Convergence Bill: hearings

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
11 August 2005

Communications Users Association of SA submission
Aware Campaign submission
Aware Campaign presentation
Convergence Bill [B9-2005]

SUMMARY
The Communications Users Association of South Africa (CUASA) and the VANS Aware Campaign briefed the Committee on their approach to the Convergence Bill. Once again, the issue of unclear definitions was raised, and it was noted that this could lead to litigation and delays. The importance of clarity for interpretation was stressed. The independence of the Regulator and the powers of the Minister came under scrutiny again. The Committee felt that undue emphasis was placed on the need for the Minister to consult with the Regulator on policy, and not enough on the need for the Regulator to consult with the Minister on regulations. It was noted, however, that a balance had to be achieved, as it was not feasible for the Regulator to refer every issue to the Minister.

The high price of telecoms in South Africa was also raised once more, and the Committee was shown how much more affordable it was to do web hosting offshore. This had serious economic implications for the country. The Committee agreed to flag the issue of the Minister’s powers, particularly in terms of determining the date and place of network entry.

MINUTES

Communications Users Association of SA submission
Mr M van den Bergh (Chairperson) explained that CUASA represented the interests and needs of users of communications in South Africa, and the use of "communications" rather than "telecommunications" in the name highlighted the convergence between communications media. It had been formed approximately four years ago, and supported liberalisation of the sector as a means to ensure greater choice for users. Effective and cost effective communication services were the substance of successful business undertakings. Such services were more likely to come about under a fully competitive telecommunications market in which market entry was subject to as few barriers and restrictions as possible. During the Department of Communications Colloquium on the Pricing of Telecommunications Services in South Africa, which laid much of the framework for the Convergence Bill, both President Mbeki and the Deputy Minister of Communications had noted the problem of the high cost of telecommunications. One of the key elements suggested was that new wireless technologies might allow for competition in the market.

Although CUASA had detailed its views in its written submission, a few key points were highlighted. The Bill referred to sections of the Independent Communications Authority of South Africa (ICASA) Act. Although it had been envisaged that the ICASA Act was to have been amended in conjunction with the Convergence Bill, the draft ICASA Amendment Bill had not been made available. These references included the definitions of "Complaints and Compliance Committee" and "investigation unit", and Clauses 3(2)(a), 10(d), 13(4)(b), 14(b), 52(2) and 60(6) of the Bill.

Mr R Webber (Executive Committee member) explained that, under the proposed converged regime, there would be five types of service providers: communications network service licensees (such as Telkom and the Second National Operator (SNO)), communications service licensees (including resellers), application service licensees, broadcasting service licensees and content service providers. Only the latter would not require a licence. CUASA recommended that the term "communications service" only be used to refer to the specific category and that its descriptive use in the Bill, referring to all categories of licenses, be deleted. Because the definitions were imprecise, there was a blurring of lines between the service categories, which was likely to result in disputes and litigation. It was recommended that the definition and therefore category, of "application services’ be deleted, and definitions regarding communications services and resellers be amended.

Under current law, the Minister was obliged to consult the Regulator before making policy decisions. In terms of the draft Bill, the Minister would no longer be required to do so. The existing condition should be re-inserted, and the word "may" in Subclause 3(4)(g) should be replaced by the word "must". The independence of the Regulator was seen as the key to moving forward. Policy directions should not impose on the independence of the Regulator in a converged telecommunications and broadcasting environment. Chapter 9 of the Constitution required an independent authority to regulate broadcasting and the safeguards in the IBA Act should be included in the Convergence Bill. In respect of number portability, Clause 65(1) stated that the Authority was to prescribe measures to ensure that number portability was introduced in 2005. This date was unattainable, and should be changed to 2006, although only mobile number portability was likely to be implemented by 2006.

Mr van den Bergh explained that, in terms of the transitional provisions, it would be important to determine with certainty which licenses would be issued to existing licensees. It appeared, for example, that Value Added Network Services (VANS) and multimedia services providers would be licensed as communications services providers, but many would possibly also require an application service provider licence. Clause 5(10) indicated that, until the transition, all existing licenses would be considered individual licenses, which was inappropriate for VANS. The provision should state that existing licenses would remain subject to all terms and conditions in the licenses until conversion. If this was not done, a lacuna could be created. The requirement that existing licence holders should submit written notice offering to surrender that license and to be granted one or more new licenses, failing which the license would expire after a period of 90 days, was unreasonable. Licensees should be invited to reapply once license conditions were known, and existing licenses should continue to apply until new licenses were issued.

In addition, under the existing regime, VANS providers had the right to interconnect with PSTS licensees. This was not continued in the Convergence Bill. This change was neither appropriate nor constitutional, and the right of all communications services licensees to interconnect with any other communications network services licensees or communications services licensees should be added.

It was clear that clarity was needed on a future market structure and there should be certainty in terms of legislative intent to eliminate litigation caused by unclear legislation.

Aware Campaign submission
Mr R Holloway introduced the Aware Campaign to the Committee, explaining that it had been launched the previous year to invoke discussion of ICT issues, particularly in the SMME sector. Many SMMEs were completely oblivious of legislative, regulatory and policy issues, and the aim of the Campaign was to create awareness and encourage participation. Areas of concern included the definitions where the lack of clarity created both problems for licensing and would have a chilling effect on SMMEs in particular, and for investment. ICASA had stated that the licensing framework would be the engine on which the Bill would ride, and if it were weak, the Bill would be weak.

New networking technologies, particularly the Internet, had resulted in a convergence of content and method of delivery. Conveyance was no longer bound to the type of content, and content and applications had nothing to do with conveyance. The object of a communications network was to get content from point A to point B. This could be compared to a transport network, where a container of goods might be transported by truck (travelling on a road) to a train (travelling on a rail) to a ship (travelling on the ocean), to be offloaded at its final destination. A simple modification to the definitions would result in content (everything that could be conveyed) and applications (to prepare the content for conveyance) being exempt, with the communications service (the conveyor) requiring a class licence and the communications network (the physical part of the system facilitating transmission) requiring an individual licence. Networks did not require a special knowledge of the content conveyed. Any person with access to a network could also host applications and content, and these could be hosted anywhere.

While the Campaign believed that networks and services should be regulated, SMMEs were concerned at the lack of clarity, the high cost of communications in South Africa and the lack of protection from network and network service providers, and were moving services offshore, where it was up to 40 times cheaper.

Discussion
The Chairperson asked what was happening with the ICASA Amendment Bill.

Mr J Mjwara (Deputy Director General: Multi-Media: Department of Communications) replied that the Amendment Bill was on its way to the Committee. The Department had met with the State Law Advisor that morning, and the Bill should be in front of the Committee shortly. One of the reasons for the delay had been the State Law Advisor’s workload.

Ms D Smuts (DA) remarked that South Africa had at one time been high on a list of web hosting sites, but had slipped. Could this be ascribed to the pricing policy?

Mr Holloway concurred that the web hosting industry in South Africa had been stronger in the past. This was because there had been no regulatory environment, and the VANS regulations had been only been published recently. The whole issue of regulations had had a chilling effect on the industry. The other area was that of cost. The company for whom he worked had investigated what it would entail to host a server off shore. It had contacted a company, which would rent a server for its sole use, and would charge $174 per month for 1,5 MB per second. This included the hardware. The best offer that Telkom had made had been for 1 MB per second, with no hardware and the international portion comprising only 10% of the connect, and this had been quoted at R45 981 per month.

Ms Smuts referred to Clause 85(3)(d) regarding transitional arrangements, and noted that it posed a legal problem.

Mr van den Bergh concurred that the guidelines mentioned would indeed have to be in place. In terms of interconnect as well, the industry was changing and VANS needed to be able to apply for this.

Mr G Oliphant (ANC) noted that the transitional arrangements referred to the process of a move from the old to the new, and asked what would happen if a license expired during this period.

The Chairperson noted that it often appeared that operators tried to retain the good parts of the old system while selectively adopting the good parts of the new, and asked for comment.

Mr Holloway emphasised that rights had to be guaranteed before licenses were converted, and this was particularly important for SMMEs and small players.

Mr van den Bergh replied that the industry was coming from the point of view of experience rather than ideology. While he agreed that parties were either part of the process or not, it was still unacceptable to have an unlicensed position.

Ms Smuts referred to the clause under which network licensees were required to interconnect and VANS would fall away, and requested clarity on physical and logical interconnection. This clause would allow VANS to self-provide, and this again led to the problem of the jurisdiction of the Minister.

Mr van den Bergh replied that physical interconnection referred to the literal joining of wires. There were many different types of logical interconnection, for example a connection between Vodacom and MTN. There could be a number of providers enabling the signal to travel, and there would have to be agreement between them so that details relating to connect would pass backwards and forwards.

Mr Mjwara noted that the Minister would not be issuing ITAs, but would determine the date and places for applications.

Ms Smuts suggested that this constituted a barrier to entry, and that entrepreneurs should be left to approach the Regulator.

Mr Mjwara explained that the fundamental reason for the inclusion of this provision in the Bill was that the Department had been warned that the "big bang" approach had to be balanced against, for example, investments. There was also an urgent need for expansion in under-resourced areas. There were a number of examples where "big bang" had prevailed, such as Chile, and the market had crashed. The provision did not mean that the Minister would unnecessarily prevent people from deploying technology, but she would open areas at a specific date and time. It was also important to be cautious during a period of transition.

Mr V Gore (ID) suggested that it would be interesting to debate the Minister’s role in detailing business plans for private companies. A case in point was the cellular industry, where the Minister had not been able to stipulate entry dates and places. He disagreed with the example cited, saying that other reasons had been in play as well. An open approach had worked well in the European Union, for example. It was important to consider the rollout of infrastructure to the 80% of the population currently not serviced.

Mr van den Bergh concurred and noted that it was easy to forget that businesses failed. It was important to differentiate between a normal business risk and an artificially created risk. It was not possible to legislate for business success or failure. People should be allowed to make decisions and fail at times. The issue was flagged.

Ms Smuts referred to the CUASA written submission on the rights of way, and noted that the Chapter in the Convergence Bill had been written as though there was still a monopoly.

Mr Webber replied that there would be at least seven application network service licensees, but it would be impractical for all of them to have carte blanche rights. The provision for an environmental impact study would appear to be the only current solution to an obligation to compensate.

Ms Smuts asked for feedback on the developments in respect of the SNO, and clarity on the implications of reported Communitel talks at Luthuli House with prominent MPs.

Mr van den Bergh replied that he was replying in his personal capacity, as he was not a spokesperson for the SNO. There had been delays with the Department of Public Enterprises, and this had been disappointing. The SNO had thought that agreement had been reached on material points and felt it was unfair that a new requirement had been put forward at the end of the process. The requirement was not insurmountable, however. In respect of the Luthuli House meeting, the Umkhonto Military Veterans Association (MKMVA) was a shareholder in Communitel, and their offices were in Luthuli House. Shares were held by MKMVA as a whole, and not by individuals or trusts as reported in some media. Mention had been made of the presence of MPs in Luthuli House to confirm the credibility of Communitel.

Mr Oliphant agreed that exemptions were a very important issue, and asked for comment.

Mr Holloway stressed that the argument that it was necessary to license content to protect children against pornographic websites was false. One blacklisting service listed 500 000 pornographic websites, and licensing the content of South African sites would not stop access to any of these.

Mr Oliphant noted that CUASA had raised the matter of frequent litigation by Telkom, and asked whether this was the major stumbling block with the definitions.

Mr van den Bergh replied that the intention was to make a good law. Telkom tended to be litigious but it was very important in any event to try to avoid resorting to litigation to discover the intention of the legislation.

Mr Oliphant asked for a response to the suggestion that it was the prerogative of the Minister to make policy, and of the Regulator to implement policy.

Mr R Pieterse (ANC) suggested that experience had shown that the Minister would consult beyond the Regulator, and that there was sufficient provision for this.

Mr M Mohlalonga (ANC) noted that this was an area of confluence between policy making and the implementation of policy directives, and asked at what point regulations should be scrutinised to ensure that they concurred with policy.

The Chairperson asked for comment on his proposal that the Bill provide that the Minister "must" consult, but that the Regulator, on issuing regulations, would also be compelled to consult.

Mr Holloway replied that in September 2004 the Minister had announced Voice Over Internet Protocol (VOIP) decisions. ICASA had issued a public interpretation document on these in May 2005, and had stated that self-provisioning would be allowed. The day before this came into effect, the Minister had announced that self-provisioning would not be allowed. This type of decision at the eleventh hour was hurting businesses that wanted to remain legal. The Minister should have consulted ICASA on the issue.

Mr van den Bergh replied that the key issue was that the Minister, as an engine of policy, was one side of the coin, and the Regulator was the other. There should be an obligation on each party to consult. The Minister tended to make relatively few policy decisions, but these were usually momentous. Conversely, the Regulator was under pressure to constantly refer everything back to the Minister who was very busy and this delayed the process. There had to be a balance.

Mr Oliphant asked whether there were any practical examples regarding number portability.

Mr Webber replied that only mobile number portability was on the table at present. Portability required the network operators to have a sophisticated database of numbers. The first three digits indicated the network at present, and it was currently more cost-effective to use an on-net call. Of the operators, Cell-C stood to gain most, and the largest incumbent, Vodacom, claimed that it would take a year. Indications were that August 2006 would be the earliest time at which number portability would be possible, hence the suggestion that the provision of 2005 in the Convergence Bill be amended to 2006. It could not be left open ended. It was possible that, in due course, there might be portability over fixed numbers to mobile numbers as well. There was concern from users that the network operators might use number portability as an excuse not to drop tariffs.

Mr van den Bergh noted that number portability tended to result in an early flurry that would reach stability.

Mr Pieterse concurred with presenters that a strong independent Regulator was required, but suggested that the ICASA Act be strengthened rather than the Convergence Bill, or there might be a risk of confusion, or "legislation hopping".

Mr Mohlalonga suggested that the independence should be clearly defined, and the experience to date taken into account. The issue should be flagged.

Mr Mohlalonga asked whether CUASA could propose new formulations for the disputed definitions.

The meeting was adjourned.