Independent Communications Authority SA; Sentech: Strategic Plan & Budget 2006/07

Meeting report

COMMUNICATION PORTFOLIO COMMITTEE
13 March 2006
INDEPENDENT COMMUNICATIONS AUTHORITY SA; SENTECH: STRATEGIC PLAN & BUDGET 2006/07
 

Independent Communications Authority of SA briefing
Sentech briefing: Part 1 & 2 (if problems downloading, email [email protected])

SUMMARY
The Independent Communications Authority of SA (ICASA) briefed the Committee on its plans and objectives for its telecommunication services and its engineering and technology services for this year. It identified key market issues and outlined its promised deliverables for 2006/07. After outlining its budget, it discussed how it had aligned itself with the government's Programme of Action and the progress on this.

The Committee asked about assessing existing Under Serviced Area Licence operators (USALs) before looking at future licensing, problems with the previous ICASA Chief Executive Officer and Chief Financial Officer, whether ICASA had been consulted on government’s aims to roll out broadband, consumer complaints about ADSL and expenditure on office refurbishment.

Sentech representatives then briefed on their Strategic Plan, highlighting its major projects, digitisation benefits, developments with the East African Submarine Cable System (EASSy), and preparations for the World Cup 2010. Lack of funding was identified as a major risk.

The Committee commented about the lack of clarity about Sentech funding especially in the light of the Deputy President's announcement about broadband roll-out. Open access to EASSy was questioned.

MINUTES
Independent Communications Authority of SA briefing
The Independent Communications Authority of SA (ICASA) briefed the Committee on its plans and objectives for the year. The presenting team were Mr Paris Mashile (Chairperson of the ICASA Board), Mr Eric Nhlapo (acting Chief Executive Officer), Mr Wojtek Skowronski (General Manager: Engineering and Technology), Mr Lumko Mtimde, Ms Mamodupi Mohlala, Ms Jayshree Naidoo and Ms Nadia Bulbulia (all Councillors).

Mr Mashile, Chairperson, provided an overview of the strategic objectives and vision. Mr Nhlapo, CEO, then explained strategic objectives in detail. He noted that ICASA planned to issue licences to 14 under-serviced areas and thereby improve Universal Service and Access. ICASA wanted to launch an investigation into adult content to facilitate a strategy to protect minors, and co-ordinate with the jurisdiction of the Film Publications Board (FPB). Mr Skowronski elaborated on the Engineering and Technology Services aspects and explained that ICASA aimed to develop an effective broadcasting plan that would gradually introduce digital broadcasting and protect the existing and planned services in the band. ICASA also planned to update records in order to licence new entrants. Frequency Spectrum audits of Major Operators were also in the pipeline.

Discussion
Mr R Pieterse (ANC) asked about the current problems around the ICASA Chief Executive Officer (CEO). Having an Acting CEO in an organisation like ICASA was not conducive to the stability needed. He also asked about areas without community radio stations, and not connected to nodal points. How should such regional inequities be approached? Mr Pieterse also asked if ICASA had looked at the current seven Under Serviced Area Licence operators (USALs) before looking at future licensing. The Committee has been informed that the current seven USALs were not doing well financially.

Mr K Khumalo (ANC) had hoped that the ICASA Chief Financial Officer (CFO) ‘saga’ would have been mentioned. The income statement that ICASA had distributed to the Committee was too small to read. Mr D Smuts (DA) agreed.

Ms Smuts (DA) noted that the budget proposed for the Medium-term Expenditure Framework (MTEF) period were as follows: R199 million for 2006/07, R217 million for 2007/08 and R237 million for 2008/09. This seemed to be more than the numbers ICASA mentioned at the 9 November 2005 meeting as amounts of money it hoped to receive. She had notes to the effect that ICASA was hoping for or expecting R177 million, R118 million and R103 million, respectively.

Ms Smuts asked what was happening with the ICASA CEO and CFO. Had ICASA been consulted regarding the government’s aims to roll out broadband? What were ICASA’s views on how these plans were situated in the broader liberalisation field?

Ms Smuts noted that ICASA had presented that it shared jurisdiction with the Film and Publications Board (FPB) for adult content on television. She was not convinced that was the case, and felt ICASA held full responsibility. Broadcasting codes had been drafted and regulated by ICASA, such as the ‘watershed hour’ before which stations could not screen adult content.

Ms Smuts further noted consumer issues should not be deprioritised. ICASA had been holding roadshows and on the other side of the spectrum there was an inquiry on ADSL prompted by a flood of complaints. What had the roadshows achieved? South Africans are radio listeners, and so is that not a more logical place to reach the public? Who pays for the roadshows?

Ms S Vos (IFP) asked about the R20 million that ICASA had spent on office refurbishment. She sought clarification on what exactly the money had been spent. She asked how many offices had been refurbished. Mr M Mahlalonga (ANC) agreed that R20 million on office refurbishment was excessive.

Mr Mashile replied on the issue of the CEO, saying that accusations of alleged wrongdoing had been levelled against the former CEO, and hearings were currently taking place. The allegations referred to the procurements of goods and services with disregard to tender processes. On the matter of the CFO saga, about R110 000 disappeared from the safe and no one knew where that money had gone. That money should have been deposited in the ICASA bank account.

Ms Mohlala (ICASA councillor) dealt with the issue of the licensing of the USALs. Such USALs were businesses, and should be treated as such. Any new business could not be expected to break even in the first twelve months of its operation. The nature of the licences was that they serve areas where other operators had not felt that it was not viable to serve. These licenses were not for favourable, profit-conducive environments. They have always been accepted as such.

Mr Mashile explained that the R20 million indicated for office refurbishment had in actual fact been spent on other things. The total breakdown would be included in the ICASA Annual Report.

Ms Naidoo (ICASA councillor) dealt with consumer complaints. ICASA would forward the numbers of complaints, their nature and resolution times, to the Committee. With regards to the roadshow, she explained that suggestions for an alternative would be welcomed and considered. Visits to communities had proven effective, and ICASA had also been using radio broadcasting.

Sentech briefing
The Sentech presentation team was made up of Mr Colin Hicking (Chairperson of the Board), Dr Sebiletso Mokone-Matabane (Chief Executive Officer), Mr Gladwin Marumo (Chief Operating Officer and Acting Chief Financial Officer), Mr Marc D’Oliveira (Manager, Office of CFO), Mr Dingane Dube (Executive, Government and Regulatory Affairs) and Mr Johan Raath (Executive, Office of COO).

Mr Hickling expressed excitement about the awarding of multi-media service licences to Sentech and the State’s intention to digitise the broadcasting network. However shareholder capital injections were essential for Sentech to execute its mandates. Protracted negotiations with different state departments were having a toll on Sentech’s ability to maximise multi-media service licences. He conveyed frustration at losing out to competitors and not being able to increase the organisation’s market share due to lack of state funding. He emphasised that "the window of opportunity was closing on Sentech".

Dr Mokone-Matabane, CEO, explained that Sentech complained of the same problems every time it presented to this Committee. She was concerned that Eskom’s lack of capacity problems (to provide electricity in the Western Cape), also might face Sentech. The communication network was as important as electricity, and breakdowns could cause chaos. Such a scenario was not impossible.

Mr Marumo, Sentech’s COO and Acting CFO, said that, Sentech’s goals for this year were to initiate digitisation and roll out wireless broadband. He elaborated on the benefits of digitisation, such as better spectrum usage, more channels per frequency, regional access, more language representation and cheaper tariffs for broadcasters. He quoted the South African Deputy President as prioritising: "ICT infrastructure, which includes the strategy to rapidly grow South Africa’s broadband network; implementation of a plan to reduce telephone costs more rapidly; the completion of a submarine cable project that will provide competitive and reliable international access, especially to Africa and Asia."

Discussion
Ms Smuts said that she was completely astonished by the presentation. Sentech had been asking for funding for so many years to construct the broadcasting infrastructure that the company needed to digitise. From the 9 November 2005 meeting she had understood that at long last - after the government had announced that they were planning to spend on infrastructure - that R600 million would in fact have come to Sentech. When the Treasury's Estimates of Expenditure were released, she had seen that Sentech was not getting R600 million over three years, but three different sets of figures were cited. The Department of Communication, in two places, did refer to the digitisation of infrastructure. In one place it talked about Sentech receiving R135 million for 2006/07, R105 million for 2007/08, and R105 million for the year thereafter. In another part of the document it talked about R95 million for this financial year, sixty something million for the next one and R50 million.... When it came to actual figures what was set down was a R100 million for this year, R65 million for next year and R53 million, totalling about R210 million, and she did not see the R600 million. When the Committee met with the Department on 31 March, they would need to ask why there were discrepancies? Where was the R600 million?

She questioned if these announcements by the government been made without any consultation with Sentech? Another concern was why should Sentech be given funding if it was in fact competing with other people and organisations? Perhaps Sentech's response would be that it was not allowed to borrow the R1.5bn it needed and as a result, the government was speaking to you about this issue. The matter was as clear as mud and it could not go on like that.

Ms Smuts also asked for clarity on the East African Submarine Cable System (EASSy). She understood that it was not a "cable club" and not a product of private contract. If it were a cable club, then how could it be an open access cable?

On the issue 2010 Soccer World Cup, Mr Pieterse said he disagreed with Sentech’s goals but his main concern was the day-to-day communication that had to take place.

Mr Oliphant asked if the R1.5bn needed by Sentech would cover the total infrastructure costs.

Dr Mokone-Matabane stated that Sentech had been engaging constructively with the Minister, the Director-General and senior staff members of the Communications Department. They still needed the involvement of the Minister of Finance, so that Sentech could be given authorisation to borrow funds, or funds be made available. As to the question of aging analogue infrastucture, they were primarily talking about television. The infrastucture was built during Bophuthatswana times, and so it was quite old. He referred to reburbishment including generators for backup to provide uninterrupted power supply and to old air conditioning units that needed to be replaced. So it was not only the transmitter, but a whole lot of civil works that had to be undertaken. The R95 million would take care of the first phase of the digitisation process which was making sure the infrastucture was in place.

He continued that they also would need to ensure that employees are properly trained, so that when the conversion happened their staff were competent. Their current staff had not operated in a digital environment, so even their old experienced technicians and engineers will need to go for training. The issue of aging was about infrastructure, as well as about people.

Mr Marumo commented on EASSy, saying that if we were not careful as a country, and did not learn to do things ourselves, we would end up selling the entire country to India. If South Africa could not operate the EASSy cable, and it was not prepared to make that investment, then it was fair to say that it was not serious about communication.

He noted that if Africa was connected by India on the Eastern side and by Europe and the USA on the Western side, that would mean Africa was being colonised. And he would argue against that. South Africa did need representation in the scheme of things. He was pleased by Telkom's stand that they would be involved in the project to connect Africa. He thought that Sentech should be involved in that project too.

Regarding the issue of open access, they had pointed out that it was a difficult issue. As far as the cable was concerned it had to be open access, anyone had to be able to join. The people who owned the cable should not be the same people who managed it.

With regards to Sentech's business model, they had said unequivocally that they were primarily looking at the wholesale situation, so as to enable others to use the infrastucture and do more business. They believed that that was the model that would work for South Africa.

He concluded saying that the R1.5 billion that Sentech needed was to roll out broadband internally. It would be used for infrastructure costs and marketing purposes.

The meeting was adjourned.