The Committee held a public hearing on the Electronic Communications Amendment Bill. The hearing was attended by officials from the Department of Telecommunications and Postal Services, representatives of Independent Communications Authority of South Africa, industry stakeholders and members of the public.
SENTECH submitted that subsection 19A (f) of the Electronic Communications Act is not in the best interests of State-Owned Entities licensed under the Act and therefore proposes that the subsection should be omitted. SENTECH also pointed out that the Minister had published the policy directions on the licensing of high demand spectrum and hence there is no need to amend the Electronic Communications Act. Given that the Wireless Open Access Network will be a new entity, time should be afforded to the Wireless Open Access Network to find its feet in the ICT landscape. SENTECH submitted that the section 67 competition process may work against these incentives if instituted too soon. The Committee asked if SENTECH wanted the Wireless Open Access Network to be a State-Owned Entity and if so why. Further, the Committee also inquired whether SENTECH wanted to become a customer of the Wireless Open Access Network or wanted to get spectrum. The Department clarified that the envisaged Wireless Open Access Network would not be a public entity, but a private company.
The Support Public Broadcasting Coalition and Media Monitoring Africa reported that Bill was unconstitutional because it undermined the independence of ICASA and that they would challenge the Bill if it was passed in its current form. Further, the Broadcasting Coalition and Media Monitoring Africa did not support the licensing of a Wireless Open Access Network. It argued that the National ICT Policy Review did not recommend the awarding of a circumscribed new licence to a single Wireless Open Access Network operator. The Broadcasting Coalition and Media Monitoring Africa strongly argued against the introduction of a Wireless Open Access Network without doing proper research into its feasibility. The Broadcasting Coalition and Media Monitoring Africa submitted that the entire process of the Bill must be scrapped and restarted. The Committee also asked if there were other models of open access which would achieve the same objectives as the Wireless Open Access Network.
The Support Public Broadcasting Coalition and Media Monitoring Africa did not support incentives given to the Wireless Open Access Network because the incentives had the potential to create a monopoly wireless provider of broadband infrastructure. Furthermore, the Support Public Broadcasting Coalition and Media Monitoring Africa were fundamentally opposed to the splitting of ICASA and the creation of a new regulator. The Support Public Broadcasting Coalition and Media Monitoring Africa emphasised that ICASA should not be split, but should be a single, strong, independent, converged regulator which plays its role as a fully-fledged Chapter 9 institution whose independence is constitutionally protected. The Committee asked why the Support Public Broadcasting Coalition and Media Monitoring Africa did not support splitting ICASA into different entities, yet they criticised ICASA’s inefficiency. The Committee requested clarity on what constituted public broadcasting in a converged environment. In addition, the Committee wanted to know how the Wireless Open Access Network would create a monopoly.
The Committee was told by the Liquid Telecommunications that the proposal for a single Wireless Open Access Network mimicked the pre-2005 policy environment and had the potential to frustrate the objectives of the Bill. Even though the introduction of a Wireless Open Access Network was supported, Liquid Telecom was concerned about the fact that it had not worked anywhere else, except in Rwanda. Liquid Telecom recommended that a Regulatory Impact Assessment Process should have been done before the Bill was drafted. Although services-based competition was ideal, the question was why infrastructure competition was neglected. Liquid Telecommunications argued that market forces should determine whether infrastructure is an unnecessary duplication or desirable and pro-competitive redundancy. The Committee also asked if Liquid Telecom considered the Bill to be unconstitutional and how the Wireless Open Access Network would create a monopoly.
The Committee was informed by the Internet Services Providers Association that there should be clarity on implementation of the Bill. It was important for the Committee to engage with the Department and ICASA with a view to providing stakeholders with a clear roadmap towards the finalisation of the processes contemplated in the policy direction process and the Bill, and how the two will coexist and interact. ISPA supported the amendments on infrastructure rights but proposed that industry representation should be provided for in the Rapid Deployment Steering Committee and that it should not be left to the discretion of the Minister. The Bill gave the impression that the Wireless Open Access Network was to be regulated as an incumbent rather than a new entrant with references to pricing and access obligations. ISPA did not understand why the Wireless Open Access Network was being subjected to prescribed rates.
The Wireless Access Providers Association of South Africa said that the jurisdictional implications of the proposed amendments, with particular regard to ICASA exercising jurisdiction over entities which are not the holders of licences issued under the Electronic Communications Act must be carefully considered. The Wireless Access Providers Association also indicated that it was not desirable for deployment to be suspended pending a resolution by ICASA as there was a dispute over the reasonableness of compensation.
The National Association of Broadcasters said the administration of spectrum should be done in such a way that broadcasting is not undermined. Spectrum was assigned for services including broadcasting services in accordance with the National Radio Frequency Plan. The effect of the proposed amendments was that the assignment of all spectrum is now placed squarely within the purview of the Minister responsible for administering the Electronic Communications Act. The Department indicated that the Minister’s role was to approve the radio frequency plan, based on recommendations made by ICASA. Furthermore, the National Broadcasters recommended that the timelines for the determination and assignment of the high demand spectrum should take into account the Broadcasting Digital Migration and the restacking processes, as well as the spectrum needs of broadcasters.
The Committee was told by ABT Africa that 60% of the Wireless Open Access Network must always be owned by black shareholders/investors including women and the youth. ABT also refuted the argument that the Wireless Open Access Network will be a failure merely because it had failed elsewhere in the world. The Committee asked how ABT Africa would participate in the Wireless Open Access Network and where it would get its funding from. The Committee was also interested in understanding the prospective customers of the Wireless Open Access Network.
The Chairperson opened the meeting after introducing himself and asked Members of the Committee and representatives from different entities to introduce themselves.
The Chairperson said that the Minister sent her apologies because she was attending a meeting with Portfolio Committee on Communications which was meeting with the South African Broadcasting Corporation.
The Chairperson asked Members of the Committee to reflect on submissions made on Monday 26 November, as they would discuss their views on the Thursday.
Briefing by SENTECH
Mr Thato Toko, Technical Regulatory Specialist at SENTECH, said section 19A (1) (b) of the Bill did not go far enough to address the issue of equity ownership as intended in section 9(2) (b) of the Electronic Communications Act (ECA). The compliance to section 9(2) (b) of the ECA should not only be confined to the Wireless Open Access Network (WOAN) as an entity but also to individual persons. SENTECH submitted that subsection 19A (f) is not in the best interest of State Owned Entities (SOEs) licensed under the ECA and therefore proposes that the subsection should be omitted.
The ECA empowers the Minister to issue policy directions and this negates the need to amend the ECA in respect to principles already catered for in the Act. It is on this basis that SENTECH proposed the omission of section 19A (5) and (6) of the Bill. Mr Toko also pointed out that the Minister published the policy directions on the licensing of high demand spectrum and hence there is no need to amend the ECA.
The Bill should empower the Authority to institute section 67 of the ECA only from the fifth anniversary of the licencing of the WOAN in the interest of ensuring that objectives of the National Integrated ICT Policy are met. Given that the WOAN will be a new entity, time should be afforded to the WOAN to find its feet in the ICT landscape. SENTECH submitted that the section 67 competition process may work against these incentives if instituted too earlier. SENTECH did not support the inclusion of section 31A (1), (2) & (3) in the Bill. It was of the view that section 31A (1) of the Bill overlooks the issue of affordability for entities with existing obligations while section 31A (3) assumes that entities assigned similar spectrum are similar in financial status and this may have the unintended consequence of financially burdening some licensed entities.
Further, SENTECH said it was concerned that the proposed section 31B of the Bill will have unintended consequences that may activate the inclusion of other agencies such as the Competition Commission. As such, both the spectrum and spectrum dependent equipment are viewed as assets whose acquisition may translate to a merger or be linked with merger procedures. Spectrum re-farming would not change the allocation as stated in the National Frequency Plan, nor does it affect assignment. Therefore, SENTECH submitted that spectrum re-farming is neither an allocation nor assignment issue, but an operational method of addressing functional challenges and/ or opportunities.
The Chairperson asked Members to make comments.
Ms M Shinn (DA) asked if SENTECH wanted WOAN to be an SOE and if so why.
Mr Toko replied that SENTECH was not advocating for a WOAN to be a SOE, but was asking for an opportunity to be part of the WOAN. SENETCH believed that even if the WOAN was not an SOE, the provision may hinder SOEs from forming part of the WOAN.
Ms Shinn asked if SENTECH wanted to become a customer of the WOAN or wanted to get spectrum.
Mr Toko responded that SENTECH wanted to be part of the WOAM consortium.
Ms Shinn said that the Minister had indicated that SOEs will not be part of the WOAM. She asked if SENTECH was saying there was a policy change, or hoped that there would be a policy change.
The Chairperson said SENTECH wanted the Committee to legislate and overrule the Minister’s policy. He added that they had the freedom to express their views, but it was up to the Committee to decide.
Mr Toko said there had been no policy change but hoped that it would change.
Mr Robert Nkuna, Director General, Department of Telecommunications and Postal Services (DTPS) said that the Department allowed all entities to participate on their own and to give their views. The Bill stated that the envisaged WOAN would not be a public entity. However, an entity in which an SOE had shares, did not necessarily become a state-owned company. If any SOE wanted to invest in the WOAN, it was a different matter. Nonetheless, he reiterated that a WOAN cannot be a SOE as defined in the Public Finance Management Act (PFMA).
Ms J Kilian (ANC) apologised for being late. She asked if public entities will make investment into the WOAN. She said how did the Department see investment in the WOAN?
Mr Nkuna responded that the investment would take different forms. He indicated that SENTECH had different sites and infrastructure across the country which could be used by WOAN. Investment may take account of using existing infrastructure. He said that the Department had not discussed the matter with SENTECH but some investors could make financial investments while others, like SENTECH, could use infrastructure that they had. He restated that the WOAN could not be a public entity as defined in the PFMA but should be a private entity.
Ms Shinn said that there was need to discuss whether an entity that built infrastructure with public funds could become part of the WOAN.
The Chairperson said all issues will be discussed further by the Committee.
Briefing by Support Public Broadcasting Coalition and Media Monitoring Africa
Mr Tsanga Mukumba, a member of SOS Legal Sub-Committee, said the Bill was unconstitutional because it undermined the independence of ICASA. SOS and MMA would challenge it by way of representation to the President not to sign the Bill and /or follow legal proceedings as the amendments to the ECA were unconstitutional. As such the Committee had to take particular note of the constitutional concerns because SOS and MMA were of the view that it would be unlawful to enact the unconstitutional provisions of the Bill. Provisions that are unconstitutional include among others, subsection 1(b) on the definition of ‘broadband’; subsection 1(e), definition of high demand spectrum; subsection 4(b); section 19, sections 34A and B. SOS and MMA were of the view the transferring the management of spectrum from ICASA to the Minister is unconstitutional and undermines ICASA’s independence.
SOS and MMA did not support the licensing of a WOAN for the following reasons. It argued that the National ICT Policy Review did not recommend the awarding of a circumscribed new licence to a single WOAN operator. The insertion 3A providing for the licensing of wireless open access network service introduced a new category of licence, seemingly a hybrid between infrastructure and service. This was entirely at odds with the existing licensing framework within the Act, and served to undermine and deviate from the approach set out in the current Chapter 3. The SOS and MMA were of the view that the WOAN has not been tried and may not work and that the government is better placed to invest properly, alongside the private sector, to ensure that South Africans have access to affordable, fast and quality electronic communications infrastructure, services and content. SOS and MNA strongly argued that the introduction of a WOAN required a proper research and feasibility study to determine if it will be viable.
SOS and MMA were further concerned by the special incentives given to the WOAN in terms of section 19A (3)(b). Terms and conditions applicable to the WOAN imply that these may differ from ICASA’s standard terms and conditions for I-ECNS licensees, as published, which state that the aim of the regulations is to ensure that they apply equally to all licensees. What was worse, was that the draft licence required a series of special incentives, including a privileged spectrum fee dispensation, rights of way privileges, and financial support from the Universal Service and Access Fund (USAF). Existing licensees will be forced to utilise the services of the WOAN for at least 30% of their bandwidth requirements, no matter what quality of service they receive, if they intend to apply for any high-demand spectrum. SOS and MMA were of the view that the incentives are anti-competitive and have the potential to create a monopoly of wireless provider of broadband infrastructure.
SOS and MMA believe that there are serious competition challenges within the broadcasting and electronic communication sectors. It was not clear how section 67 will operate when there was a proposal that ICASA be replaced by a new regulator that would deal solely with ICT functions i.e. non-content related issues. SOS and MMA were of the view that section 67 required a converged regulator in order to be effective and indeed even operational. Furthermore, SOS and MMA were fundamentally opposed to the splitting of ICASA and the creation of a new regulator. They believed that ICASA should be a single, strong, independent, converged regulator which played its part as a fully-fledged Chapter 9 institution whose independence was constitutionally protected. In conclusion, SOS and MMA submitted that the entire process of the Bill must be scrapped and restarted.
The Chairperson asked for comments from Members.
Ms Killian said SOS and MMA had acknowledged in the written submissions that it would be good to have two institutions to regulate competition. However, in the oral presentations, they had indicated that there was a problem with having two bodies regulating competition. She asked Mr Mukumba to explain whether he was agreeing with the provisions of the Bill on competition or not. She said the submissions seemed as if SOS and MMA agreed with the amendment in the Bill.
She asked Mr Mukumba to explain why he did not support splitting ICASA into different entities yet he had criticised ICASA’s inefficiency. She also asked him to tell the Committee of other models of open access which would achieve the same objectives as the WOAN.
Ms Shinn said she wanted Mr Mukumba’s view on what would constitute public broadcasting in a converged environment. She was concerned with whether there should be a public broadcaster or a licence condition for people who use converged communications infrastructure to broadcast news.
She asked for clarity on how the WOAN would create a monopoly. The Council for Scientific and Industrial Research (CSIR) report had indicated that the WOAN should serve at least 20% percent of the population. The majority of the population would be served by other operators. She wanted to understand how the WOAN would create a monopoly.
Mr C Mackenzie (DA) asked if SOS and MMA would challenge the Bill in Court on the basis of unconstitutionality if it was passed without including the submissions made by them. He asked if SOS and MMA were of the view that the Competition Commission should be carrying out market reviews and not ICASA. He said ICASA was better placed to do the market review considering its knowledge of the sector. He asked, if ICASA conducted the market review, what would be the appropriate timescale?
The Chairperson stated that SOS and MMA had raised a lot of questions on the constitutionality of the Bill. He had hoped that SOS and MMA would also have dealt with transformation. He asked how transformation would happen.
The Chairperson also asked for clarity as to whether SOS and MMA were of the view that the state should provide the infrastructure for networks in rural areas. The submission stated that the Post Office was a monopoly. He asked if there was need for another entity to deal with infrastructure in rural areas. He wanted to know why the process should be scrapped.
The Chairperson asked the Department to clarify the issues raised.
Mr Nkuna responded to the issue of whether the process should be scrapped. He said the question that had to be answered was whether there was a problem in the telecommunications sector. The people who wanted the process stopped conceded that there was a problem in the sector. He asked if there was another way of dealing with the problems in the sector, other than through Parliament. The Department was of the view that there should an agreement as to whether there was a problem or not.
In terms of constitutionality of the Bill, he said after having gone through the submissions, there was a need to determine if the solutions being offered would resolve the challenges in the sector. The International Telecommunications Union separated three things in the radio regulations. Firstly, it separated allotment which was the reserving of spectrum bands for specific services like maritime, aviation. Secondly, the national administration would do allocation and thirdly assignment. Assignment was defined as licensing and was the responsibility of regulators.
He said, section 33 of the ECA precluded the Minister from giving or assigning licences. Section 192 of the Constitution pointed to the fact that the Minister could not determine who must get a licence or whose licence must be used. There was a difference between the Minister allocating certain bands and assigning licences. Section 192 in relation to ICASA’s independence meant that the Minster could not dictate to ICASA who must get a licence. However, the Minister could determine what the spectrum bands could be used for. He said that there was need to agree on the problem statement.
Furthermore, in relation to the model for open access, he said all the providers of fibre in South Africa were operating on open access basis. What was the difference between the open access model in fibres environment and the envisaged WOAN? He said the difference was scarcity. Because of scarcity, it would not be possible to allow everyone to operate their mini-network. Therefore, it would be better to group the little that was available so that it could be shared by many people. The model of open access was already applied in South Africa but in a different context. The Department was of the view that open access must continue but there was a need to consolidate small players.
He added that it would not be necessary to check where open access had been applied. SENTECH had shown that South Africa had a common carrier model. SENTECH had always been required by law to operate on non-discriminatory and transparency principles to the extent that more than 95% of broadcasters were carried by SENTECH. In broadcasting, South Africa had perfected a model which other countries would want to copy.
Mr Alf Wiltz, Chief Director: Telecommunication and IT Policy (DTPS), said the splitting of ICASA was not a matter covered in the Bill. However, there was a challenge in the White Paper and SA Connect as to whether stakeholders were properly consulted. The Department’s argument was that input on both were properly canvassed and stakeholders were consulted.
SA Connect had already started the process of the WOAN and provided that the Minister must determine the viability of establishing a wireless open access network. The policy was clear when it was laid down in 2013. It had continued in the Policy Review process and the White Paper. The Minister had carried out consultations in November 2016 after the White Paper was released up to the time when the Bill was drafted.
Furthermore, SOS and MMA had argued that all the three envisaged Bills under the White Paper should have come to Parliament at the same time. He said the three Bills drafted under the White Paper were not directly linked or dependent on each other. The ECA Amendment Bill could stand on its own and clearly referred to the current ICASA.
He said the current definition provided that the Minister must determine and define broadband. He was surprised why SOS and MMA wanted the Minister taken out of the definition. He did not see the point. As far back as SA Connect and the White Paper, it had been the role of the Minister to update what was relevant and what the latest definitions should be to take the country forward. The Department had added a role for ICASA to make recommendations to the Minister to define the concepts. The Minister would work with ICASA in the process of determining definitions of concepts.
In terms of the submission that the report on spectrum audit done by spectrum licensees should not be given to the Minister, he said the Bill provided that the report must be given to both the Minister and ICASA. The Minister had a policy role and required the information.
He said he was surprised why SOS and MMA wanted the process to be scrapped when they had welcomed most of the amendments brought by the Bill.
Ms Kilian urged the Department to consider answering questions and clarifying concerns rather than making arguments and unnecessary comments to counter the submissions. She said the Department would need the stakeholders to implement the Bill. She suggested that the Department should avoid criticising presentations. It was important to understand each and every aspect of the Bill because the Committee was engaging in a fact-finding process.
Ms D Tsotetsi (ANC) said she thought SOS and MMA would be given an opportunity to either concede that the process should not be scrapped or clarify why they wanted it to be scrapped off.
The Chairperson asked SOS and MMA to respond to the concerns raised by Members. He added that SOS and MMA could also supplement its comments on the Bill in writing and address some of the concerns raised.
Mr Mukumba indicated that SOS and MMA would stick to their unconstitutionality argument. He said the regulation of broadcasting was the domain of ICASA and not the Minister. He said that was a plain legal fact because the Bill abrogated power and violated the Constitution. He, however, conceded that there was A need for collaboration between ICASA and the Minister, but the Minister should not have the final word or control.
He said he could not respond to certain technical issues raised because he was not involved in the drafting of the comments. However, as directed by the Chairperson, SOS and MMA would make further submissions.
With regards to whether the market reviews should be done by ICASA or the Competition Commission, he said ICASA should lead the market review but it should not be a legislative requirement. He added that it had to be an ordinary function of ICASA to produce the reports that inform its work. He stated that to allow for flexibility, the market review function should not be legislated.
Furthermore, he said that the state had a duty to ensure that all human rights are respected and the people are able to freely express themselves. In today’s works the rights included the right to access to the internet. He said that states were expected to provide libraries in 1950. However, in 2018, states were expected to provide libraries with computer centres. Therefore, the state must also provide the infrastructure that would allow people to access the internet, particularly in rural areas that were not well serviced. Whether the state chose to lease from a private entity or run it itself, it bore the responsibility to provide the last mile coverage and the basic access to the internet.
In terms of the choice to go ahead with WOAN, he said SOS and MMA did not dispute that it was a policy decision but disagreed that it was the right policy decision. He said, the fact that there was a problem and a modality chosen to fix the problem did not mean that it was the only modality to solve the problem. The process that was used to solve the problem was flawed because it was not rationally related to the consultation that took place. He emphasised that even if there were consultations, the WOAN was not given the reasonable consideration it ought to have been given. The research commissioned by the Department had indicated that the WOAN was not feasible.
He said several pieces of legislations were underway. He agreed that the ECA Bill was a standalone legislation but SOS and MMA were concerned about whether it was the optimal way to approach the legislation of the sector. He cautioned against doing things that could have unintended consequences in the future.
The Chairperson thanked Mr Mukumba and asked SOS to make further submissions to clarify the questions raised by Members.
Briefing by Liquid Telecommunication (Liquid Telecom)
Mr Mike Silber, General Counsel: Liquid Telecommunication South Africa, said the Bill was welcomed and supported but there were serious structural concerns. The first concern raised was the proposal for a single wireless open access network (WOAN) which mimicked the pre-2005 policy environment and had the potential to frustrate the objectives of the Bill. The Bill proposed significant radical changes to the structure of the sector which might have unintended consequences. Even though the introduction of a WOAN was supported, Liquid Telecom was concerned about the fact that it had not worked anywhere else, except in Rwanda, because of cost implications and lack of competition.
Liquid Telecom was of the view that an incentive-based, light-touch regulatory model was required. Income disparities and inequality required regulation that drove costs down, not up. The market undoubtedly required a restructure. However, it had to be done in a way that did not result in the creation of single operators who could drive costs up, destroy existing wireless business models that had been painstakingly developed over time and remove the confidence of investors, both local and global, who were needed to grow the sector. All of that required a strong, resourced and effective regulator.
Further, the Bill overstepped in respect of the role of ICASA and handed over operational allocation powers to the Minister. That defied all best practice and reduced the core competence of the regulator to a mere administrative role. In this regard, Liquid Telecom made reference to definitions of ‘broadband’, high demand spectrum, allocation and argued that the transfer of powers to the Minister also undermined the independence of ICASA. It, therefore, suggested that that approach should revisited.
Moreover, there should a clear separation between regulation and policy. It further argued that the Bill provided for matters that were currently enabled by the ECA, but not implemented. There was also a risk of excessive reliance on inter-governmental co-operation and a lack of institutional capacity.
Mr Silber said the sector had seen the effects of the implementation of the current legislation without an impact assessment. Regulation carried costs and those needed to be fully understood in the process of regulation. As such, Liquid Telecom recommended that a Regulatory Impact Analysis/Assessment (RIA) Process should have been done. Liquid Telecom submitted that an RIA was essential before the Bill can be finalised. That exercise could only serve to ensure that proposed amendments and their implementation had the intended effect, or where that was lacking, the gaps and pitfalls were fully understood so that budget and course correction could occur.
Liquid Telecom supported the promotion of services-based competition, but failed to understand why infrastructure competition was neglected. It suggested that the most effective solution to both possible forms of ‘concentration’ was promoting infrastructure competition. Finally there was a suggestion that a duplication of electronic communications infrastructure be avoided. Licensees required redundant networks to ensure reliability and network resilience. It argued that market forces would determine whether infrastructure was an unnecessary duplication or desirable and pro-competitive. While Liquid Telecom supported the policy objective underpinning universal service and access obligations, it recommended that the Committee reflect on the effectiveness to date of the command and control manner in which those had been designed and measured since 1996 and whether, in fact, they had worked. The idea of applying an ‘obligation’ in exchange for the right to a licence, was one that sat appropriately in a monopoly and duopoly sector. Liquid Telecom recommended that the universal service and access obligations should rather be relevant, replete with incentive and market mechanisms that directed operators to compete for subsidies to roll-out networks and offer services.
With regards to Rapid Deployment, Liquid Telecom urged the DTPS to convene, on an urgent basis, a consultative workshop to develop the specifics of that chapter in conjunction with all role players to effect a workable, simplified set of provisions that were capable of immediate implementation and immunised from legal challenge. Liquid Telecom was concerned about the feasibility of single trenching in terms of section 20F. It argued that the implementation of such an approach would result in single points of failure and have adverse unintended consequences for service delivery and further investment.
Section 20C (2) provided for the Authority to establish procedures for resolving disputes that might arise between ECN licensees and landowners. Liquid Telecom submitted that the dispute resolution needed industry assistance. Liquid Telecom also supported competition provisions, international roaming and open access. In conclusion, Liquid Telecom emphasised that there was a need for more consultation, but focused on implementation.
The Chairperson thanked Liquid Telecom for its presentation and invited Members to ask questions.
Ms Shinn asked how WOAN would create a monopoly for a wireless network. The CSIR report had indicated that the WOAN needed 20% of the market share of the population to operatively and profitability.
Mr Mackenzie asked if regulatory concerns expressed in the Bill were unconstitutional and if Liquid Telecom would challenge the Bill in court. He asked if Liquid Telecom thought that the principles of open access could be met through regulated roaming contracts. He wanted to know if the same objectives could be achieved if ICASA regulated termination rates or roaming rates.
Ms Tsotetsi said what would be reasonable timing to deal with the Bill appropriately.
Ms N Ndogeni (ANC) asked how the rural and underserviced areas could be serviced and have access to the internet.
The Chairperson said that the issues raised by Liquid were crucial and should be reflected upon. There were people who had been complaining that the Bill has been outstanding for too long. However, the view from Liquid Telecom was that the Bill was being rushed. He reminded the Members that the Committee did not intend to rush the Bill.
He asked Mr Nkuna to remind the Committee and the stakeholders of the purpose of the Bill and the problem that it sought to address. He asked if Members and stakeholders agreed that there was a problem in the sector and if the remedy being prescribed was appropriate.
He mentioned that the usurping of powers from the ICASA to the Minister had been raised by other presenters during the first public hearing and were still being raised by stakeholders. He indicated that there had to be time set aside to deal with the constitutional issue by inviting constitutional law experts. He added that the issue of competition was complex and that Mr Nkuna should clarify those concerns.
Mr Nkuna said there were variations to the literature of regulatory impact assessment. However, the important aspect was the cost benefit analysis. To undertake costs benefit analysis, one would need information from companies as to how the Bill would impact on their operations. Furthermore, information should also be obtained from consumers. It would be a very long process. The rationale behind public consultation was to arrive at a partial regulatory impact assessment. He added that the Department relied on operators for information and that there was research done by the Department to arrive at certain positions.
He repeated that it was incumbent upon operators and people making submissions to ensure that they provided the information on how they would be affected by the Bill and the extent to which they might be affected in both qualitative and quantitative terms. He said that even if the Department was to do the RIA on its own, it would have to approach the industry players for the information. He added that if stakeholders were of the view that some aspects of the Bill would affect them, it was also appropriate for the Department to know how they would be affected.
The important question was whether transformation would ever end. He was of the view that transformation was an evolving continuous process and was highly complex. According to his understanding, it was impossible for any government to think that transformation would come to an end. As such, policy makers had to continue finding solutions.
The Telecommunications Act of 1996 had taken a position that no other person other than Telkom would be granted a licence to provide long distance telecommunication services until a date to be determined by the Minister. The imperatives at the time were different compared to the current time. Another position was taken that no other person other than Telkom would be granted a licence to provide long distance telecommunication services until 07 May 2002. The rational of that position was to protect the investments of Telkom. Lessons had been learnt about regulations and policy making to determine what to protect and when to allow new entrants in the market. The government had always been geared towards balancing the interests of the new entrants and protecting interests of the existing operators.
In relation to the market structure, the Department envisaged that there were some emerging companies that might not be at the scale of the existing operators but some of the emerging companies were also providing services using the Industrial Scientific and Medical bands and Wi-Fi bands. For instance, the Internet Services Providers Association (ISPA) was representing some small entities providing internet services.
The small companies had pleaded with the Department that they were unable to build infrastructure and did not have access to spectrum. Hence, the Department was trying to assist existing small companies. He said, it was important to understand the rationale of what the Department was doing and whether what the small companies were asking for, was relevant. He said that was the crux of the Bill. He hoped that the submissions of ISPA and Wireless Access Providers Association would shed more light because the two associations represented small entities.
He indicated that it was essential to ascertain whether infrastructure competition was not necessarily in favour of service-based competition. There was a need for competition on the supply side. However, when the Department had done its assessments for barriers to entry between infrastructure and retail side, it had realised that that people had too many ideas. The problem found was more on supply side of the market. Nothing could be done to address problems on the retail side because there were already ideas and those would be presented by the small entities.
The existing model created a barrier to entry for new entrants. As such, the Department wanted to facilitate competition that would allow others to enter the market. That was the gist of what the Department was trying to achieve in the Bill.
Mr Nkuna stated that if the big companies were to propose reforms to the Committee and the Department during their presentations, it would easy to deal with the challenges in the sector. He hoped that the big companies would make proposals on reforms that would be acceptable to the small entrants and the Committee to transform the sector. The Bill was one of the instruments that could be used to introduce changes in a regulated market. He pleaded with big companies to come up with positive reforms.
Mr Wiltz said the court had interpreted the independence in the ICASA Act from the ECA and how the independence provisions had been crafted in terms of those legislations. The judgments also favoured the Department’s argument that there should be synergies between ICASA’s actions and the Minister’s policies. However, it did not take away the powers of Parliament to define the nature of ICASA’s independence through legislative changes from time to time. The Department respected ICASA’s independence but was of the view that ICASA should not regulate the sector in isolation, but must be guided by government policy.
With regards to timelines, Mr Wiltz said the Department agreed with the concerns raised in the submissions and the Department had removed a lot of timelines in the Bill on what ICASA had to do. The Department left the critical ones to ensure the success of the Bill. For instance, the open access framework in the Bill was critically important. However, to give effect to it, it would be vital to have defined markets. ICASA had informed the Department that it would take a long time to define the markets but the Department had requested ICASA to start defining the markets before the Bill was completed.
In terms of clause 47(2) the President had the power to put different sections of the Bill into operation at different times. However, the President would act on the advice of the Minister when the preparatory work had been completed. The President would issue a proclamation on the specific sections that should come into effect after ICSA had completed the regulations. He said, it was nonetheless at the discretion of the Committee to take out all the timelines in the Bill. He warned that there was a risk in removing all timelines and that it would delay the success of the Bill. He proposed that the timelines be extended to give ICASA more time to do its work properly without rushing. He also agreed that ICASA should be resourced going forward.
In terms of the universal services access obligations (USAO) framework and reverse auctions, Mr Wilz said it was true that the ECA provided for things that should have been implemented. Section 90 of the current ECA provided for reverse tenders but had not been implemented. The focus of the Bill was to link USAOs and spectrum because high demand spectrum would be released. It was important to ensure that those who received high demand spectrum should also get USAOs. He added that there were shortcomings, which could be improved. The Bill tried to bring about compliance audits and the use of monitoring enforcement equipment to ensure that USAOs were monitored and enforced.
When the Department had wanted to force the WOAN into a standard ECNS, it had found that it would be a misfit because all ECNS licence categories had to be treated equally. The WOAN, as anticipated, had unique characteristics because it would get incentives and obligations that did not apply to other ECNC licensees. The WOAN would have the characteristics of what was termed as a deemed entity. Therefore, existing incumbent operators that had significant market power and controlled scarce resources would in due course become deemed entities. Mr Wilz explained that the special category for the WOAN was created because there was no other way of treating the WOAN as a normal ECNS licensee.
Mr Wilz assed that the 30% capacity of the WOAN came about due to certain agreements in the industry on buying capacity in the WOAN in return for forfeiting high demand spectrum. The Bill had provisions on individual procurement of capacity in respect of spectrum. In the Policy Direction, two categories were included: firstly, a minimum of 30% individual procurement and, secondly, a minimum of 30% of collective procurement capacity. The Department did not want to compromise the Policy Direction process which had not been completed but was useful for the Committee to consider. The Department was of the view that there should be a certain minimum capacity procured collectively by those that accessed additional spectrum.
Mr Silber said the WOAN would create a possible monopoly of wireless network in the market. He mentioned that there were several initiatives on the wireless network that were taking place. ISPA had been advocating for wireless access and roaming on mobile networks for a long time. There was a possibility of skewing the market in favour of the WOAN which would move the focus from operators gaining roaming or other wireless access to networks, to focusing on the WOAN. That meant that the regulatory interventions required would fall away together with the business models that were being looked at by operators. He said, Liquid Telecom was concerned about the unintended consequences of the WOAN if it was pursued without detailed consideration.
ICASA started a process of examining the wireless broadband market. He said that was an important intervention which would focus on the mobile broadband market and that certain recommendations would be provided.
Mr Silber indicated that he did not know whether the provisions of the Bill were unconstitutional. However, he was of the view there might be certain provisions that were constitutional and some that were unconstitutional. He added that there could be provisions that created uncertainty and would result in an unwillingness by operators to invest in an environment which was unpredictable. A ministerial directive would not have to follow the same process that a regulator would have to follow. He reiterated that there could be unintended consequences. He pointed out that the intention was to move things forward and not to usurp power.
There were a lot of people in the industry and consumers who were concerned about the delays of change in the sector. Mr Silber stated that in the event that there were provisions which were unconstitutional, it would not be necessary to litigate. Liquid Telecom would not litigate on the basis of uncertainty to achieve delay. The concern however was that without certainty, other players could manipulate the uncertainty to delay the process of transformation.
Mr Silber indicated that the problem was that changes had to come from the ICASA Act and he hoped to see a Bill in relation to a separation of powers between ICASA and the Minister. He was of the view that the Department should give the industry the full picture to understand how the different legislations (ICASA Act and ECA) interacted. He said it was possible for the concerns to be addressed in the ICASA Act but the industry was not aware if that process would ever take place.
In terms of the question of whether open access should be regulated by ICASA, he indicated that the regulator had taken a progressive step when it took ISPA and Telkom into a room and requested the two parties to find a solution. He said the Regulator had left the room for the parties to discuss and a solution was found. He indicated that if operators were not able to engage on wireless access of their networks, the regulation intervention would be appropriate but only after a proper consultation. However, at the moment, there were operators who offered access to their network.
Furthermore, he said the legislative process of the Bill had been in place for a while and that he understood parties were aggrieved because of the delay. Nevertheless, there were different stages from drafting of the White Paper to the draft bill which most industry players were involved in. The industry however did not get the opportunity to discuss on specific issues that came out in the Bill. The Department only discussed and went behind closed doors and came out with the Bill. He said when the first ECA was enacted, there were working groups comprising of industry players, public sector, the Department and non-industry private players that dealt with specific matters. He was also involved in one of the working groups at the time. He stressed that the industry was concerned about solutions and not legal language and suggested that working group had to be created to deal with certain technical chapters. He stated that it was not too late to do that.
He was of the view that there should be further engagements on technical issues in the Bill to address the cost to communicate. He was also of the view that the timing was not appropriate given that the Committee would go on recess and that Members would be preparing for elections next year. He emphasized that matters that did not require regulations should not be regulated, but the focus should be on matters that were critical and needed to be regulated.
In relation to the issue of USAOs, Mr Silber said that he was not suggesting that the additional audit and compliance requirements were inappropriate but the White Paper provided for the restructuring of the universal service access concept in South Africa. He was of the view that USAOs should involve payment of money into a Fund wherein operators would be able to bid into the fund to build and operate infrastructure using subsides. The reason for this was that operators would be able to provide services in under-serviced areas while fostering competition with other service providers with access to their infrastructure. As a result, consumers would get better services not only from the owner of the infrastructure but from other service providers with access to infrastructure build by another operator.
Mr Silber added that Liquid Telecom did not offer mobile services, as such; there would be a need for mobile operators with market penetration and the ability to sell airtime and devices and offer access its infrastructure. Liquid Telecom needed mobile operators to also use their infrastructure to make their businesses more economically viable. According to Liquid Telecom, it was therefore critical to look at reverse auction and how operators would access the funds for USAOs and had the expertise and experience in maintaining services levels for demand industry customers, rather than companies that did not use incentives to keep the infrastructure in a good state.
He encouraged the Department to publish its internal research concerning the entire Bill since the industry had not had sight of the research. He pointed that there were a lot a questionnaires and information that the industry had submitted to ICASA, on a continuous basis. He added that there was no need for a 10-year RIA, but an objective RIA conducted by an expert. The CSIR Report was clear that there was no research undertaken on financial modelling. Therefore, the assumption of 20% market share was just an assumption without any basis.
With regards to timelines, he stated that he was concerned about the Bill imposing timelines on a regulator which had missed all timelines in that past. It was not practical to impose six months on ICASA to do something when it had failed to do so in 11 years. He also did not think that the provision granting the President power to determine when certain sections would come into effect was helpful. He said there was a need for a different approach to hold ICASA accountable. He pointed out that the Committee had to hold ICASA accountable to its annual plans and to ensure that the regulator developed a multi-year plan to implement obligations of the ECA. All obligations could not be implemented in a year and therefore, it would be best to have a long term plan.
He suggested that the industry players, ICASA and the Department, should also engage on how to set regulatory timelines that would allow all process to be finalised within a reasonable timeframe. He pointed out that most of the ISPA members (including Liquid Telecom) did not provide for any USAOs other than paying their fees. He was concerned that there was no certainty as to how the definition process would take.
He agreed with Mr Nkuna that transformation was a process that did not end. However, he stated that there seemed to be a misunderstanding as to what transform was about. According to his interpretation, the transformation which the Bill sought to achieve was focused on ownership structure rather than the transformation of the lives of the people of South Africa by giving them quality services.
Mr Silber emphasised that Liquid Telecom was committed to participate in the WOAN as a supplier or customer, provided that there was certainty. He said if the WOAN was going to rural areas, he would be interested in participating because that would boost infrastructure development in rural areas while sourcing resources from local suppliers. However, the Bill was silent about those commitments, and this created a lot of uncertainty.
In terms of the competition aspect, he said he was surprised by Mr Wiltz’s suggestion that all entities with SMP would become a WOAN in the wireless space. However, the Bill in its current form suggested that all operators were deemed entities regardless of their size. He said that there was a danger in having a deeming provision because it did not do any objective analysis to understand whether an entity had SMP. He said two things had to be done: firstly, defining markets and secondly, understanding markets power within the market. The Bill was crafted in such a way that it defected the purpose and objectives that should be achieved. He added that the deeming approach was misguided. He urged Members and the Department to reconsider what the WOAN intended to address and how it sought to achieve transformation.
Mr Silber thanked the Committee for giving Liquid Telecom the opportunity to engage in the debate and pointed out that the entity would be available, if needed.
The Chairperson said the Committee would wait for Liquid Telecom’s supplementary submissions
The meeting adjourned for lunch.
The Chairperson pointed out that stakeholders and the Department had to find consensus on issues in the Bill and present a report on a common position to assist the Committee that would be coming in the following year. He hoped that the Department and industry stakeholders would continue to engage and narrow down differences before the next Committee resumed its term.
Briefing by Internet Services Providers Association (ISPA)
Mr Dominic Cull, Regulatory Advisor, ISPA, told the Committee that the lack of effective regulation and failure to implement key provisions of the ECA were the main causes of the current market structure and the high cost to communicate in South Africa. He stated the implementation Bill would not be effective unless remedial action was taken.
ISPA submitted that the rights and obligations imposed without an effective dispute resolution and enforcement mechanism were hollow. The current facilities leasing regime under Chapter 8 was ineffective and licensees regarded compliance as discretionary. ICASA was in urgent need of reform and re-capacitation. Hence, ISPA proposed that the Committee should consider engaging with ICASA to undertake a gap analysis aimed at identifying competencies and additional resources which would be required to ensure effective implementation of the amended ECA. ICASA should have an appropriate budget with a shared clarity on the implementation steps to be taken and the deadlines by which that had to be done, and then holding the Authority to account, based on the shared understanding. However, ISPA believed that the responsibilities of ICASA should be reduced and staggered to make it realistically manageable.
ISPA was of the view that there should be clarity on implementation of the Bill. There were significant risks in taking a “short cut” which, in effect, amounted to a piecemeal implementation of a set of interventions contemplated in the ICT Policy White Paper. ISPA was concerned that high-demand spectrum would be assigned without the associated obligations and regulatory framework contemplated in the White Paper and Bill. There was a potential conflict between outcomes of the two processes and hence a need to revise amendments to chapters 3A and 5.
It was important for the Committee to engage with the department and ICASA with a view to providing stakeholders with a clear roadmap towards the finalisation of the processes contemplated in the policy direction process and the Bill, and how those would coexist and interact. ISPA emphasised that the issuing of an individual electronic communications network service (IECNS) licence and the assignment of radio frequency spectrum licences to the WOAN or through a competitive process, should be done after a clear roadmap of implementation had been provided.
ISPA supported the amendments on infrastructure rights but proposed that industry should have representation on the Rapid Deployment Steering Committee and that it should not be left to the discretion of the Minister. It also recommended that the Minister should further be empowered to draft and publish a governance framework for that Committee. Additionally, ISPA requested that the Committee should consider whether it is competent in law for ICASA to be empowered to prescribe regulations which might be seen as affecting the rights of, and imposing obligations on, third parties who are not licensees and who therefore do not fall under ICASA’s jurisdiction. The Committee should also ascertain if it is appropriate and possible to prescribe wireless rates for “adequately served” premises.
Although ISPA supported open access and the promotion of service-based competition aimed at remedying the anti-competitive impact of vertical integration and dominance in SA, it was worried about the effects of Chapter 8 of the Bill. ISPA was of the view that ICASA could only make regulations that applied to licensees and licence-exempt parties. As such, there had to be consistent regulations of electronic communications facilities. More so, ISPA believed that the Bill should include provision for prohibiting agreements entered into between licensees and property owners which were not open access, contrary to the provisions of the proposed Chapter 8. It also requested consideration of the nature of and relationship between ‘technical inability’, ‘environmental inability’ and ‘technological inability’. ISPA pointed out that the Bill should include a definition of ‘control’ and deeming provisions on timeframes for processing of applications, registrations and notifications to ICASA.
The Bill gave the impression that the WOAN was to be regulated as an incumbent rather than a new entrant with references to pricing and access obligations. ISPA did not understand why the WOAN, as a new entrant, was being subjected to prescribed rates and how the WOAN would create a monopoly and if it would be treated as a deemed entity. Hence, ISPA requested that the Committee should consider whether the remedies set out in subsection 19A(5)(b) requiring the WOAN licensee to engage in active infrastructure sharing, comply with prescribed wireless pricing and comply with roll-out obligations, were appropriate.
Briefing by Wireless Access Providers Association (WAPA)
Mr Dominic Cull pointed out that WAPA broadly supported the Bill and its objectives, the interventions of the WOAN and the opportunities it would bring. The WAPA members also supported the focus on spectrum trading and sharing, open access and competition as mechanisms to change the current market dynamic. However, it was of the view that there was tension between the Bill and the policy direction concerning radio frequency spectrum. As such, WAPA recommended that the Department should provide alternative texts for the amendments to Chapters 5 and 3A. WAPA submitted that a streamlined notification process should be used, rather than a formal application for trade in spectrum. In addition, WAPA recommended that there ought to be a distinction between high-demand and other spectrum made in section 31C regarding spectrum sharing.
WAPA submitted that section 31A of the Bill should oblige ICASA to consider universal access and service obligations already imposed on service licensing (ECS/ECNS) when imposing such obligations in respect of radio frequency spectrum licensing. WAPA was of the view that universal service and access obligations should only be imposed in respect of radio frequency spectrum licences for high-demand spectrum.
WAPA supported the proposed amendments relating to the interaction between ECNS licensees and landowners, such as municipalities. However, it was of the view that the jurisdictional implications of the proposed amendments, with particular regard to ICASA exercising jurisdiction over entities which were not the holders of licences issued under the ECA, had to be carefully considered. WAPA also indicated that it was not desirable for deployment to be suspended pending resolution by ICASA where there was a dispute as to the reasonableness of compensation
Mr Cull added that WAPA welcomed the proposal on section 20E to facilitate the use of high site infrastructure for the deployment of radio-based systems and facilities which promote broadband. However, it recommended that the Committee should reconsider what ‘access fee’ means and if it covered costs incurred in accessing land. WAPA pointed that it was not clear as to the method and factors to be considered for prescription of wireless rates in respect of adequately served premises. Thus, it proposed that the prescribed wireless rates should only apply to deemed entities.
In conclusion, Mr D Cull empathised that the Committee should consider providing for a period between publication of the Bill and the coming into force thereof and give ICASA an opportunity to undertake the review of regulations and other steps required to align the current regulatory framework with the provisions of the finalised Amendment Act. Alternatively, the Department should consider staggered implementation with certain sections commencing at later dates. That would greatly assist ICASA in its implementation processes and reduce the uncertainty caused by a regulatory framework which was at odds with amended primary legislation.
The Chairperson asked the Members to comment on the two presentations.
Ms Shinn asked whether it would be quicker and easier for ICASA to implement what had already been legislated in the current ECA and whether it would increase competition and vertical separation in the market. She wanted to find out if resourcing ICASA with money and expertise would achieve the same objectives as the Bill.
She also asked if WAPA members would not want to become a separate WOAN and apply for spectrum. She wanted to understand if there was room for more than one WOAN. She said some presenters had complained that the WOAN would create a monopoly and have a negative impact on competition and wanted to understand if Mr Cull’s shared the same view.
Ms Killian asked if WAPA members expected to be part of WOAN and to share network services. She asked how WISP members would bridge the rural-urban divide and whether the WOAN was the best solution to bridge the rural gap. She also asked if WAPA intended to have more members who would also play a role in bridging the urban-rural divide.
The Chairperson said ICASA should provide clarity on the issues raised. He also directed Mr Cull that WAPA and ISPA could still provide supplementary submissions.
Ms Botlenyana Mokwele, Councillor, ICASA, said ICASA was aware of the issues and requested more time to respond to the issues in writing. She said ICASA welcomed the proposal made by Mr Cull that ICASA had to be afforded sufficient time to prepare for implementation before the Bill became an Act.
Mr Nkuna agreed with the Chairperson that the Department should engage more with the industry to find consensus. The engagements should be structured and results-based. He emphasised that it should not be an opportunity to open the discussion to the extent that there would not be progress. What would help the Department were specific proposals on how to achieve transformation in the sector and the drafting or wording of the Bill. He said Department would propose the engagement to stakeholders and indicate the kind of proposals that were required so that the Department could make recommendations to the Minister.
In terms of rapid deployment function, he said there were many options being explored. One option was to engage with different departments individually. The Department of Environmental Affairs stated that if DTPS sat down with the DEA, there would be dedicated environmental officers to help the DTPS.
There were also concerns that many approvals had to be obtained from the Department of Water and Sanitation (DWS) when one had to cross a river. The Department had engaged with DWS. However the biggest problem was the local government. He said, the Bill could not be used to regulate local government because local government was already regulated by the Municipal Systems Acts of 2000. The Department was engaging with the Department of Cooperative Government and Traditional Affairs to ensure that the issue of rapid deployment could be dealt with collectively.
He hoped that the engagements between DTPS, COGTA and other departments would result in a Memorandum of Understanding. Additionally he hoped that the Bill would only regulate matters that could only be constitutionally regulated by DTPS and not encroach on the issues that could be regulated by local government.
Mr Nkuna said the Department had done its best with the Rapid Deployment Centre to create the centre within the Department, and industry stakeholders had already forwarded people through the FTTX Council. The Department was now considering buying GIS equipment so that the centre can start its operations. The Department was already receiving emails from industry players and was assisting the players.
He stated that the vertically integrated companies by their nature would first provide for themselves before they could provide for others. He indicated that the two presentations by ISPA and WAPA highlighted that there were already people doing something to provide services using the Wi-Fi band because they did not have access to the radio frequency spectrum. He added that those people were the ones that the Department had been talking about and trying to assist.
In terms of the WOAN, Mr Nkuna stated that the investors would have to come together and sign a Memorandum of Incorporation after ICASA had called for people to apply. The qualification criteria would be outlined by ICASA. He said if many companies applied for the WOAN licence, ICASA would be objective and scrutinise the business plan of applicants and also consider the capacity of the applicants. He said there would be a process to formulate the WOAN and the applicants would be people or entities that were already participating in the industry and had experience in the industry. He said the WOAN, as conceptualised in South Africa, was a different type of WOAN from that conceptualised in other countries.
Mr Wiltz said the jurisdiction of ICASA over non-licensees in the context of rapid deployment was an important issue and had been raised by many stakeholders. He indicated that under the current ECA, the policy direction was being formulated to address jurisdiction in the shorter term than contemplated in the Bill. The Department’s view was that anyone could voluntarily submit to the jurisdiction of ICASA, but it was not mandatory to do so.
He added that under the current ECA and the Bill, ICASA could handle dispute resolution but the parties still had an option to go to courts. Other options also existed for ICASA in that they could appoint a service provider that would have a list of adjudicators and the parties would then voluntarily submit to the jurisdiction of such adjudication process.
Mr Wiltz said the regulations would provide for further details and determine how the process worked, and the fees. He added that the process could work similar to the alternative dispute resolution process which was working well under the Electronic Communications and Transactions Act of 2002.
He stressed that the same regulations could also provide for other bodies to adjudicate certain disputes such as in the National Environmental Management Act (NEMA) of 1998. The NEMA and the DEA had their own dispute resolution mechanism that concerned disputes with an environmental impact. He emphasised that the regulations for ICASA could point to a specific voluntary dispute resolution process or give guidance to complaining parties to consider other dispute resolution processes that were already in place. However, the Department would consider any suggestions from the industry stakeholders.
Mr Wiltz said some provisions of the Bill would have to be changed if the policy direction was issued although the substance could be similar. In terms of high demand spectrum, the policy direction dealt with what was considered to be high demand spectrum today. However, as time goes on, new high demand spectrum would become available and the Bill would have to deal with the future high demand spectrum. He added that the same applied with WOAN and certain things would have to change in future, such as licensing.
In relation to clause 69A (7) regarding the quality of service and compliance with targets under SA Connect, he indicated that ICASA would prescribe the quality of standards to the Minister. The Department was of the view that ICASA should also monitor compliance. SA Connect provided that the regulator must monitor deployment of networks, speeds and capacity. He added that ICASA must look at all networks and would have the authority to request information from operators because the Minister did not have such powers and because the Minister would not do technical testing. That information would help the Minister to set the policy direction.
The Chairperson said Mr Nkuna had mentioned that the Department was engaging with COGTA. He advised the Department to act with caution when interacting with COGTA, local and provincial government. He added that tagging of the Bill had to be considered carefully because if the Bill was section 76, the NCOP would have to be engaged and participate in the process. He said although the Bill was currently tagged as section 75, he was getting a sense that it might be tagged as a section 76.
Mr Nkuna replied that there were challenges because municipalities wanted to include ICT as another utility, which could increase the charges that were already high. The Department was engaging at various platforms with SALGA and COGTA to resolve the issue. One of the considerations was whether to include the industry stakeholders in the engagements so that there could incentives when they deploy infrastructure. For instance, if the municipalities do not charge fees, operators would also be expected to offer something like free Wi-Fi. He indicated that the Department was beginning to develop a strategy that would allow both the municipalities and the industry to offer each other something. He hoped that the Department would report on the progress to the next Committee.
The Chairperson reiterated that Mr Cull could make further written submissions.
Briefing by National Association of Broadcasters (NAB)
Mr Philly Moilwa, Chairperson, NAB, introduced his colleagues, Ms Nadia Bulbulia, Executive Director, and Ms Tholoana Ncheke, Executive Policy & Regulation.
Ms Nadia Bulbulia stated that NAB was concerned about issues of freedom of expression, fairness, accountability and transparency. As such, NAB was of the view that certain provisions relating to independence of ICASA and institutional capacity had to be revised. Section 192 of the Constitution of the Republic of South Africa provides for the independent regulation of broadcasting. The independence of the regulator and regulation is further safeguarded by section 3(4) of the ECA read together with sections 3(3) and 5(4) of the ICASA Act.
The Bill introduces a new provision in terms of which ICASA must now comply with ministerial policies and policy directions in its administration and management of spectrum. The section 30 amendment may have the unintended consequence of weakening the independent regulation of broadcasting as broadcasters are also users of radio frequency spectrum. Therefore, NAB strongly recommended that the Bill be revised to give meaningful effect to ICASA’s independence.
The Bill stipulates timelines within which ICASA is to develop regulations and also proposes substantial tasks for ICASA without any indication of whether consideration has been given to ICASA’s capacity to deliver. Any revision of the timelines would necessitate another legislative review process which requires time and resources.
Ms Ncheke suggested that the administration of spectrum should be done in such a way that broadcasting is not undermined. Spectrum was assigned for services including broadcasting services in accordance with the National Radio Frequency Plan. The effect of the proposed amendments was that assignment of all spectrum is now placed squarely within the purview of the Minister responsible for administering the ECA. Therefore, NAB hopes that the Minister will engage with the broadcasting industry as part of the development process of the National Radio Frequency Plan.
The NAB recommended that section 31C of the Bill on spectrum sharing should only come into effect after the regulations had been developed by ICASA and finalised to ensure that spectrum sharing is only implemented in instances where it has been determined that it will not cause any harmful interference. The impact of spectrum re-farming on the broadcasting industry must also be given due regard, to ensure that licensed broadcasters are not squeezed out as a result of competition for limited frequencies on the radio spectrum over which they broadcast. The allocating high demand spectrum may have implications on broadcasters’ digital terrestrial television transmitters operating in the 700 MHz and 800 MHz bands. Hence, NAB recommended that the timelines for the determination and assignment of the high demand spectrum should take into account the Broadcasting Digital Migration and the restacking processes as well as the spectrum needs of broadcasters.
The Bill provides that radio frequency licences that includes exclusively or individually assigned high demand spectrum as determined by the Minister may not be renewed on the same terms and conditions at the end of the licence term. The NAB submitted that the provision should be carefully reconsidered as it is likely to prejudice licensees who make substantial long-term investments in their infrastructure and networks. In conclusion, NAB pointed out that the concurrent jurisdiction between ICASA and the Competition Commission on competition matters should be co-ordinated and managed in a clear and consistent manner to ensure regulatory certainty that was crucial for stability and increased investment in the broader ICT sector.
The Chairperson thanked NAB officials and indicated that most of the issues raised by NAB had also been pointed out by other presenters. He then invited Members to ask questions.
Mr Mackenzie asked if NAB officials were of the view that the Bill was unconstitutional and if NAB would be prepared to challenge the Bill if it was passed in its current form.
The Chairperson asked Mr Nkuna to address the concern regarding timelines in the Bill and how that could affect investments and the economy of the country.
Mr Moilwa replied that NAB believed in persuasion and engagement to influence policy. However, he could not speak for individual members of the NAB and added that the association would not bar its members from litigating. Additionally, he stated that NAB had engaged with the Department and acknowledged changes that had been made since the first draft Bill. He hoped that the Department would continue to engage with the industry to find common ground.
Mr Nkuna said there was question of whether the high demand spectrum applied to broadcasting. His view was that, it did not apply to broadcasting. Each broadcaster was allocated a particular frequency, including community radio stations. That meant that currently there were more than 200 frequencies that had been licensed to broadcasters individually. If the frequency was to be in high demand, it would mean that the frequencies allocated to each broadcaster would have to cope with high demand. However, the intention of opening up high demand spectrum was for the purposes of electronic communications services and networks. He indicated that the Department would have to find out how to clarify the issue because it could have unintended consequence.
Mr Nkuna said that if there was no need to review and renew a licence, it meant that operators or licensees would have lifelong or indefinite licences. The intention of the Bill in requiring licences to be renewed was to deal with the changing needs of the industry or the operators, and to determine if the conditions had been met by licensees. He added that the terms and conditions could also change with time.
In relation to the policy direction and current allocation to broadcasters, Mr Nkuna said that the Department was going ahead with the policy direction, mindful of the fact that the spectrum licensed to mobile operators was currently occupied by broadcasters. Therefore, once broadcasters had migrated, the spectrum would be used for broadband services. That meant that only 2600 MHz was available for occupation by mobile operators. The 700 MHz and 800 MHz would only be available at a later stage. He added that the Department would be meeting with the industry next year in February and would discuss issues peculiar to broadcasting.
In relation to the independence of ICASA, he said there was a trust deficit because section 34(2) of the current ECA already gives the Minister powers to approve the Radio Frequency Plan developed by the Authority. Approving may mean that the Minister will not agree on what would have been proposed by the ICASA or that the Minister should agree. However, approval also means that the Minister would have to apply his mind to what would have been submitted and decide to approve or not. He added that ICASA’s role in the Radio Frequency Plan was merely making recommendations to the Minister.
The current law requires ICASA to assign radio frequencies consistent with the National Radio Frequency Plan. That meant that the Authority would assign radio frequencies based on a National Radio Frequency Plan that would have been approved by the Minister. He reminded Members that he had attempted to differentiate allotment, allocation and assignment. The Bill was trying to enhance clarity as to who should allocate and who should assign.
He mentioned that up to the beginning of 2018, there had been no Radio Frequency Plan in South Africa because of the disjuncture between recommendations and approval. When the Radio Frequency Plan has been submitted to the Minister, the Minister would have to engage with other Ministers because other ministries like Aviation, Security Services and Maritime were affected by the Radio Frequency Plan.
He stated that the problem started when ICASA had proposed that the spectrum currently occupied by broadcasters should be set aside for broadband and that it should be reflected in the Radio Frequency Plan. The Minister had disagreed. It was then agreed that a footnote should be put in the Radio Frequency Plan stating that after a certain transitional period the spectrum would be transferred.
He reiterated that the Bill was trying to resolve the difficulties involved in separating functions of ICASA and the Minister’s role to approve and the implications in situations where the Minister did not agree with the recommendations. He hoped that the industry would help the Department to resolve the challenge.
Mr Moilwa stated that there was an omission in section 34(2) as had been read by Mr Nkuna. He indicated that section 34(2) stipulated that the Minister ‘must’ approve the National Radio Frequency Plan developed by the Authority. According to him, there was no room for the Minister to exercise his discretion but to approve. He said the Bill was now proposing that the Minister must develop the plan whereas in the current ECA, the Authority was the one required to develop the plan. He said there was a fundamental difference.
He indicated that the issue of trust deficit was not about how the industry saw the Department but was a historical regulatory issue across the globe, which was why an independent regulator was important. He added that it was not something that came from the NAB. There was logic in why section 192 of the Constitution provided that there should an independent regulator.
Mr Moilwa said the argument of NAB was that spectrum could not be separated from broadcasting services. There was need to harmonise the law and not deviate from the Constitution when it came to the independence of the regulator. He reiterated that the Minister’s role in the current provision was only to rubberstamp but the Bill was doing the opposing.
Ms Bulbulia stated that she looked forward to engaging with the Department to clarify issues in the Bill. She agreed with the Department’s view that what is perceived as high demand spectrum would perhaps change in future. For that reason, the Bill should not be specific. She was happy that the two departments were harmonised and integrated and looked forward to a closer working relationship.
Ms Ncheke said the concern regarding renewing of licences and licence conditions was that the wording of the Bill directed that the licence conditions must not be the same. According to her, that meant that there had to be a change in conditions but the Bill did not specify whether there would be an engagement to establish the new terms and conditions. The impact of new terms and conditions may have a detrimental impact on members.
Mr Wiltz said he was inclined to agree with Mr Nkuna. When the radio frequency plan is developed by ICASA, there should a consultation process in terms of section 34 (7). He said there was no rubberstamping as indicated by Mr Moilwa. Further, section 34(11) provided that the Minister must within 30 days after receipt of the plan, either approve the plan after which the plan would become effective or notify the Authority that further consultation is required.
He said clause 131E(7) sufficiently provided for assignment spectrum. However, the entire spectrum regime moved to openness and was related to other obligations for deemed entities. He said the intention was to share a scare resource among many operators. That was a key theme of the White Paper which also included openness, and transparency.
As to consultation, Mr Wiltz stated that ICASA would follow due process as provided in the relevant subsection. ICASA would also be required to do an inquiry and in that process ICASA would have to consider policy, market development, promotion of competition and the extent of availability of open access networks. After that inquiry ICASA would make recommendations to the Minister and the Minister would then give a policy direction which again should go through public consultation process.
The Chairperson pointed that there was a window period for stakeholders to submit further comments and said NAB may also prepare supplementary submissions. He reiterated that the NAB should also engage with the Department together with other industry players during the time when the Committee would have been dissolved.
Briefing from ABT Africa
Mr Muzi Makhaye, Founder and Chairman, ABT Group, told the Committee that ABT supported the objectives of the Bill including the promotion of transformation, lowering the cost of communications and increasing competition. Nonetheless, Mr M Makhaye pointed that clause 1.9 of the Bill relating to spectrum and licensing had a potential to create confusion if read against the previous public statements, including the Minister’s Budget Vote of 2017.
The WOAN was a key element of the Bill and ABT welcomed the extent to which it had been canvassed and debated by the industry and the public at large. ABT suggested that the Department should quickly release spectrum, the licensing of the WOAN with strong B-BBEE credentials, and an even stronger model to sustain the WOAN. He strongly cautioned that there would be dire consequences in the industry if the WOAN was not established and that would pose threats of losses for the SMMEs, funders and other investors.
ABT Africa stated that ICASA had to be brought under the Department and the Ministry’s ambit to avoid unnecessary contradictions on policy and regulation that had led to the recent court action. That would help to focus the Regulator on transformation issues and inclusive growth. Correctly, the Bill strengthened the powers of the Minister by ensuring that he approved universal service obligations attached to operators’ licences. Mr Makhaye further urged that the Minister be mandated to drive national priorities by issuing policy directives to the Authority, as was currently the case with the DTPS Policy Directives to the Authority.
The absence of recognition for the regulatory framework had resulted in an impediment to rolling out broadband where big business were unfairly competing against new players for Phase 1, as managed by Broadband Infraco. The question arose, why had big business ignored the rural network in all their 20-odd license periods? SMMEs from the Broadband Infraco experience had done very well compared to big business in the Phase 1 rollout. More SMMEs had to be accorded the opportunity to do the rollout of the forthcoming phases. Mr Makhaye welcomed the Department’s attempt to create a regulatory framework that enabled rollout but he urged the Department to create opportunities for SMMEs to do broadband rollout.
Rapid deployment would be an equally critical issue as the rollout of 5G networks is fast becoming a reality. As such, ABT Africa proposed that the Minister and the Department should expedite the 5G network build by SMMEs through a policy direction to the Authority. ABT welcomed the objective of the Bill to transform the sector. To deliver impactful results of transformation, ABT recommended that should there be one WOAN. SMMEs should be allowed and supported to participate in any business they wanted to and not be restricted to being resellers of services for big business.
Although ABT Africa supported the intention to attach the creation of Mobile Virtual Network Operators (MVNOs) to the spectrum licensing for the incumbent operators, it argued that that was not sufficient. ICASA should consult SMMEs rather than think for them. The ICT SMMEs have been let down. With good support, they could have long built and operated their own networks. People who were retrenched from big business did not lose their skills and expertise. They become entrepreneurs who, if supported through legislation, would access the market and transform the market. ABT proposed that ICASA should license spectrum to SMMEs and new entrants equitably as it assigned spectrum to the operators.
ABT was of the view that 60% of the WOAN had to be permanently owned by black shareholders/investors, including women and the youth. ABT also refuted the argument that the WOAN would be a failure merely because it had failed elsewhere in the world. For the sustainability and commercial feasibility of the WOAN, ABT recommended that operators should acquire an aggregated minimum 60% spectrum from the WOAN rather than the CSIR’s proposed minimum of 20%. Additionally, the spectrum offtake arrangement had to be a fixed arrangement for the first five years of the WOAN and overseen by the Authority.
The Chairperson asked Members to comment.
Ms Tsotetsi asked for the distinction between black shareholders (including women and youth) and B-BBEE. She stated that foreign companies preferred employing foreign nationals as they got cheap labour. She wanted to understand the reason for preferential treatment of foreign SMMEs at the expense of South African SMMEs in the ICT sector.
She asked about the bottleneck to transformation in the ICT sector. Where was the bottleneck? There was a transformation policy but it was not benefiting the targeted groups.
Mr Mackenzie asked for the type of investment required from participants in the WOAN and the participation of ABT in the WOAN. He asked what participants would have to bring the WOAN? He said he had tried to browse on the website of ABT Africa and its Facebook page but could not find a working website.
Ms Shinn asked how the WOAN would be structured, and how the board would be structured. She stated that she needed to know how long it would take for the WOAN to be registered as a new company and to get a licence from ICASA.
She was of the view that the WOAN participants had to be able to build their own network after the three years of using infrastructure owned by big operators. Therefore, she wanted clarity on where the network would be constructed. She also asked about the type of customers that would be served by the WOAN and where the participants would get funding from.
Mr R Nkuna stated that the Department had been engaging with industry on the WOAN. He added that what was being proposed by ABT Africa came from the engagements which the Department had with the industry.
The provisions on WOAN in the Bill might have to be redrafted in a forward-looking way. The debate on economic growth recognised that SMMEs should play a role in the WOAN, but mechanisms for the SMMEs to participate in the WOAN were missing. He said some difficult decisions would have to be made if it was envisaged that the digital economy would only grow when multiple SMMEs participated throughout the value chain. He pointed that growing an economy led by SMMEs required difficult decisions and hoped that the industry and Department would work together to find solutions.
The Department was of the view that the WOAN had to be a company. When licensing operators, ICASA would follow a certain criteria. The criteria would require a business plan, technical capacity to deploy the network and funding. It will would be difficult for ICASA to adjudicate if there were no criteria as to who could operate the WOAN.
In relation to the funding criteria, ICASA would normally approve applications if the applicant had a commitment from a financier indicating that the business plan was viable, and that the financier would finance the project if the licence was granted. Assuming that there were three applications for WOAN, ICASA would have to use an objective test to assess applications. Even if there was only one application, ICASA would still have to apply the objective test to determine whether the applicant was capable of providing the services.
Mr Makhanye said his comments were based on what the President had said about where economic opportunities should be prioritised. He stated that he was not against the B-BBEE regulations or policies but was of the view that the B-BBEE had failed to transform the economy and particularly the ICT sector.
He believed that if the ICT players had fulfilled their B-BBEE obligations in their licence conditions, the sector would have been transformed. The Bill was being promulgated because the existing big companies had not fulfilled their obligations. The failure to fulfil the obligations by existing companies had resulted in SMMEs facing many challenges. If the failures were not pointed out, the companies would think that they were doing well. Transformation had to be visible from the management and employees of the companies and the type of work done to uplift SMMEs and transform the sector in general.
In relation to the question of preferential treatment for foreign SMMEs, he said that the reason was to avoid the responsibility of interfacing with unemployed South Africa. Foreign company would not follow the laws of South Africa and it was difficult to track SMMEs. He stated that some foreign companies would disappear before paying SMMEs for their services. The companies that employ foreigners do so because the foreign nationals did not know the relevant legal recourse to a situation. Those companies avoided South Africans who knew the law and the remedies in labour law. People who ought to be driving transformation spent more on non-compliance.
In reply to Mr Mackenzie’s question, he said he had been an entrepreneur in the ICT sector since 1993. He was also involved in the formulation of the first Telecommunications Act. He had an ICT company with a running website, but the website for ABT Africa had been hacked.
He said the WOAN would be like any other business active in the ICT field. He indicated that the WOAN would be disrupting the sector. It would borrow structural models from existing companies but would advance the objectives which the Bill expected it to achieve. The WOAN would be an efficient company with a board and directors. The details had not been finalised, but it would a listed entity.
Because of the Fourth Industrial Revolution, the WOAN may not need to have big building in all provinces like traditional companies. World class skills necessary for its success had already been identified. Mr Makhanye emphasized that the WOAN as a business would not fail.
He added that black SMMEs were skilled to run any company. Most of the big companies operating in the ICT sector had many black managers and executives but black managers running the big companies was not enough, even though there had been effort to transform the sector. He emphasised that SMMEs had the requisite skills to run the WOAN.
Mr Makhanye said that investors would be very ready to invest in a new idea in the field of ICT. He had an idea of how much it would cost to start the WOAN but would not publicise the figure. He reiterated that the WOAN would be a listed company allowing previously disadvantaged people to buy and own shares in it.
Ms Shinn asked who would be his customers or target market.
Mr Makhanye replied the customers would be anyone from the current incumbent companies, any municipalities and manufacturers and any other customers requiring spectrum.
Ms Shinn asked if the WOAN would also serve people in rural areas and other under-serviced areas.
Mr Makhanye responded that WOAN would be a national business. As such, it would ensure that people in the rural areas were serviced. The WOAN would be built into e-knowledge and e-commerce for people in the rural area. He stressed that it was in the interest of everyone to ensure that people in rural areas received services.
The Chairperson thanked ABT for the presentation and responses. He reiterated that all presenters were allowed to submit further comments.
The meeting was adjourned.
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