Convergence Bill hearings: Submissions by SABC and M-Net/Multichoice

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
10 June 2005
CONVERGENCE BILL HEARINGS: SUBMISSIONS BY SABC AND M-NET/MULTICHOICE

Acting Chairperson:

SABC presentation on the Convergence Bill
SABC written submission on the Convergence Bill
Multichoice/M-Net presentation on the Convergence Bill
Multichoice/M-Net submission on the Convergence Bill Part1
Multichoice/M-Net submission on the Convergence Bill Part2
Convergence Bill [B9-2005]

SUMMARY
The South African Broadcasting Corporation and M-Net / MultiChoice made oral submissions regarding the Convergence Bill. Central concerns related to the looseness of the definitions used in the Bill, inadequate procedural safeguards regarding the role of the Minister as well as issues surrounding licensing.

MINUTES
The submissions were group presentations by the SABC and then M-Net / Multichoice followed by extensive discussion. Mr Solly Mokoetle (SABC Acting Group Chief Executive Officer) led the SABC delegation of Ms Lara Kantor (General Manager: Policy and Regulatory Affairs), Mr Herman Warren (Director: Corporate. Strategy), Ihron Rensburg (SABC Strategic Corporate Services Chief Executive), Ms Sharoda Rapeti (MD, Technology), Mr Lynn Mansfield (General Manager, Special Projects), Aldred Dreyer and Chris Mamitinza. The M-Net / Multichoice delegation included Mr Nolo Letele (CEO, MultiChoice Africa), Mr Glen Marques (CEO, M-Net), Ms Clarissa Mack (Group Executive, MIH, Policy and Regulatory Affairs), Ms Karen Willenberg (Director, M-Net Regulatory Affairs), Mr Kwezi Mtengenya (GM MultiChoice Regulatory Affairs) Ms Amanda Armstrong (Director, Werksmans).

SA Broadcasting Corporation submission
The presentation was led by the Acting CEO, Mr Solly Mokoetle. Ms Justine White, the SABC’s attorney, briefed the Committee on the SABC’s concerns regarding definitions and market structure; the role of the Minister and ICASA; legislative provisions on Broadcasting and licensing. Mr Ihron van Rensburg (Chief Executive, Strategic Corporate Services) discussed three matters arising from the provisions of the Convergence Bill: ownership; subscription broadcasting and contributions to the universal service fund.

Mr Mokoetle said that the SABC welcomed the Convergence Bill as the first step towards bringing together the broadcasting, signals distribution, telecommunications and computing/IT sectors and harmonising the regulatory procedures surrounding infrastructure, services and content.

The public broadcaster welcomed the work done to eliminate duplication in different pieces of legislation, such as between the IBA Act and the Broadcasting Act of 1999. Mr Mokoetle stated that the SABC supported further amendments to the Broadcasting Act in order for it to become an ‘SABC Act’ - it required further review to customise it to the SABC and the challenges it faced.

The SABC had a social programme aimed at meeting national challenges such as the promotion of nation building and diversity, building democracy and restoring human dignity, and had to ensure a large audience share on traditional as well as new platforms. Chapter 9 of the Convergence Bill however gave no indication to ICASA as to the social goals of the commercial and community broadcasting sectors and how these are to be regulated.

Mr Mokoetle expressed the SABC’s concern that the Bill linked the setting of licence conditions to "significant market power". The SABC believed that this provision should be amended to ensure that all tiers of broadcasters made a contribution to social goals.

The proposed repeal of Section 27 of the Broadcasting Act was an area of great concern. The repeal of this section would undermine the SABC’s financial viability as it would mean that it would be unable to raise TV licence revenues, which at present contributed approximately R500 million to its annual revenue.

Definitions and market structure
Ms White expressed the SABC’s concern that many of the definitions in the Bill were too broad to be of appropriate use in the electronic communications sector. It suggested that the definition of application service be deleted with consequent amendments throughout the Convergence Bill. It proposed that Clause 3 should make provision for four categories of service: content (unlicensed); broadcasting services (individual licence); communication network services (individual licence) and communications services (class licence).

The role of the Minister and ICASA
The Convergence Bill must achieve two important complementary objectives:
- Government should play a key guiding role in policy development;
- ICASA should have a constitutionally appropriate role and position.

The SABC believed that apart from a few easily rectifiable potential constitutional problems, licensing and the radio frequency spectrum still posed some constitutional difficulties.

Legislative provisions on Broadcasting and licensing.
Ms White reiterated that the Broadcasting Act should become an ‘SABC Act’ so that the general broadcasting sector could be regulated through the Convergence Bill only. The SABC asked that the drafters take care to ensure that the important provisions were incorporated in the Convergence Bill so as to properly bolster the broadcasting sector and to ensure that it was legislated for effectively.

As far as licensing issues were concerned, the SABC expressed concern regarding the setting of licence conditions; the amendment of licenses; the renewal of licences; licence terms; transitional provisions and the issue of granting class licences.

Ownership
Mr Ihron Van Rensburg said that the SABC welcomed the greater regulation-making flexibility for ICASA on ownership issues as captured in Clause 3 of the Bill. However, it felt that the policy or social goals for ownership regulation ought to be clearly stated so that ICASA had guidance when formulating its ownership regulations.

Subscription Broadcasting
The SABC was concerned about the issue of subscription broadcasters acquiring exclusive rights for the broadcast of national sporting events. Section 30 (7) of the Broadcasting Act has given rise to regulations that did not meet the public interest of giving broad access to national sporting events. The SABC suggested that the Convergence Bill should guarantee that the public had access to national sporting events, as was the intention when drafting the original Broadcasting Act.

Section 30(6) of the Broadcasting Act, which stated that advertising and sponsorship could not be the biggest source of revenue for subscription broadcasters, should also be included in the Convergence Bill in order to maintain appropriate regulatory distinctions between subscription and free-to-air broadcasters. Mr Van Rensburg made reference to ICASA’s position paper in regard to subscription, published a week earlier.

The Bill imposed an obligation on all licencees to contribute to the Universal Service Fund, but did not take into account broadcasters’ existing contributions to the Media Development and Diversity Agency. It proposed that this section be amended so that broadcasters would be exempts from making contributions to the USF.

Mr Mokoetle concluded the SABC’s presentation by thanking the Committee for the opportunity and assured that the SABC would be available for further consultation.

M-Net/MultiChoice submission
The presentation was led by Ms Clarissa Mack, with contributions by Ms Karen Willenberg, Mr Kwezi Mtengenya, Ms Amanda Armstrong and Glen Marques.

Ms Mack commented on the complexity of translating the Convergence Bill into law. This complexity was compounded by Section 192 of the Constitution. Once the Bill had been passed ICASA would be faced with the same difficulties so resources and funding would be critical particularly in the transition period.

She said that their submission dealt with the Bill from a broadcasting perspective and would not touch on issues linked to telecommunications. She noted that M-Net and MultiChoice had been guided by other jurisdictions such as the UK and the European Union, but they were not necessarily proposing that South Africa follow the same route as these countries.

Definitions
Ms Armstrong stated that like the SABC, M-Net was concerned that the definitions used in the Bill were too broad. This held consequences for licensing. It was particularly difficult to ascertain which services or business activities would require a licence as well as to determine the nature and extent of the regulation of various service and business activities. In addition the Bill appeared to create subsets within the definitions. This was problematic specifically with regard to the definition of communications network services, broadcasting services, broadcasting, communications services and content services. M-Net proposed that the licensing framework should be streamlined and that definitions should be amended.

Ms Armstrong stated that many of the definitions were unnecessary primarily because they were not used in the Bill. A number of the definitions needed to be more clearly defined. There were some terms that had been used that ought to have been defined. She noted that once terms were defined they should be used consistently and appropriately throughout the Bill.

Powers of the Minister and the Independence of ICASA
Ms Mack raised M-Net’s concerns regarding the power of the Minister in relation to four matters in particular: policy directions; the licensing of broadcasting signal distribution; the approval of all licence conditions as well as frequency.

M-Net suggested that those clauses in the IBA Act which stated that the Minister may not issue policy directions for the granting, amendment, suspension or revocation of a licence or issue policy directions that might interfere with the independence of the authority, should be retained. It was also suggested that Clause 9 be deleted. Ms Mack pointed out that if the Committee should decide against deleting the suggested clauses, Section 192 of the Constitution would also need to be amended.

As far as the licensing framework was concerned M-Net felt that the existing framework might be to rigid in that it did not make provision for future scenarios especially in a sector that was very dynamic.

Process and Procedures
Ms K Willenberg noted that the Bill did not deal with process and procedures adequately. There was a reduction in both public consultative processes and procedural safeguards. The lack of procedural safeguards was most worrying in the area of licensing. The Bill proposed to expand the powers of the Minister and ICASA but at the same time reduce the checks and balances on that power.

Competition
Ms Armstrong stated that M-Net and MultiChoice believed that in an industry in transition the Competition Authority should play the leading role. The Bill should avoid creating a situation of concurrent jurisdiction between ICASA and Competition Authority. In terms of this suggestion, Clauses 8(3) to (7), 61 and 63 were of particular concern.

Limitations on Ownership and Control
Mr K Mtengenya said that although M-Net and MultiChoice believed that there should be limitations on ownership and control they did not believe that this should be imposed by way of legislation. They believed that any limitations should be determined by Parliament in terms of national legislation and not by the Broadcasting Authority.

Universal Service Fund
Mr Mtengenya echoed the SABC saying that telecommunications were usually required to contribute to the USF. He too reminded the Committee that the broadcasting services had already made contributions to the Media Development and Diversity Agency in the advance of media plurality and diversity. He commented that he did not believe that the Broadcasting Act wanted to subject broadcasters to double taxation. Section 81 should be amended so that it did not apply to broadcasters and broadcast signal distribution services.

Transitional Arrangements
Ms Armstrong identified three objectives integral to a smooth transition:
-those providing communications services should be protected when the Convergence Act came into practice;
- the process should be as orderly as possible and
- all possible transitional issues must be catered for in the convergence legislation.

Mr Glen Marques concluded by saying that convergence was an extremely important process and that the industry took it seriously. He thanked the committee for the opportunity to make an oral submission and assured them of M-Net and MultiChoice’s availability for further assistance and discussion.

Discussion
The Chairperson commented that he wanted to hear the Department’s reply to concerns of the two presenters that there were inadequate procedural safeguards regarding the role of the Minister and the lack of public consultation.

Ms M Smuts (DA) asked if the safeguards from the Independent Broadcasting Authority (IBA) Act could be included in the Convergence Bill, as it was common-sense to put the safeguarding procedures back in the Bill, and would also prevent lawsuits.

Ms S Vos (IFP) asked the Department to share their perspectives on the limiting of foreign ownership of media.

Ms N Mokoto (ANC) noted that she thought that the Bill was clear in separating the powers of the Independent Communication Authority of South Africa (ICASA) and the Minister, particularly regarding the issue of the granting of licences, and asked the South African Broadcasting Corporation (SABC) to reply in light of the constitutional requirement that broadcasting be regulated independently.

Ms White from SABC stated that regarding ICASA’s powers, as was noted in their original submission, SABC felt that the constitutional problem lay in a lack of provision for ICASA to also regulate telecommunications providers, as the regulator had to regulate telecommunications and broadcasting separately to fulfil the constitutional obligation of Section 192. However, this problem in the Bill was a wording issue which could easily be solved.

Ms Mokoto also asked SABC what the implications of a 25-year licence term were and why they thought that it should be shorter. Additionally, she asked SABC why they suggested that the current Broadcasting Act be renamed the SABC Act, and whether they were implying that the SABC should be regulated separately from the Convergence Bill. Additionally, she asked what the point of regulating content was, including broadcasting, if it could not be limited. Finally, she cautioned that the wholesale inclusion of parts from other Acts could reduce the efficiency of the Convergence Bill, as the intent of the Convergence Bill was to regulate everything under the same legislation.

Regarding the regulation of content and broadcasting, a presenter from M-Net noted that Clause 85 of the Bill envisioned what was in the new categories, and that "broadcasting" would continue to be regulated as a class, as distinct from "content," which was seen to include predominantly Internet content. On the topic of distinct services, Clause 85(g) of the Bill retained the idea of distinction, but this was complicated in light of Section 192 of the Constitution. There was a need for differential regulation between telecommunications and broadcasting, both constitutionally and on issues such as local content, but the intent of the Converge Bill was to regulate them both the same.

Mr K Khumalo (ANC) asked SABC why they wanted a separate SABC Act, and what the implications of this would be under Section 192 of the Constitution. Secondly, he asked SABC to explain their reasoning behind suggesting 15-year terms for public broadcasters, but only 10-year terms for commercial broadcasters.

Mr Mohetle from the SABC replied that if all of the technical matters from the Broadcasting Act were included in the Convergence Bill, the only subject left in the Broadcasting Act would be relating to the public mandate and public service charter which regulated the SABC. Therefore, as this section was not going to be included in the Convergence Bill and the remaining aspects were specific to the SABC, it would be more convenient to retain it as a separate Act.

Mr Mohetle continued that the suggested changes in the licensing terms were a method to ensure that broadcasters contributed to the growth and development of South Africa. The shorter terms meant that the licences would come up for review more often and that in that review ICASA could evaluate whether the licencee was adhering to transformational principles. He emphasised that these shorter licence terms would only apply to those who provide content, but that 25-year licence terms would be appropriate for technical providers.

Mr Ihron Rensburg repeated that the portions of the Broadcasting Act which were not included in the Convergence Bill essentially comprised the SABC Charter, which could either be included in a new SABC Act or in the Convergence Bill, and noted that the SABC would still be regulated the same as other broadcasters. He also commented that the shorter licence terms as proposed in paragraph 3.10 of SABC’s written submission was intended to use licence renewal as a chance to review the licencee’s achievements of its social goals.

A presenter from M-Net countered that the 25-year licensing terms were OK, as the licencees would not go unreviewed for 25 years, as there would be a monitoring process. Additionally, they would have to be thoroughly evaluated if they applied for any amendments to their licence. She also noted that SABC had given all the other broadcasters a licence five years shorter than their own.

Ms Smuts asked why the issue of ownership was only dealt with in Chapter 13, specifically in regards to the transfer of licence. She noted that Sections 48, 49, and 50 of the IBA Act dealt more fully with the issue of ownership control and asked if those provisions would be carried over into the Convergence Bill. Secondly, she noted that the inclusion of the phrase "significant market power" as a means to introduce additional licence conditions on those companies was specifically directed at Telkom, as previously there had not been a legal mechanism to reign in those with significant market power. She stated that the SABC was too big, but was it the intent to apply significant market power regulations to other broadcasters than the SABC.

Ms Mack from M-Net argued that limitations on foreign ownership ought to be couched in the legislation, not in the ICASA regulations. M-Net’s position was that foreign ownership ought to be regulated, but with an exemption or partial exemption for African nationals, much like the European Union had in place for EU nationals.

Mr Khumalo asked for clarity about whether SABC thought that content must not be licensed, as the Bill used "content service" and "applications service" interchangeably. Secondly, regarding the wording of the Minister "may" consult with ICASA versus the Minister "must" consult with ICASA, he noted that the Convergence Bill must retain the balance between the Minister and ICASA which was struck in the IBA Act.

Ms White stated that the SABC was not advocating the non-regulation of broadcast content. On the contrary, the SABC was in favour of strong regulation of broadcasting to ensure local content was included, but was opposed to content regulation of the internet. She asked for clarification regarding the difference between a communications service and an applications service.

A presenter from M-Net replied that their presentation had highlighted the correctness of the Minister issuing policy directives, as long as there were adequate procedural safeguards in place.

Regarding M-Net, Mr Khumalo asked if they proposed ending foreign ownership restrictions or simply maintaining the restrictions, and exactly which proposals M-Net was championing?

Mr Khumalo also asked the SABC about their position on contributions to the Universal Service Fund (USF), noting that they had a point regarding funding their future competitors. These contributions were painted as double taxation, as the Media Development and Diversity Agency (MDDA) funded all sorts of communications, while the USF was restricted to broadcasting.

Mr G Oliphant (ANC) asked about the SABC’s wish hang on to the provision allowing them to collect R 500 million from TV licence fees, rather than considering an alternative model of public broadcasting funding with which the Committee was currently grappling.

Mr Mohetle from SABC replied that regarding the repeal of Section 27 of the Broadcasting Act, dealing with SABC’s funding, that SABC was aware that there was a national initiative to find alternative funding models for public broadcasting, including those issuing from the Department of Communications involving taxation, use of licence fees, as well as other means of raising funds. However, SABC did not want to remove the R500 million of funding without a secure alternate source of funding to replace it with, as that would negatively affect SABC’s ability to deliver on its public mandate.

To M-Net/Multichoice, Mr Oliphant asked about their proposal that the Competition Commission (CC) deal with all competition issues as it had the tools to do so, whereas the status quo indicated that ICASA would deal with competition issues general to the field of communications, while the CC would deal with specific mergers and acquisitions.

Ms Vos asked M-Net if they felt that the CC was more competent, as ICASA lacked capacity.

Regarding competition, Ms White stated that SABC supports the co-jurisdiction of the CC and ICASA, but noted that competition was not regulated across all industries and that the two bodies regulated differently. Most important, however, was that ICASA needed proper funding and capacity to deal with the concerns of its own particular area of expertise.

Regarding the capacity of ICASA, it was M-Net’s position that the lack of capacity resulted directly from a lack of funds, and that ICASA should be funded adequately to enable it to work in a converged environment. Regarding competition and jurisdictional issues, ICASA and the CC were working together to resolve the problem. However, one additional concern was that if ICASA issues a ruling regarding competition, an appeal would go to a normal court without the expertise to deal fully with the issue, rather than a Competition Tribunal, where a CC ruling would go on to appeal.

Regarding their proposed definitions, Mr Oliphant asked where M-Net got their definitions from, and whether they had any examples of their prior use or references. Finally, he asked M-Net to elaborate on how exactly the Bill was unconstitutional so that the Committee could more fully consider the necessity of amending the Constitution.

Ms White from SABC replied that in drafting the definitions they had simply used their own common sense in writing them, keeping in mind that the current Convergence Bill definitions were too vague to be useful. Ms Armstrong stated that M-Net’s definitions were entirely the product of M-Net, and were drafted to be practical and uncomplicated.

Ms Smuts noted that M-Net had asked for the reinsertion of the procedural safeguards from the IBA Act, and asked SABC their view of those safeguards in regards to the sufficiency of Chapter 3 of the Convergence Bill if Chapter 5 was fixed.

SABC felt that it was constitutionally appropriate for the Minister to issue policy directives, and that the SABC supported the additional safeguards which were lacking in the Bill, including requiring the Committee and ICASA to be consulted on the direction of ministerial policy.

Regarding Clause 55 in the Bill, M-Net understood the reasons for its inclusion, but that although this section was fine for telecommunications providers, it was constitutionally problematic for broadcasters in light of Section 192. Particularly troubling was the proposed power of the Minister to issue licences in the Bill. M-Net echoed the call for additional procedural safeguards

Ms Armstrong, representing M-Net, repeated that regarding the issuing of policy directives by the Minister to ICASA, there were primarily drafting problems in Clause 3 of the Bill. In Clause 3(1), the power of the Minister to make policy was clearly laid out. The problem arose in Clause 3(2), where the wording implies that the Minister is able to issue powers to ICASA, for example to investigate something, and that ICASA would be bound to comply. The main point of concern was that nowhere was the Minister required to consult with ICASA or solicit public comment, but had the power to issue ICASA with policy directives, rather than a more general policy direction

A presenter from SABC replied that SABC’s objection to contributing both to the USF and the MDDA was not that they did not want to fund their competitors, as that was, in effect, the ultimate goal of the MDDA. Rather, a concern was that the goal of the USF was to extend telecommunications access rather than access to broadcasting, and that SABC would prefer the money they contributed to the USF to go towards improving broadcast access. In the case of the MDDA, this money was also used to increase the broadcasting access, and was effectively the broadcasting equivalent of the USF.

The Chairperson commented that under Clause 74(3)(i), the purpose of the USF was to provide communications and communications network services.

Ms White noted that those definitions were problematic, as the term "communications service" could be broad enough to include broadcasting, although the definition was often not meant to include broadcasting. However, in the interest of fair regulations, the current situation should be examined, as telecommunications had ton contribute only to the USF, while broadcasters had to contribute to both the USF and the MDDA. A means of avoiding this disparity could be to include a provision stating that al licencees must contribute to the USF if they were not already contributing to another fund.

A presenter from M-Net asserted that M-Net made substantial contributions to the MDDA in both money and assistance, and they viewed the retention and strengthening of the MDDA as key to achieving the stated objectives of transformation in broadcasting.

Ms Smuts asked the Department to clarify the definition of "universal service" as it related to telecommunications, particularly in a new converged environment, where it would be possible to use the Internet via broadcasting means. If the term referred only to Internet access, then there was no argument, but if the policy wasn’t clear than it would have to be reconsidered.

Mr Joe Mjwara, the Deputy Director-General of Communications, replied that "universal service" should be considered to include broadcasting, as "carriage" in the Convergence Bill also included broadcasting. Therefore, broadcasting must reach all South Africans, an estimated eight million of whom are without access to it. Other interactive service’s conditions of access would be dealt with in their particular licences, as it was as yet impractical to require "universal service" of them.

Secondly, Mr Mjwara noted that contributions to the MDDA are entirely voluntary, rather than the statutory requirements of contributing to the USF, although a parity of an overall expected percentage of profits should be given to the funds. However, although the details of required contributions had been left out of the Bill, all providers should contribute to the USF.

On the issue of reinserting procedural safeguards and requiring public input, the Department had intentionally left out of the legislation in order to enable ICASA to respond more quickly and made necessary changes in the regulatory landscape, rather than requiring a cumbersome bureaucratic process, as was the case in the IBA Act. Although they were left out to increase ICASA’s flexibility, it was not intended that these safeguards never be followed, but rather specific guidelines should be implemented and followed by ICASA in each case.

Regarding foreign ownership, the Department had included an amendment for consideration and the impact of ICASA’s input was being considered. The Department was mindful of the cultural and national issues regarding foreign ownership, and considered a limitation on foreign ownership also important to ensure a diversity of viewpoints was heard in the media. The legislation on foreign ownership would continue to be developed, and issues relating to concentration of media ownership and ownership across types of media would also be considered.

On the regulation of those with "significant market power", the Department had not yet considered its application to the sphere of broadcasting, as it was difficult to plan for the Convergence Bill without being able to forecast the landscape of the eventually converged environment.

The meeting was adjourned.