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TRANSPORT PORTFOLIO COMMITTEE
4 June 2003
NATIONAL PORT AUTHORITY BILL: HEARINGS
Chairperson: Mr J Cronin (ANC)
Documents handed out:
ICASA Submission (Appendix 1)
National Port Authority Bill 2003 (Draft 2)
The Committee on Transport was briefed by Telkom and the Independent Communications Authority of South Africa (ICASA) on the drafting of the National Port Authority Bill. Telkom had two suggestions for amendments found in their Memorandum and agreed to by the Department of Transport. ICASA provided their experience on the making of regulations to the Committee.
The purpose of the meeting was to continue with the briefing process with respect to the redrafted version of the National Port Authority Bill (NPA). Telkom and ICASA to presented submissions to the Committee.
Mr. Chose Choeo, Legal & Regulatory Executive presented Telkom's submission. He explained that Telkom had previously met with the Department of Transport to discuss possible amendments to the Bill. The Memorandum indicated what they agreed upon, and Mr Choeo reviewed this with the Committee. He indicated to the Committee to disregard the initial submission that was previously handed out.
A member of the Department of Finance stated their agreement with the amendments.
Mr Farrow (DA) reviewed that in the working draft of the NPA presented the day before, telecommunication had been deleted from the sections involving port infrastructure, terminal infrastructure and port service.
Chair asked for reassurance that telecommunications would be provided for in the Bill. The Port authority would need to ensure that there was effective infrastructure, which would necessarily include telecommunications.
Mr Choeo acknowledged the concern and agreed that the port authority would have to ensure telecommunication infrastructure. The companies that are responsible for the infrastructure would be most effected by this, and he hoped that they would make their own submissions (like Transtel).
Chair noted that they had received no indication from Transtel that they wished to make a submission, but that they should not depend on them before taking their concerns in to account.
The Department of Transport noted that Transtel did make a submission to the Committee, and that they would go through it to ensure their concerns were included.
Chair thanked Telkom for their submission, adding that they very alert and helpful in the drafting process.
Independent Communications Authority of South Africa (ICASA)
Chair thanked ICASA for their quick response, despite the short notice. Although they were not involved in the port authority, the Committee needed the benefit of their experience.
Mr Lumko Mtide, Councillor said there submission was to provide information on the establishment of regulations in the communications sector, and the lessons they had learned.
He then went over the presentation (see attached document), which reviewed the structure of ICASA, the principles of regulation, and their idea of what made a good regulation.
Chair thanked ICASA for their presentation and said that it was exactly what they were looking for.
Mr Farrow (DA) complimented the Chair on inviting ICASA, and then asked how ICASA was financed.
Mr Schneeman (ANC) stated that during the public hearings the National Port Authority submitted
their desire to have the regulation by temporary. He asked ICASA's opinion on this short-term approach, and if temporary regulation could play a meaningful role, particularly with respect to the different stakeholders involved.
Mr Mtide stated that even in an environment with more competition, the need for a regulator was very important. He commented on the experience in the US, where the FCC, which was the American equivalent to ICASA, had been for 100 years as a regulator within telecommunications industry. The FCC has shifted its focus over the years, to the changing environment and the increase in competition.
The experience in South Africa had been much the same. The IP and satellite industry has discussed removing the regulator, but it has been acknowledged and accepted that this will not help in balancing the demands of this sector.
ICASA is largely financed through Parliament. If they need additional funds, then they must go through the treasury, which eventually goes through Parliament. The Public Service Funds Act limits how they may accept donations.
Mr Farrow said that in the present state of the Act, donations from every source needed approval from the Minister. He expressed concern that there could be a conflict of interest. The President appoints the Councillors, and they then report directly to the Minister.
Mr Mtide stated that this concern was difficult to address as it was a requirement of the Act and did not elaborate. He added that with respect to reporting, they reported annually to the National Assembly through the Minister. They did not report directly to the President, unless they were resigning.
Chair discussed the White Paper on Ports. There is a need to specifically regulate the relationship between Transnet and the Port Authority. Presently the White paper combines the landlord function with the regulatory function of the Port Authority and envisages that this would fall under the Minister of Public Enterprise. He suggested that they needed to separate these two functions and that it would make more sense under the Minister of Transport. He noted that the Bill was neutral to the end stages of this reality, which was appropriate, as they should not be too prescriptive.
He asked if ICASA was simply a regulator or if its duties included something else.
Mr Mtide replied that ICASA was simply a regulator with no other functions.
Chair asked about the size of ICASA's staff.
Mr Mtide replied that they were still in a process of finalisation with the staff, but that presently there was a requirement for 300 staff. He added that the communication sector they were dealing with was quite large covering many different industries.
Chair said that they were only dealing with seven ports, therefore the size would be different. Ports are also not as politically sensitive as Communications. Therefore, their criteria were much different and they had a much narrower field of stakeholders to deal with.
A member from the Department of Transport, stated that they needed to re-examine the proposed legislation, to consider the Chair's point about separate landlord and regulatory functions.
Chair expressed his concerns that there was too much detail in Chapter V of the Bill which should be put into regulations. He asked ICASA's opinion on the matter.
Mr Mtide stated that it was helpful when the functions and framework were clearly defined, so they could help the Councillors or Committee in undertaking their work. The legislation should clearly define the relationships, terms, functions, and mandates of the staff. He suggested not to cut down on the detail.
Mr Farrow (DA) stated that the public hearings on this Bill had brought out the need for neutrality and transparency. There was concurrent jurisdiction between ICASA and the Competition Commission, with respect to the memorandum of understanding. He suggested that they needed to be wary of this and deal with it in the Bill.
Mr Mtide stated that this shows how detail is provided in the Act, or is left to the discretion of its actors. Until now they had been able to manage the memorandum of understanding well. If a Bill is too discretionary it might be open to challenges.
Meeting was adjourned.
Experiences & Lessons Regarding the General Role of a Sector Regulator:
Presentation to Portfolio Committee on Transport
Councillor Lumko Mtimde
04 June 2003
It is a pleasure to have been invited to speak to the Portfolio Committee on Transport about the National Ports Authority Bill being discussed here today. ICASA has made a submission on the Bill, which addresses some of the technical issues around the port reform process, but we are here today, at the request of the Committee to provide input specifically on the establishment of a regulator for the ports, and to assist through sharing information and ideas on the establishment of the regulator in the communications sector and some key lessons learned.
ICASA, as many of you may know, is the merged independent regulator for broadcasting and telecommunications in South Africa. In July 2000 we merged the broadcasting regulator with the telecommunications regulator to form one independent body responsible for licensing, regulating and allocating the frequency spectrum. Independent regulation is a relatively new field in South Africa. We've been regulating the communications sector for almost ten years now and we are consistently learning in an increasingly complex environment. We are here today to share with you some of the ideas we feel are central to successful and effective regulation, and to give you some insight on the establishment of a ports regulator based on lessons learned regarding the role of a regulator.
What is Regulation?
"The art of regulation involves establishing rules that allocate value to customers and suppliers in such a way as to maintain incentives for the firm to create value while promoting political legitimacy in the eyes of consumers and stakeholders." It is the art of balancing the interests of the public at large - consumers, industry and government - to achieve objectives that ultimately are in both the national and public interest. In order for regulation to be successful and effective, it is critical that the institutional and legislative frameworks put in place are adequate.
Communications Legislative Framework
In South Africa, the activities of the Department of Posts and Telecommunications were divided into the South African Post Office and Telkom in 1991. Telkom was incorporated as a legal entity under the South African Companies Act, 1973. The White Paper on Telecommunications Policy, 1996 and the Telecommunications Act followed after the new government came into power in 1994. These policy statements and laws established a framework to separate the regulatory, operational and policy-making functions in respect of telecommunications.
On the broadcasting side of the business the recognition in the Constitution of the right to freedom of expression, including the freedom of the press and other media, specifically required that "all media financed by or under the control of the state" be regulated "in a manner which ensures impartiality and the expression of diversity of opinion." As such the IBA Act was promulgated and introduced a number of changes, including the establishment of an independent broadcasting regulator to regulate broadcasting in the public interest.
In line with the Constitutional protection previously enjoyed by the IBA, ICASA is a Constitutional body, governed by the Constitution Act. Further to that, the ICASA Act provides for the establishment of ICASA and deals with issues such as the financing of the Authority, the appointment of Councillors, the staffing of the regulator and its accountability. It is the ICASA Act that, legislatively, merged the IBA and SATRA.
In terms of regulation of the broadcasting and telecommunications sectors, ICASA relies on three underlying statues - the IBA Act and the Broadcasting Act, on one hand and the Telecommunications Act, on the other. These sets of legislation address the substantive issues around regulation of telecoms and broadcasting.
And of course, ICASA in performing its functions, complies with a host of other relevant pieces of legislation including the Public Finance Management Act, the Labour Relations Act, the Employment Equity Act, the Administrative Justice Act and Media Development and Diversity Agency Act. This, in summary, is the communications legislative framework in terms of which ICASA functions.
Given the global nature of communications and the lack of respect that communications technologies have for national boundaries, it is important that in addition to complying with national legislation, ICASA must bear in mind international agreements and treaties entered into by the South African government. These include agreements such as the WTO Agreement on Basic Telecommunications Services, and the associated Reference Paper which address market reform, and in particular the opening of markets to both foreign and local competition; the SADC Protocol & Model Legislation on Transport, Communications and Meteorology, which addresses both telecoms and broadcasting, and in fact deals with transport issues directly relevant to this Committee as well. The SADC Protocol and Model Legislation also deal specifically with the establishment of regulators in the sectors concerned. Also, in terms of technical regulation and in particular regulation of both broadcasting and telecommunications frequencies, ICASA considers International Telecommunications Union (ITU) recommendations and resolutions.
A three-tier framework exists for the communications sector, in which the regulator plays a critical and unique role. There is a delegation of specific responsibilities between on one level the government which is responsible for policy development and ensuring that the legislative framework is in place. In our case, such responsibility rests with the Ministry and Department of Communications. The responsibility for implementation of government policies and the application of accountability standards to operators and service providers rests with the regulator, ICASA. Finally, the responsibility to run network operations and provide services lies with private, commercial and public and community operators licensed by the regulator such as SABC, ETV, Telkom , mobile cellular operators and commercial radio licensees.
This institutional framework consisting of the three layers - Government, the regulator and the operators - places the regulator in a unique position of balancing the interests of several players in the public interest. The relationship between operators and the regulator is governed by licence conditions and regulations, while that between the regulator and the government is governed by legislation and also, in the case of the communications sector, by a Protocol which is being finalized which will put in place a structured way for ICASA to relate to the Ministry. This Protocol describes the way in which the Ministry for Communications and the Authority will function and work together to achieve the objectives for the sector.
ICASA- Institutional Arrangements
As I mentioned earlier, the ICASA Act established the Authority. It contains critical provisions relating to the constitution and appointment of Council, financing and accounting by the Authority and the staffing of ICASA.
With regard to the constitution and appointment of Councilors, in terms of section 5 of the ICASA Act, the seven (7) Councillors sitting on the Council of the Authority must be selected in an open and transparent process involving the public. They are nominated by the public and interviewed by Parliament. The National Assembly publishes a short list of candidates and interviews are conducted by the Portfolio Committee on Communications who then make recommendations through the National Assembly to the President. Councillors are then appointed by the President. The Councillors serve staggered terms to ensure continuity and also to ensure independence of decision making.
ICASA is financed from money appropriated by Parliament in terms of section 15 of the ICASA. Act. The regulator is accountable through several mechanisms, including the submission of an annual report and annual financial statement to Parliament through the Minister for Communications. The accountability of the regulator is extremely important as a key principle of regulation.
Finally, the staffing of the regulator is key. The Council, in terms of section 14 of the ICASA Act, must establish its own administration to assist the Authority in the performance of its functions. To this end the Council must appoint a suitably qualified Chief Executive Officer and other staff. We have found that there is a dearth of expertise in the fields of telecoms and broadcasting, and in particular in the area of communications regulation, and have as such had to face several challenges with regard to the recruitment and retention of staff.
With the backdrop provided on the institutional and legislative framework in which ICASA operates, I will now discuss the role of ICASA in the reform of the communications sector.
The government has embarked on a policy of 'managed liberalisation' of the communications sector as discussed in the 2001 Telecommunications Policy Directions. This includes the separation of the regulator, government and incumbent operators' functions as discussed earlier. It involves the privatization of state-owned operators - as has been done with Telkom. Sector reform includes the facilitation of market-based approaches to the supply of telecoms and broadcasting services and the promotion of pro-competition policies. Sector reform further places on the regulator the responsibility of introducing new players in the sector through the issuing of new licensees in a fair and transparent manner. Finally, a key policy objective of sector reform, in particular in a South African context, is to ensure that the demographics of the country are reflected at all levels in the sector.
Principles of Regulation
Let me pause now to talk about some of the key principles of regulation. ICASA, like all regulators, strives to achieve transparency, independence, accountability, consistency and regulatory certainty, and credibility. It is important that regulator's decisions are based on a clear public record that it exercises independence from undue influence in exercising its powers, and that it is constant in its decision-making. Without giving due regard to these principles, a regulator cannot achieve critical regulatory and national objectives. But a regulator must be given the space in which it can adhere to these principles - hence the appropriate institutional and legislative arrangements need to be made and a solid foundation for regulation of a sector, especially a sector being reformed, should be made.
In the context of sector reform, when several key and often controversial issues arise, the credibility of the regulator is important.
Policy Objectives of Regulation
Why Do We Regulate?
Whether we are discussing regulation of telecommunications, broadcasting, energy or even ports, there are some fundamental policy principles that are supported by regulation. You will note that many of the policy objectives that justify regulation have general applicability - even in the ports sector. Where in telecoms we talk of regulating for interconnectivity of networks, in ports, you will be dealing with issues of access to ports and port facilities in a non-discriminatory, fair and transparent manner.
Where in the context of broadcasting regulations, ICASA deals with ensuring that SMME's participate in the sector, in ports the same objective holds true. The process that ICASA has undergone and the many challenges we have faced in regulating Telkom, a public monopoly in the telecoms sector, can be compared to the challenges ahead for the National Ports regulator which will undoubtedly have to look into issues of allocation of scarce resources such as rights of way, fostering competition through promotion of the efficient supply of good quality services at affordable prices. The regulator will face similar challenges as ICASA as it regulates to prevent the abuse of power by the National Ports Authority and ensures equal access to the ports and to the provision of port services. Similar challenges may lie ahead in monitoring the business relationship between Transnet and the Authority - regulatory tools developed in the communications sector may be applicable in your sector.
Ultimately in communications, we seek to, through regulation, create a climate to promote investment to expand and upgrade networks and to promote public and investor confidence in the sector. Again, the policy objectives are the same although the sector is different.
Powers of the Regulator
Policy objectives cannot be achieved in a vacuum. There is little value in policy objectives and goals if the institutions are not in place to achieve them. A regulator is only as effective as its powers - ICASA has the powers to license, to adjudicate disputes and complaints, to monitor and enforce compliance, to develop and implement regulatory policy, to make regulations and to consider information received from operators. It is these powers that allow the regulator to achieve its objectives and to play a role in shaping the development of the sector in line with the broad policy outlined by Government. In exercising its powers though, ICASA falls back on the principles discussed earlier of transparency independence, accountability consistency and credibility.
Economic & Competition Regulation
Areas of regulation on which ICASA focuses in an era of liberalisation are economic and competition regulation. These entail the evaluation of tariffs, controlling market entry and/or exit through the issuing and revocation of licenses - both spectrum and service. ICASA monitors performance and enforces compliance to ensure that social and economic obligations are being met by licensees; and we create the space for broader stakeholder participation in implementing policy reforms.
In the area of competition regulation, ICASA has concluded a Memorandum of Understanding (MoU) with the Competition Commission with whom it has concurrent jurisdiction on competition matters. In areas such as excessive pricing, service bundling and price discrimination, the relationship between the Commission and ICASA is useful - in particular ICASA benefits from the broad economic analysis provided by the Commission. However, on sector specific issues such as interconnection disputes, and facilities leasing cases, the technical expertise provided by the Authority is critical. The sector specific approach to issues that ICASA provides allows issues to be dealt with in a more speedy fashion and with a better understanding of the particular context of matters.
The benefit of sector specific regulation vs. multi-sector regulation is merely one of the key issues that a regulator must address. The way the sector is defined is important - the merger of two sector specific regulators , IBA and SATRA, was inspired by synergies identified between the two sectors which necessitated that only one regulator perform the function previously performed by two. However, although the legislation recognizes the need for concurrent jurisdiction on competition issues, it also realises that there are specialized resources and skills required for the regulation of the communications sector - hence the need for both a broad competition authority and a sector specific communications regulator. Both are critical, but the distinction between their functions, while subtle, is significant.
Sector specific regulation is often juxtaposed against the notion of self-regulation. The question is sometimes asked why regulate when there is competition? Even in a competitive environment sector specific regulation ensures that self-interest does not take precedence through self-regulation at the expense of the public interest. At this point in time, with increased competition in the communications sector, ICASA still is relevant and has a distinct regulatory function to play. Competition and liberalization do not reduce the role of the regulator, but rather shift the focus of the regulatory body. Lessons learned from our counterparts in the United Stated and United Kingdom, amongst others, demonstrate that ICASA cannot see its regulatory functions as limited to this brief period during which 'managed liberalization' occurs, but we will continue to protect the public interest, albeit in a different manner, but with the same underlying principles, in a more competitive environment.
Given the similarities between regulation of various sectors, coordination with other regulators is paramount. This coordination exists on both a national and international level. In addition to the relationship with the Competition Commission, ICASA enjoys a good relationship with other sector specific regulators in the country such as the National Electricity Regulator (NER). On a regional level, ICASA participates in the activities of both TRASA and RIARC.
A third key issue is staffing. As mentioned earlier, staffing the regulator is a challenge. Attracting and retaining staff, and adequately remunerating them is a challenge that is faced by many regulators. It is not unique to ICASA , nor is it unique to the communications sector. Another staff-related challenge is the avoidance of 'regulatory capture'. What I mean by this is the prevention of the 'capture' of staff by industry or government - thus ensuring that the regulator performs its functions in a manner that is free of conflicts of interest, at both a staff and Council level, and guarantees independence and accountability and is in line with the three tiered institutional structure.
This leads to discussion of independence. I have touched on the notion throughout this presentation, and maintain that it is a key issue to be addressed by all regulators. The term 'independence' is often misunderstood. In my view it refers to independence to implement policy and is critical, hence the establishment of the Protocol that I discussed earlier and the separation of the functions of the regulator from those of operators. Independence of any interference in the regulator's decision making processes is key, and is a challenge for a regulator who must do a balancing act between public and commercial interests.
Test of Good Regulation
At the end of the day, when a regulator looks at what it has accomplished, it can ask itself a few key questions to see if the regulatory goals and thus the policy objectives for the sector have been achieved. It can reach decisions on cases based on a well developed public record, and in so doing ensure that it decisions:
- have broad public support;
- are enforceable;
- are easily understood by the public as well as technocrats;
- balance the interests of all those affected;
- avoid unintended or unforeseen circumstances where possible;
- balance critical elements of risk, cost and practical benefits; and
- identify accountability by the relevant parties.
If the above apply, then a regulator, whether it be a communications or ports regulator, can be satisfied that it has indeed worked in the public interest.
I hope the insight I have provided, while broad and focused on the sector in which ICASA works, will assist the Portfolio Committee in its deliberations. I further hope that ICASA has been able to assist in clarifying the issues raised with us by the Portfolio Committee. Should you require any further clarification on the regulatory experiences and lessons from ICASA, we are available to answer any questions.
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