ICASA, Sentech and SABC Budgets and Strategic Plans: briefings

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Communications and Digital Technologies

11 March 2005
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Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE


11 March 2005
ICASA, SENTECH AND SABC BUDGETS AND STRATEGIC PLANS: BRIEFINGS

Chairperson:
Mr M Lekgoro (ANC)

Documents handed out:

ICASA Presentation
Presentation by Sentech Limited
SABC Presentation

ICASA website
Sentech website
SABC website

SUMMARY
The Committee was briefed by ICASA, Sentech and the SABC on their respective strategic plans and budgets. ICASA was working towards providing more affordable services, encouraging investment and liberalising the telecommunications market. They were involved with the recently tabled Convergence legislation, the licensing of various entities and gaining functional independence as a regulator. The presentation by Sentech focused on the need to digitise the network in order to use the spectrum more efficiently, but this required more funding. They were also committed to developing the regional TV stations. The SABC presentation included recent successes and the SABC’s focus on developing sales and marketing strategies that would enable them to develop a sustainable marketing strategy. Challenges included the development of regional TV stations and increasing content, access, coverage and digitisation. Members were concerned with issues of public and private funding for all three entities, access in under-serviced areas, community radio licensing and the SABC’s independence from government.

MINUTES
ICASA presentation

The ICASA presentation was given by Ms Jackie Manche, CEO; and Mr Mandla Langa, the Chairperson.

Ms Manche spoke on ICASA’s strategic objectives, which included promoting affordable services and universal access, and encouraging investment, convergence and digitisation. ICASA was concerned with funding, achieving functional independence as a regulator and its involvement in the Convergence legislation. ICASA faced challenges in licensing in various areas, including licensing of the regional TV services, Telkom, under-serviced areas and the Second Network Operator (see document for detail).

DiscussionMs C Nkuna (ANC) asked about the expansion of Telkom’s infrastructure into the rural under-serviced areas and whether ICASA had influence in ensuring that these areas were serviced. She also asked about the role of ICASA in the Compliance Committee outlined in the Convergence Bill, particularly when its decisions did not satisfy the role-players.

Mr R Pieterse (ANC) said that community radio licences had always been a bone of contention and that licences were issued around cities at the expense of non-metro areas. In an oversight visit, concerns about this had been raised and unsuccessful bidders felt they had not been well communicated with. He also asked if there was any way to manage issues of control over adult content for cell phones.

Ms M Smuts (DA) said that the Mr Langa might like to respond to the statements made by the CEO of Telkom before the Committee last week, particularly in terms of the new rate regime. In the last meeting, she had raised the issue of ICASA’s monitoring of SABC’s content, and had been told that monitoring did take place, but not as much as ICASA would like. She felt that the matter had deteriorated and that there had been a marked increase of government coverage in news items, and asked if there had been opportunity to improve monitoring or if there was any chance of that in the future.

Ms S Vos (IFP) asked for elaboration on ICASA’s desire to achieve fully functional independence for the regulator. Implementing the Convergence legislation would have an impact on ICASA and its staffing, and she asked how much that would cost and how long it would take to implement. She asked how effective the under-serviced area licences would be in terms of infrastructure and service delivery, whether ICASA had a new approach to consumer protection because in the past they had not had the capacity to insist on it. Where would they get the consultants and the budget to pay them and how many would they need to employ?

Mr Langa said that the under-serviced area process was trying to come up with a policy mechanism to address the lack of infrastructure, and even though some areas had been licensed, none of them were fully functional. These areas had created a forum to enable them to come up with solutions collaboratively and there had been a lot of interest from people with technology solutions to help meet these infrastructure needs, including a company from the USA. In terms of compliance disputes, ICASA would be making an extensive report in terms of its input to the Convergence Bill in its totality rather than dealing with one specific aspect because it felt that it was landmark legislation. There would be a comprehensive review of the way ICASA had dealt with community radio licences because the four year process had not yielded the best and quickest results. ICASA needed to review the way they communicated decisions with beneficiaries and was committed to looking at inefficiencies and alternatives, but it was not possible to say how they would fix every radio station. They would also look at how to use other types of media to communicate with the public. There would be a public process at some stage to develop a policy framework in which to address content regulation and there needed to be consumer awareness in terms of children and mobile phones. There had been a misconception about the rate regime being used, and in Telkom’s presentation, the impression was given that ICASA was using 4% CPI (Consumer Price Index), but ICASA had reviewed this and was in fact using CPI –3.5. They had come up with a formula that they thought was best and the other elements of the rate regime would be in the public domain in due course.

Ms Manche said that that ICASA would be issuing community radio licences in non-metro areas. They were about to issue an invitation to apply and had been through a process to identify what spectrum was available in what areas. It was important to engage the communities in the process through road shows, which would begin in the next month and continue until September 2005, at which point they would begin to process the applications.

She said that one of their challenges was that ICASA did not currently have the infrastructure and equipment required to monitor the SABC properly. They had requested R80 million over the next three years to purchase monitoring equipment because they felt that it was a critical activity that they were not doing well, and it seemed that the Treasury was sympathetic. They were engaged with the Department of Communications (DoC) and the Treasury on the issue of staff and other costs resulting from the Convergence Bill and were in the process of gauging its implications in terms of policy revision and staffing to take on that mandate. Most of ICASA’s work on consumer protection had been on telecommunications, but they lacked proper equipment. In the next year, they hoped to work on building their monitoring capacity in both staff and equipment in order to take a consumer protection approach to broadcasting. It was important for ICASA to have functional independence in its decision-making process.

Ms N Magazi (ANC) asked for a timeframe for the review of advertising regulations. In its last presentation, ICASA had been recruiting to fill vacancies, and had still not filled them. There had also been a dispute over a community radio licence and Ms Magazi asked for an update on that issue.

Mr A Maziya (ANC) asked who owned the community radio licence once it was issued, who licensed the radios of businesses, security guards and ambulances and what their relationship was in terms of communication.

Mr Langa said that the timeline for the review of advertising regulations was unclear as there was a process that had to be followed, including a public hearing, gazetting of the authority’s intention and comment from stakeholders. On the issue of the radio licence dispute, Mr Langa would get back to Committee in the next week. There were cases where the beneficiary of the license was supposed to be the community, but an individual or group utilised it in a way that did not benefit the community. The Board or Council was meant to be the representative of the community’s interests and was charged with operational management.

Ms Manche said that security companies and emergency services paid to have a special frequency assigned to them and that ICASA ensured that there was no interference in that spectrum. They found, however, that tow truck companies hacked into the emergency services frequency to listen for accidents, so ICASA had monitoring cars to detect that and confiscate equipment, but these groups kept hacking in. ICASA constantly faced a challenge in retention of skilled personnel because they lost talent to the private sector, so they continued to place emphasis on filling vacancies and requested funding to be able to offer competitive salaries.

Sentech presentation
The presentation by Sentech was made by Mr Gladwin Marumo (Chief Operating Officer), Mr D Dube, Executive of Regulatory Affairs and Government Relations; Mr Koekemoer, Executive of Finances and Administration; and Mr M Raath, Executive of Sales and Marketing.

 


Mr Marumo outlined some of Sentech’s recent achievements and its budget concentration on investment in infrastructure. One of Sentech’s main challenges was the high cost of staying analogue, so it was important to digitise the network. The advantages to Digital Terrestrial Television (DTT) were multiple and would allow Sentech to provide wider and more diverse coverage. SABC had been given a budget to digitise infrastructure, but nothing had been provided to Sentech as the carrier of the signal. They were also involved in developing the regional TV stations.

SABC presentation
The presentation by SABC was given by Mr Eddie Funde, SABC Chairperson; Mr Nicholson, CFO; and Mr Moebetle, Chief Operating Officer.

Mr Moebetle said that SABC was focusing on programming, improving technology and creating a sustainable funding model through improved sales and marketing strategies. They had been able to expand the range and accessibility of their content in terms of language and access for the disabled, but funding was a key factor in their ability to meet challenges. Key challenges were the development of the regional TV stations to broadcast in regional languages and the extension of universal access through the digitisation of the network. Mr Nicholson spoke on funding and budgeting issues, including the sale of TV licences.

DiscussionThe Chairperson clarified that all those who received state aid did not pay for their TV licence.

Mr Nicholson said that they did not want to criminalise those who received state grants and could not afford to pay licence fees.

Ms Smuts asked how the Committee could help to enable Sentech to roll out digital technology and whether they should interact with the Department or the Director General or to try to get the Treasury to finance it.

The Chairperson said that there were two ways that Members could make their concerns heard and those were through the Committee and through the parliamentary forum of the National Assembly.

Ms Smuts said that the Committee was in a position to approach the relevant ministry or the Treasury.

The Chairperson said that they would raise the matter with the Department and that Ms Smuts could take it further in Parliament if she chose to.

Ms Smuts said that R50 million had been budgeted for educational programmes and asked what those programmes would be. Funds for community radio stations had been hidden in the SABC’s budget until last year, when they appeared separately. This year, however, they were listed as ‘SABC Community Radio Stations’ and ‘SABC Programme Production’. In the way that the DoC had given the SABC equipment and the GCIS had produced packages for SABC to broadcast, the SABC acted as the hidden arm of a state broadcasting system. Ms Smuts asked what this new terminology meant. The Committee had been told that the two new regional stations, SABC 4 and 5, were too expensive and would have to be funded through public/private partnerships, but in the case of the SABC itself, public funds alone were used and this did not make much sense. Up to 40% of news items were government content, so if the SABC, with its significant market power, was not providing pluralism, they should start thinking of selling off stations to commercial broadcasters to get a greater variety of news. Ms Smuts asked how much the state would make if various stations were sold off.

Ms Vos asked if Sentech had approached government for funding to upgrade from analogue to digital equipment or if had they made any moves to establish public/private partnerships. SABC was going to be given money for programming providing information on how citizens could access government services, and she asked if this had been included in the budget and if SABC had started looking at how they would use these programmes.

Ms Smuts noted that GCIS was making those programmes.

Ms Vos asked how they were planning to develop SABC Africa.

Mr K Khumalo said that at the opening of Parliament, the SABC had given all opposition parties an opportunity to comment on the State of the Nation address, but did not give the ANC that opportunity and asked why that was. He asked if they were looking towards a public funding model or moving towards commercial funding. The budget increase for education was very small and Mr Khumalo asked why they had asked for such a small increase when so many people benefited from it. He also asked why SABC Africa received more funding than SABC 1 and 2, since these other channels had to deal with the 2010 World Cup bid and universal access. There was a continual replay of old programmes on SABC and he asked if it was too expensive to produce and broadcast local content. If the cost was prohibitive, the SABC should approach the Committee for funding.

The Chairperson said that SABC was not presenting that information because they knew that they would not receive funding. There was not enough guidance from the SABC on what model would enable it to survive in the public broadcasting arena, but the balance should be the responsibility of the government. The funding model would not be workable if they kept trying to cover the balance from the commercial side. The attitude of SABC on this issue was not always clear. The state had to be involved in areas that did not generate any commercial interest, such as language requirements, but it was often suggested that SABC sell off assets to cover costs.

Mr Pieterse said that they had to be careful with suggestions of selling assets and that he was not sure that there was any collaboration between GCIS and the SABC. GCIS had realised that there was better penetration in electronic media than print media. There were no timeframes for when there would be effective coverage, but people in under-serviced areas were expected to pay TV licences, and it was important for people to see that improvements would happen. While SABC was looking at providing coverage in the eleven languages, they should also look at making programmes accessible to the disabled. Mr Pieterse asked how many people were supposed to pay TV licences, and out of that number, how many were actually paying.

Mr Nicholson replied that when the SABC business unit was started, it had been set up with government grants. The funding model at the time had been designed to support the infrastructure and programming of SABC Education and the amount of funding had grown every year due to inflation. The R50 million budget was reflective of last year’s Medium Term Expenditure Framework (MTEF) allocation, included many programmes and was managed by the business unit. The business unit also developed radio education programming, which had a budget of R24 million for next year.

Mr Nicholson said that the small increase in education funding was an allocation from the government that was reflective of what the MTEF made available. There was no consistent approach to how much the DoC would fund for programming and some requests were met while others were not. The Treasury was more willing to fund infrastructure than programming.

Mr Moebetle said that the nature of funding for education content was based on already identified programmes and these had been directly costed. SABC collaborated with some community radio stations but did not produce for them because that budget was very specifically allocated for educational content.

Mr Nicholson explained that the SABC was an agent for the administration of payments to community radio stations to support their programming requirements because they did not have the capacity for financial administration, but programming itself was managed independently from the SABC.

Mr Moebetle said that in the legislation that required the SABC to apply for regional TV services, it was outlined that regional TV services would be funded through the Treasury. At the time, the SABC had indicated the enormity of the funding challenge and that the SABC would be unable to depend solely on its current operational funding. It had been expected that these stations would already be in operation through funding that was already predetermined in the legislation itself, but that had not happened. Proposals for public/private partnerships were only coming up now so they were not sure how that would be structured.

Ms Smuts asked if it was possible to put an amount on the sale of the stations.

Mr Nicholson said that the asset sales would not be determined by the SABC but by the shareholder and it was the job of the SABC as management to make those assets as expensive as possible. They had done a valuation for capital gain and could make those numbers available.

Mr Funde said that the issue of pluralism as mentioned by Ms Smuts was a comment.

Ms Vos said that she now understood that GCIS was making the programmes about public access to government services and that SABC was giving them the airtime, so she asked if they knew how much that airtime would cost the SABC.

My Moebetle said that they would welcome anyone who gave them a programme that was pre-packaged.

The Chairperson said that this question was not directed at the right body. The GCIS was paying for the production of a programme that they would take to the SABC for negotiation.

Ms Vos said that she agreed that people needed to know how to access government services and that the GCIS was making money available for this. SABC had said that programming was key to profitability, so their profit would be impacted by showing these packages.

Mr Moebetle said that they acquired content from various sources, so the notion of getting a pre-packaged tape was not unusual. The SABC would determine the value of the programme and would not programme anything at primetime that did not drive their mandate for that time-slot.

Ms Vos said that the value was there for citizens and the product would be looked at in terms of the core mandate of the institution, so she asked if there was a filter between the SABC and the GCIS to ensure that they did not just play government propaganda.

Mr Moebetle said that SABC filtered every programme to determine if it was appropriate for their audience at any given time. They also broadcast public announcements, but were very conscious of their mandate so that they were not a tool for propaganda or commercial interests.

Mr Funde said that their intention with SABC Africa was to be as representative as possible with the information they gave on the continent in terms of news programming, current affairs and entertainment.

Mr Moebetle said that they intended to establish two channels in order to have a news channel to be broadcast in South Africa and elsewhere on the continent and an entertainment channel which would be commercially packaged. They would want the news channel to be part of the delivery of the public service mandate, so it would not be provided on an exclusivity basis.

Mr Funde pointed out that the SABC did report comments from the ANC after the State of the Nation speech and that they could find out the editorial policy on that.

Mr Funde said that the issue of the funding model was very important, but that they had not had a proper debate in the SABC on it and would welcome comments on the matter. The current funding model had been dictated by the fact that advertising had grown, but state funding had decreased, and this presented a problem. The SABC needed substantial inputs in infrastructure and in the regional stations and the backlog needed to be dealt with through public funding. Digitisation and the introduction of new technologies required support as it could help greatly with providing coverage in under-serviced areas. At the moment, they had to maintain the status quo in terms of public and commercial funding to keep the organisation liquid and to ensure that they could deliver on their mandate.

Mr Nicholson said that they had looked very hard at putting money into SABC Africa because of the importance of reporting African news throughout Africa, meaning that it fell within their public service mandate and fit the requirements for public funding. It was also important that SABC Africa was not exclusive to DSTV so that footage could be used in normal programming, such as on SABC 2.

Mr Moebetle said that the difference in allocation of resources per channel was determined by the needs of that channel. From year to year, there would be a difference in the amount of funding that each channel received and this year, as SABC Africa was being re-launched, it was more expensive, but this would even out.

Mr Khumalo said that it was not appropriate that public funding should decrease when SABC entered into the commercial environment because it was important in terms of nation building and patriotism, and felt that there should not be as much funding allocated to SABC Africa. His question about old and new content had to do with coverage of upcoming South African film-makers.

Mr Moebetle said that expenditure had shifted significantly to spending on local content, but they needed to be cautious because foreign content was cheaper and generated more revenue. The objective of foreign content was to cross-subsidise local content and the SABC was trying to engage with local producers to reduce the cost of local content.

Mr Funde said that it was good that those who were receiving grants did not have to pay the TV licence fees and that the public had also raised questions of why they had to pay fees if they did not receive full coverage. The SABC was working towards providing universal coverage, which would be resolved by the improvement of technology and digitalisation. They were continually trying to develop a timeframe for that but it was difficult.

Mr Moebetle said that their ability to quickly improve the transmitter network depended on the speed of the regulator in granting them the necessary licences. They had made a number of requests to install transmitters, but could not do so without licences and were working to increase the reach of TV channels to reach 90% of the population.

Mr Pieterse asked how many people were supposed to pay TV licences and how successful the SABC was in recovering that payment.

Mr Nicholson said that this was reported in the annual report, and SABC could make that information available. There were 9 million households that should have TV licences and SABC estimated that they covered 6.3 million of them. There had been significant penetration of televisions as a consequence of economic growth.

Mr Raath said that Sentech was licensed as a common carrier and that the broadcasting signal distribution network was a national asset, so they had not discussed private financing, but they were continuing to engage the DoC and the Treasury.

Ms Magazi asked when they would get a Parliamentary TV channel and when the regional TV channels would be operational.

Mr Moebetle said that they had already submitted an application to ICASA and that the Chairperson of ICASA had said that they would hopefully issue the licences this year. They expected that the channels would be launched immediately after that. They would continue to have a Parliamentary slot on SABC 2 and expected to expand that slot on the regional channels when they were launched, but SABC’s ability to deliver such programmes was also dependent on appropriate funding.

Ms Smuts said that she was uncomfortable with SABC referring to Parliament as the ‘stakeholder,’ as SABC was supposed to be separate from Parliament.

The Chairperson said that it would remain uncomfortable.

The meeting was adjourned

 

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