadgets? Would they be able to have access, considering opening and closing times -- safety issues were very important for young women. The cost of communication included the cost of gadgets, because they were a prerequisite for effective communication.

Without Wi-Fi, a student had no access to course materials, could not communicate with lecturers, download lecture slides or carry out research. It was unsafe for female students to work in the library at night, because the library was situated far from campus residences, so it was preferable to study at home. Off campus students were generally at a disadvantage because they did not have free Wi-Fi access on campus. Students who lived in townships could access free Wi-Fi in certain locations, but students who lived in other areas did not have this luxury.

Internet Service Providers Association (ISPA)
Mr Dominic Cull, Regulatory Adviser: ISPA, said that the focus in the cost to communicate debate should shift to costs of data, rather than voice costs. It was increasingly accepted that in the mid-term, voice would become free in South Africa. There must be recognition of the growth in OTT services and the need for broadband to access these services. He commended the regulator and the Portfolio Committee for their efforts to reduce call termination rates. However, the issue of call origination rates needed to be attended to by regulators, because there was potential for profiteering, especially by larger players.

He said that South Africa faced an affordability gap, and not an access gap. This affordability gap was caused by the cost of mobile broadband data and the restriction on the provision of voice over internet protocol services, over mobile broadband by mobile networks. To cut communication costs, the regulator should work on measures that enhanced competition in the market for broadband services. He recommended that mobile networks move away from vertical integration — they should offer the same quality of service to Internet service providers (ISPs) downstream that they offered to retail consumers. Telkom offered a good illustration of this and the effect had been that its data prices had been considerably reduced. The separation of the wholesale and the retail market would create a fully competitive resale environment. 

Mr Mackenzie said that operators such as Telkom, and Cell C to a lesser extent, had invested large sums in rolling out networks. Did they not have a right to protect their investment and leverage on it in the spirit of free enterprise?

Mr Cull responded that there had to be a balancing act. Telkom, for example, had been compelled to separate its wholesale and retail functions by competition authorities, but had recognised that this was a more efficient manner in which to operate. He recognised that Telkom had made considerable investments in infrastructure, but his proposal was not for the networks to forgo the use of their investments, but to make better use of the capacity they had. Among the major mobile network operators in South Africa, Cell C had a resale programme. 

Ms Shinn asked what incentives or market interventions needed to be applied to encourage the rollout of broadband networks for the use of unlicensed spectrum in rural areas. How could the growth of small enterprises doing this be supported? How complex would the split of operators into wholesale and retail be, and how precisely would this separation be carried out?

Mr Cull answered that networks in rural areas had been built up without any assistance. These networks had exploited the gap between the pricing of the incumbent networks and the demand in rural areas in order to provide robust, affordable services in these areas.

Ms Tsotetsi said that the presentation emphasised the need for greater competition in the communications market. When the private sector spoke about competition it was usually referring to the maximisation of profit. What could the government do to ensure that competition in this sector was not harmful to the public?

There was a need for caution when cutting communication costs to avoid hampering the networks’ ability to provide quality services. The regulator, this Portfolio Committee and the National Consumer Commission could act to ensure this balance was maintained.

A representative of Right2know asked why the separation between wholesale and retail should be done for broadband, and not for voice.

Mr Cull replied that the separation should be for voice, broadband and data services.

A member of the audience asked what indicators should be used for the separation between wholesalers and retailers.

Mr Cull stated that he was not clear on the indicators referred to by the question. He clarified that there was a difference between the physical network and the intangible services flowing through it. The service that was provided was making available capacity on a network for others to use the services. For example, Telkom rolled out fibre in a particular area and allowed other ISPs to use it on an open access basis to compete for customers that would use that network. There must be a clear separation between the physical elements of the network which carried packets, and retail services which consumers used.

The Chairperson asked how the wireless loop unbundling would reduce communication costs. If the route of open access network was taken, where would competition happen and how would this competition help in reducing communication costs? How would broadband rollout be achieved in light of the government’s resource challenges, from the ISPA’s point of view?

Mr Cull replied that wireless loop unbundling was not something that ISPA believed was a priority at the moment. There had been a lot of focus on high demand spectrum, for which there was ongoing court action. There was also a disjuncture between the Department’s policy and the actions of the regulator, so ISPA does not think this was a short or medium term solution. On open access networks -- for example, fibre networks in metropolitan areas -- pricing was much lower than ADSL and mobile data costs. There was no limit to capacity with fibre, so fibre service providers sold network capacity to downstream network providers such as Afrihost and Mweb, and this was where the competition happened and where prices were driven down.

Touch Central
Mr Thabo Molefe, of Touch Central, said that Touch Central was an on-line radio station, so its business and sustainability depended on people having affordable access to data. The #datamustfall campaign had arisen from the realisation that South Africans could not afford to access the internet, especially in comparison to their counterparts in the other members of BRICS (Brazil, Russia, India, China and SA).

It was hard to interact and sell products and services to the world without affordable Internet access. Businesses such as Touch Central contributed to the revenue of mobile networks, but the networks were not considering the cries of consumers for the reduction of high data prices. Also, the implementation of governmental initiatives such as e-learning in Gauteng would be a challenge if data costs did not go down significantly. The burden of high Internet prices fell mostly on previously disadvantaged people because they were economically worse off. High data prices also hit rural dwellers hard and prejudiced them in terms of job opportunities, which were increasingly being advertised online.

He requested that the House ask the networks to have an open conversation around their data pricing strategy. The call was not for free data, but for the networks to revise their pricing of data in South Africa, which was high compared to other African countries.

Mr Gareth Cliff, from Touch Central, said that there was a philosophical aspect to the argument being made in favour of the reduction of data prices. This campaign offered an opportunity to emancipate and empower women and children through affordable access to information. It was Important for people to have alternative means to communicate and by which to access information. This would help to reduce the deep inequalities that existed in South African society. He emphasised that Touch Central as not in s battle with mobile operators or with the government, and realised that compromises may have to be made. Data prices were indeed on a downward trend, but it was important to accelerate this process to further internet access.

Ms Shinn said that the CSIR presentation had shown that small business people in rural areas were building networks using unlicensed spectrum. Would there be an opportunity for Touch Central’s followers to become part of the solution, by establishing those kinds of networks? 

Mr Molefe replied that there were enough ISPs to roll out Wi-Fi across the country. If networks could afford to open up their networks for voice calls at reduced tariffs during the early hours of the morning, this showed that they could afford to forgo revenue. The ISPs were the relevant partners for rolling out data services across the country. 

Ms Tsotetsi commended the presenters for creating employment for young people. The percentage of households with internet access at home showed that the Western Cape had the best access to the internet out of all the provinces.  This highlighted the gap between affordability and the demand for access to the internet. She asked for the statistics to be broken down by whether they related to rural or urban areas.

Mr Molefe answered that most ISPs were very present in urban areas, and considered rural areas to be a less important market than urban areas.

A member of the audience asked whether the #datamustfall campaign was targeting business, the private sector or ICASA. What intervention would Touch Central make if data pricing was up to them? What percentage did they wish data to fall by?

Mr Molefe responded that data prices should fall by half.

Dr Johnson (CSIR) suggested that the #datamustfall campaign should be extended to all educational materials.

Ms Maseko (ANC) asked about Touch Central’s listenership — how big was Touch Central’s audience and in which provinces did its members live? Was it a predominantly urban or rural audience, and what was the age of the average listener?

Mr Molefe responded that according to anecdotal evidence, Touch Central had a significant rural audience. The success of the #datamustfall campaign showed that Touch Central had a large audience. It was difficult to track precise numbers, due to the nature of the radio station, but on the day of the station’s launch, it had over six million listeners. The age profile of the station’s listenership was primarily people between the ages of 18 and 35 years.

The Chairperson asked whether it was useful to compare the cost of communications in countries with very different conditions. For example, China had a much higher population than South Africa and so operators there could afford to charge much lower tariffs. She asked for clarity on which costs in particular the presenters wanted to fall -- was it costs faced by users in accessing the internet in order to stream on-line radio stations, or the costs of on-line radio service providers in providing the service, or both?

Mr Molefe responded with the example of Ghana, which had about half the population of South Africa and had more networks because spectrum had been opened, and therefore had lower mobile tariffs. In Nigeria, MTN had cut its tariffs after the entry of new players into that market, which had enhanced competition. Networks should be paying on-line radio stations, because radio stations created more revenue for mobile operators.

Mr Mackenzie (DA) asked whether Touch Central was licensed by ICASA. 

Mr Molefe replied that their content was not regulated by ICASA; although they aimed to ensure that their content was family friendly.

The meeting was adjourned.

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