Wireless Applications by Municipalities & Job Creation in South Africa: briefings; address by Deputy Minister

COMMUNICATIONS PORTFOLIO COMMITTEE
9 June 2006
WIRELESS APPLICATIONS BY MUNICIPALITIES & JOB CREATION IN SOUTH AFRICA: BRIEFINGS;
ADDRESS BY DEPUTY MINISTER

Chairperson: Mr G Oliphant (ANC)

Documents handed out:
Presentation by City of Cape Town: The Case for Wireless Municipal Networks
Presentation by Uninet : The UNIFi Knysna Project
Copy of article in Mail and Guardian: Wireless in Knysna
Presentation by Telkom: The Changing Regulatory Environment and effects on the ICT Industry
Presentation by SA Call Centre Community

SUMMARY
The City of Cape Town summarised its achievements in Information and Communications Technology, which included creation and rollout of the Smart Cape internet access system to all libraries, which reached 50 000 users, electronic payments systems, provision of business training and access to new businesses, and improvement of services.  The high cost of telecommunications hindered its attempts to improve service still further.  Its annual bill for telecommunications within its offices was currently in excess of R100 million and further costs arose from traffic, security, emergency and library services.  It had discovered that it could install and run its own communication network for a once-off cost of R10 million and, by using wireless technology, achieve a cost saving of R40 million per annum. This would meet its visions of connecting the city to all. This would free funds for other projects, including the 2010 traffic signage necessities, housing, education and connecting clinics and youth centres. 

UniNet gave a presentation on its partnership with the Knysna Municipality, which had resulted in wireless connection across the municipality by way of various systems, including short-range access from municipal building and long range hotspots. The services offered included internet access, online payment, linkage of offices, and provision of services in areas where no telecommunications had been offered before. The end users were firstly the municipality itself, and secondly the community, who had access to low cost, high quality facilities for fixed line and mobile services. Some calls to municipalities were free. It was a far more affordable solution, which gave short range access. The pricing was around 40% cheaper than other mobile services, in absence of any interconnection with a Telkom site. Telkom had taken issue with this, claiming that UniNet was breaching the provisions of the Telecommunications Act. UniNet believed that it held licences under the proper format and that a Ministerial determination had altered the position in relation to municipal land and ability to allow other operators to use facilities.

Telkom gave a presentation on its interpretation of the Telecommunications Act, and the reasons why it did not regard municipalities as able to transfer certain licence rights. It believed that there was no need for municipalities to become network operators, as the opening of the market would in any event lead to the reduction of costs, which seemed to be the major issue. Radio frequency spectrum was a fundamental resource, which was scarce and limited. There was some dispute as to ownership of the spectrum. Telkom noted that technology would have to match to the spectrum and that there was a need for strict regulation in order to provide quality service and preserve the radio spectrum. Telkom was disappointed to see what it regarded as premature and opportunistic behaviour of municipalities and others.  It believed that since the system was in transition, the Telecommunications Act still applied and should be strictly enforced.

ICASA believed that the future lay in e-government, and it must support all initiatives aimed at supplying e-government.  This would include paying accounts online, improved access to the disabled, tackling the digital divide, addressing 2010 imperatives and looking further into the future. Whilst ICASA understood Telkom’s strict interpretation of the Act, it did not agree that it was correct.  Unfortunately technology could not afford to wait for regulation as systems needed to be tested in preparation for 2010; and it was vital to be ready for handover by 2008 to FIFA. The Ministerial determination, in ICASA’s view, had changed the position. ICASA believed municipalities were indeed able to transfer rights, in the way that the Knysna municipality had done, and gave an explanation of this. Under the new ECA, municipalities would all be able to register and could compete in telecommunications on a commercial basis. ICASA would not be able to impose universal service obligations in respect of areas, and it might be that some municipalities would not be able to rollout to all areas.

SACCCom was an NGO founded in 2004 as the national coordinating body for the business process outsourcing (BPO) industry and was charged with national job and wealth creation. The stakeholders were foreign direct investors, corporate entities, including IT, electronic, broadcasting and telecommunications industries, and offshore employers. Business Process Outsourcing and Off-shoring (BPO&O) was a global activity that had a positive impact on employment and economic wealth creation. However the high costs of telecommunications remained a major disincentive.  South Africa could offer good English language ability, good infrastructure and cultural affinity with the major players in UK and USA.  As against this, however, the lack of competitiveness meant higher costs, Telkom’s monopoly over undersea data cables and lack of facilities beyond certain points in overseas countries meant increased costs, and there was a scarcity of skills, leading to higher pricing.  The reality was that South Africa had already lost business to other developing countries that were able to offer better pricing. Industry and government were working together to try to develop and promote this market.

The Deputy Minister, at the end of the meeting, commented upon the presentations and isolated certain points.  He indicated that the Ministry and Department were committed to providing increased and improved access and that every effort would be made to ensure that a strong Regulator was able to assist in these aims.

Questions included gender and transformation issues of the companies presenting, the types of jobs at, and the location of call centres, the ownership of wireless network infrastructure, and the security and reliability of wireless networks.  Other questions addressed Telkom pricing, the effect of the Ministerial determinations on Section 41 of the Telecommunications Act, the spectrums used, the pooling of municipal resources, the sectors covered, illegal hotspots and enforcement.  

MINUTES
The Chairperson announced that the briefings were being held pursuant to the developments during deliberations on the Independent Communications Authority of South Africa (ICASA) Bill, in respect of wireless technology. The parties would make presentations and there would be opportunity for some questions.  ICASA, however, would attend a future Committee meeting when its views could be more fully expressed and questioned.

Briefing by the City of Cape Town (CCT): The Case for wireless Municipal Networks
Mr N Sooful (Chief Information Officer, CCT) stated that although his presentation referred to “wireless municipal networks” and although his views would reflect a majority of other municipality views, the systems he would talk to could also include fixed lines or a combination of wireless and fixed.

CCT had done a great deal in terms of Information and Communications Technology (ICT) over the previous five years, since creation of the new City. It was recognised internationally as a government leader in enhancing delivery but also in using ICT for social and economic development.  It had won international interest and awards, and its case study had been used in seven countries on the African continent, and used as examples of best practice.  Socio-economic considerations underpinned all that was done in ICT. The key issue was how to use ICT to improve government services, reduce waste, free up funds for other priority projects, meet the aims of ASGISA and enable growth and development.

The Smart Cape Access Project (Smart Cape) had the objective of ensuring access to basic information and communications technology, by installing five internet enabled access points at each municipal library.  It had been successful in getting youth off the streets, enabling people to apply online for jobs, update CVs, for businesses to register as suppliers and tender, for orphanages to go online and access assistance from Sweden, or to enable others to do typing in order to earn money.  It was built on open source technology, and had targeted the deepest unemployment and poverty areas. There were currently 50 000 registered users.  A mobile unit travelled to places where there was no connectivity, and provided ICT access, training, HIV and Aids assistance, social development programmes, and integrated services. Smart Cape had been the channel of community based information and had assisted MRC to publicise its Aids information.  It was a popular site, used for the “Mayor is Listening” campaign, and to acquire information. 

Other initiatives included the implementation of electronic rates payment (ERP), which had resulted in an 84 – 96% efficiency increase in billing.  Digital Business Centres provided entrepreneurs and business development opportunities, in Khayelitsha, Langa and Gugulethu and 130 businesses had been provided with information on starting and running businesses.  Non-traditional businesses would now use technology to expand their markets and run their business better. An “ICT for the Masses” campaign offered basic computer literacy to all, free, through 20 training centres.  Of the last sixteen trained, five had immediately obtained jobs as data capturers. CCT regarded the municipality as ideal for research and development and supported other municipalities, worked with the Universal Service Agency, SETAs (Sector Education Training Authorities) and other international links

Cost-effective telecommunications were obviously a vital part of these efforts, as also vital to connect the local authority and government.  The main problem faced currently was the very high cost of telecommunications.  When the ‘new’ city was created in 1994, 39 municipalities were linked into one, covering enormous distances. The high costs of connectivity had hampered efforts to work swifter and better between offices. It was a duty of local government to bridge the digital divide, and access to ICT was the key to better development. CCT had 24 000 employees. Online systems could deal swiftly and efficiently with fraud and isolate problems. Security cameras, the call centre, traffic lights, emergency services, electronic road signage, and a host of other matters were all dealt with via telecommunications. Within CCT, the current bill was more than R100 million for data and call charges, excluding traffic control and other incidental matters.  No discounts were granted for local authorities or clinics. Many of the youth centres and clinics could not be connected because of these excessive costs, and this hampered efforts to produce a single patient register to assist primary health care. 

Smart Cape had huge demand and the network was slow, being limited, of necessity, by the cost of the connections, which were already in the region of R4.4 million per annum.  Library management systems cost a further R1.6 million.  It would cost R1.6 million to connect 100 clinics for telecommunications, and to install Smart Cape there would cost a further R4.4 million.  CCT had gone out to tender and had established that it could install its own wireless network for a one-off cost of R10 million.  This was the primary reason why municipalities wished to move away from the existing Telkom services.  Only by reducing its costs would it be able to fulfil its commitment and constitutional duty to all citizens.  By doing so it would also be able to expand its ICT offerings to schools, enabling the delivery of videos online, and better social services.

CCT’s vision was to move telecommunications from a cost centre to an enabler, to invest money to create benefits for the community, to create a city where residents and businesses could be connected to the city administration, to have access to ICT, and basic infrastructure services.  This would be a key economic driver.  CCT had therefore applied for a Private Telecommunications Network (PTM) licence, so that it could install and manage its own telecommunications structure, reduce costs to allow it to provide lower cost services, to provide a network that was better suited to adding needs at lower cost, and to enable it to improve a range of services.  By using wireless technology it would achieve savings of R40 million per annum, and a 40% saving in costs.  This would free much-needed funding for housing, education and social services. Traffic signage was also another priority that would require funding before 2010. 

In conclusion, utilising wireless technology in its privately run network would allow for connectivity of facilities and staff and improve service delivery at the local level. Local government was best suited to providing services as it was constitutionally obliged to develop communities, and in the modern world access to technology was considered an essential basic service.  CCT would like to see all local governments being licensed to provide telecommunications, either by fixed line, or wireless, or combinations, thus providing services for themselves, or to licence out to other operators, and to make a substantial difference to the lives of all citizens.  CCT extended an invitation to the Committee to visit its facilities and obtain more information on the strategies and actions planned.

Presentation by UNINET on the UNIFi Knysna Project
Mr D Jarvis (Chief Executive Officer (CEO) UNINET) reported that in November 2005 the Mail & Guardian had carried an article on the Knysna Municipality’s use of wireless technology. UNINET had worked with the Knysna Municipality (KM) to build a Wireless Technology structure to redress the severe imbalances in the distribution of telecommunications and to empower the community to have access. The business case for the municipality had looked at reducing costs, restraining decline in services, breach the digital divide and obtain better value for the taxpayer’s money.  UniFi and the Knysna municipality had therefore built wireless local access between Sedgefield and Knysna, a distance of 35 kilometres.  To do so it had to install WiFi hotspots which would provide mobile access to data and voice services. UniNet provided the internet and connectivity, to fulfil the Municipality’s commitment to give low cost commercial services to the business and residential communities.

This used an open access business model, which had received international recognition.  The services were operated and maintained wholesale. The entire project had been financed by re-assignment of operational capital by taking the existing funds that would have been used for telecommunications from Telkom and building a new network.

Mr Jarvis tabled schematic diagrams to show how the system worked and noted that there was toll-free connectivity between all schools and clinics, to the municipal database. It was wired for hotspot public access to free internet and voice. Solar powered transmitters could provide information to base stations up to sixteen kilometres away.

The end users were firstly the municipality itself, and secondly the community, who had access to low cost, high quality facilities for fixed line and mobile services. Some calls to municipalities were free. It was a far more affordable solution, which gave short-range access. The pricing was around 40% cheaper than other mobile services, in absence of any interconnection with a Telkom site. There was a small cost between local and national telecommunications, with the first 100 minutes free, and thereafter a nominal fee. The majority of calls in the informal settlements had traditionally been made mobile to mobile because of the lack of low cost fixed lines. Now there were 89 municipal sites connected to the network, and 120 hotspots could provide 30% coverage all the time. This would shortly be expanded to 180 more hotspots to provide 60% coverage all the time. The municipality held a licence, and UniNet used the spare capacity of the network.  Changes in the Electronic Communications Act (ECA) would change the marketplace so that wholesale access would be a prerequisite.

Mr Jarvis reported that UniNet had recently obtained support from dti, and although there had been allegations from Telkom that the WiFi programme with the Knysna Municipality was illegal, ICASA had advised otherwise and the Department of Communications had actually offered support and helped them to secure financing.  The World Bank had seen the open access model as one that should be extended throughout Africa, and an amount of R60 million had been invested on the assumption that this project could serve as a pilot to the rest of South Africa. Four projects were planned for the future in smaller towns, and a tender had also been made for the Durban Metro. UniNet felt that local government partnerships were a key part of the strategy to grow businesses and to deliver real social and economic development.

Presentation by Telkom: The Changing Regulatory Environment and its possible effects on ICT industry and the economy.
Mr J Tlokana (Senior Regulatory Specialist: Telkom) reported that Telkom was fully supportive of the government’s mandate to reduce poverty and unemployment, to use ICT as a key economic driver, to share the fruits of a growing economy, to reduce and eliminate inequality and to enter strategic partnerships. Telkom believed that ICT was a key input into economic growth and social development, that a more liberalised ICT sector would allow for more players, giving increased service, and would lead to reduction of production and distribution costs.

The current regulatory environment meant that telecommunications, broadcasting and signal distribution were regulated under different Acts. Operator licences were based on fixed, mobile, broadcasting, signal distribution or multimedia licences and one licensee could not cross into another market. The proposed ECA would try to eliminate these disparities.

The Private Telecommunications Network (PTN) licences fell under the Telecommunications Act. The ECA did not make provision for them and they would not apply once the new Act was in force. If a PTN was used principally for own operations – such as purely within Municipal offices – then no licence would be required. If PTN was interconnected to PSTN (Public Switching Telecommunications Network) then licensing would be required. No licence would be required between premises on contiguous properties or single land.  The issue of land ownership had been very important in Knysna’s case, and not all municipalities had acquired ownership although they were able to do so. Telkom believed that all were still bound by the Telecommunications Act, which was still in force.

Radio frequency spectrum was a fundamental resource, which was scarce and limited. There was some dispute as to ownership of the spectrum. Certain categories of radio devices, such as baby monitors, lower power walkie-talkies, cordless telephones, microwaves and WLAN were not licensed because the probability of interference was very low. Mr Tlokana noted that technology would have to match to the spectrum and that there was a need for strict regulation. If there was to be an open market, there must be harmonisation and interdependence of technology. The integrity of the radio spectrum would have to be maintained in order to provide quality service. Bandwidth was always an issue in the unlicensed spectrum.

In the licensed spectrum, compliance was equally important and there were different types of licences. Costs of compliance included the licence fees and spectrum fees and there were fines for non-compliance. The ECA would promote convergence of different services, make provision for regulation of communications and networks and provide for new licences. It would grant licences by class, individual, spectrum and certain exemptions. Telkom regarded the ECA as a strategy to advance market liberalisation, creating more space for more players, with enhanced responsibility on the Regulator.

Telkom was disappointed to see what it regarded as premature and opportunistic behaviour of municipalities and others.  It believed that since the system was in transition, the Telecommunications Act still applied and should be strictly enforced. When the new licence regime came into operation, it would permit more players. Telkom urged that there should be a clear regulatory framework so that the market sector could commence rollout and do business properly instead of arguing about the interpretation of clauses. Protection must be provided for all. ICT costs would in due course fall due to economies of scale.

Presentation by Independent Communications Authority of South Africa (ICASA): Regulatory guidelines on wireless applications by Municipalities
Mr Z Masiza (Councillor, ICASA) referred to recent press articles and stated that the aim of all operators was to be able to select the best networks, to use multi-media devices, to move to realtime, and offer enhanced services. He stated that the presentations from CCT and UniNet had given an indication of what municipalities were already doing.  Clearly the future lay in e-government. ICASA would be failing in its duties if it failed to support and supply e-government.  All issues of new technology were designed with the ultimate aim of realising this, and its ambit would extend to paying accounts online, improved access to the disabled, tackling the digital divide, addressing 2010 imperatives and looking further into the future. Whilst he understood Telkom’s strict interpretation of the Act, unfortunately technology could not afford to wait for regulation as systems needed to be tested in preparation for 2010; and it was vital to be ready for handover by 2008 to FIFA.

The reality was that there was currently no access provided in certain areas to the internet.  However, the technology and the market forces were there already.  E-health, and E-voting were also an urgent issue, and since India had already introduced the latter, South Africa should be able to as well. 

In regard to UniNet, ICASA summarised the basis of their benefits, as against Telkom’s claim that UniNet was not entitled to provide a private telecommunications network. UniNet had believed that its Value Added Network Services (VANS) licence permitted it to provide the network. From February 2005 the Minister of Communications had announced that municipalities could lease spare infrastructure capacity to licensed telecommunications operators. Essentially the main area of dispute, when the matter was referred to ICASA, related to the fact that Knysna, being situated on either side of the lagoon, was not on “contiguous” land, despite the fact that its area of management extended to all areas. The question of access to the wireless spectrum also raised the question of the frequency to use, the possibility of interference and the ownership of the rights to the spectrum.

Mr M Mchunu (Manager, Frequency Management, ICASA) gave a brief explanation of the possibility of interference, and stated that the local municipalities were mostly seeking permission to operate within the 2.4 gHz band. There were currently no licence users in the 3.8 gHz band, and this was being investigated for wider operations. Re-use of the spectrum was another issue; for instance a spectrum licensed in Knysna could be re-used in Springbok. There was also a historical problem in that spectrums had traditionally been issued in blocks, with one band accommodating only seven operators. These issues would have to be examined and amendments possibly made before the ECA came into force. Interference could come from other users, which could include users of low-level equipment. ICASA attempted to limit the scope of use.

ICASA welcomed innovation and wished to see universal access and service.  The biggest problem arose in delays in rollout by the SMOs. Hence it was willing to look at other solutions. It believed that the Municipal determinations of 2004 had created a problem, and that although Telkom had referred to section 41 of the Telecommunications Act it had not taken the Municipal determinations into account.

Under the new ECA, municipalities would all be able to register and could compete in telecommunications on a commercial basis. ICASA would not be able to impose universal service obligations in respect of areas, and it might be that some municipalities would not be able to rollout to all areas.

There was a need to change the mindset of operators and ICASA. ICASA should not be engaged in technical and legalistic deliberations, but should be focussing on development and the need to meet urgent ICT needs. There were still some problems with “cherry-picking” and licence fees, with PTAs and others paying divergent fees. ICASA would not have any control over the application of facilities or municipal rights of way, although it could help to negotiate interconnectivity. There was also the question of whether telecommunications would be a core or subsidiary business of municipalities. Multi-sector regulation also still needed to be dealt with. Many municipalities had not made application for PTM licences and ICASA was not sure how best to encourage them to apply.

ICASA was obliged to ensure that there was no market failure, and although the Minister had made an announcement in May ICASA still needed to wait to hear how implementation should be done and how to fast-track wireless rollout.  The issue of 2010 had been raised, but ICASA believed that it was vital to look perhaps 30 years hence, to meet the vision of how municipalities should look and act at that time.

The Chairperson informed the Committee that ICASA would be called back to brief the Committee on the state of readiness to deal with the challenges of the ECA that would shortly be signed into force.

Presentation by the South African Call Centre Community (SACCCom) on job creation
Mr M Mfele (CEO, SACCCom) reported that SACCCom was an NGO founded in 2004 as the national coordinating body for the business process outsourcing industry (BPO), and was charged with national job and wealth creation. The stakeholders were foreign direct investors, corporate entities, including IT, electronic, broadcasting and telecommunications industries, and offshore employers. Business Process Outsourcing and Off-shoring (BPO&O) was a global activity that had a positive impact on employment and economic wealth creation. Service providers fell into eight main sub-sectors, including call centres and e-mail businesses, all of which used IT channels which could therefore provide services wherever there was access, at competitive prices. Developing countries had benefited hugely, and in India one million new jobs were forecast. BPO&O therefore had the potential to make significant contributions to ASGISA initiatives. dti had commissioned a study in 2002 which showed that there was rapid growth in the industry, with the potential to create 100 000 new jobs in South Africa over the next five years. Globally the industry would grow about 50 per annum over the next five years. There was potential to contribute R7.9 billion to the GDP by 2009, and this impact would be felt in both rural and urban areas.

The current costs of telecommunications, and the lack of competitive opportunities, were major hindrances, and this meant that South Africa ran the risk of being sidelined and therefore not being to attract the social and economic side benefits of increased employment, as well as accessing the opportunities for highly skilled labour trained at the expense of the service providers. ASGISA had identified BPO&O as one of the priority sectors. Strengths in the sector arose through the strong capabilities in insurance and the finance industries, the fact that English was a commonly used language, the key partnerships already existing in UK and USA and cultural affinity with them, and an attractive business environment. Already IBM and Dimension Data had signed new deals. Regrettably South Africa had not managed to attract investment from major European and American multinationals, in contrast with India, Philippines and Hungary, and one of the main disincentives had been cited as the high costs of telecommunications. Some contracts had been lost in the past few weeks due to uncompetitive pricing.

Challenges that therefore needed to be addressed were the high costs of telecommunications, the higher costs of operations than key competitors, challenges with the enabling regulations, difficulties of setting up new operations, the limited vendor landscape and an uncompetitive technical infrastructure. For instance, the cost of a 1000 seat BPO centre in South Africa was around R23 million per annum, and the cost of leasing a 2MB line around US$186 000 per annum, compared with US$72 000 per annum in India.  Most companies used a call per minute package, due to limitations of scale. South Africa had a higher labour cost because the skills demand outstripped the supply. South Africa also required investors to use more than one company to provide end-to-end solutions, making investment more risky.

Government and business had resolved to work together to try to find ideal solutions and to this end dti had consulted the President’s Big Business Working Group to work together over three years. Business Trust and SACCCom would also be involved. Over R100 million had been approved in funding. The start-up would focus on supporting the market, creating an enabling environment of incentives, developing the pool of competitive talent, supporting the industry to represent all key stakeholders and controlling quality.

SACCCom recommended that the cost of telecommunications must be reduced to contribute to greater competition. SACCCom had also noted the high cost of international bandwidth, stating that South African prices were higher than 11 other countries including middle-income developing countries. Telkom held a monopoly on access to undersea cables, and it was imperative that other operators be able to obtain access at wholesale rates and on the same terms and conditions as the monopoly-holder, in order to reduce bandwidth costs. There should be exploratory debates on the benefits of reduced bandwidth in order to formulate appropriate policies. A major overhaul of competition conditions would require some time and result in lost opportunities. Currently Telkom also only provided service up to points of presence in USA and Europe, which required South African entities then to enter further separate contracts with foreign domestic providers.  The cost of leasing international private circuits from Telkom was prohibitive.

Discussion
Ms D Smuts (DA) informed SACCCom that it was not necessary to have any debate on the economic implications of bandwidth.  The Portfolio Committee had already addressed this issue through the ECA, which would impose price control for wholesale and retail. The field of telecommunications had started to be liberalised some ten years ago, but a competitor was not yet “on the scene” and therefore the de facto monopoly holder had performed as would any other free market business.  There was therefore an urgent need to introduce regulatory powers. There was nothing to prevent municipalities in law from becoming fully-fledged Telcos. Ms Smuts commented that it was not for ICASA to decide what the core business of the municipalities was, since municipalities would of right be able to be registered for network service provision. Ms Smuts informed Telkom that she was surprised to hear of their reliance upon section 41 of the Telecommunications Act since effectively the contiguity constraints had been revoked, and municipalities, under the Ministerial directives, could re-sell PTN capacity. With regard to the local loop, the ECA Regulations would require listing of essential facilities.

Ms L Yengeni (ANC) was disappointed that no women had made the presentations and asked for some comment on gender and transformation issues.

Mr D Jarvis (UniNet) reported that 30% of UniNet was female black owned. The majority of management were coloured or black female.

Mr N Sooful (CCT) responded that the Head of e-Government was a woman. The department had not been permitted to employ full-time employees since 2001, and therefore the majority of CCT employees were contract workers. Six out of seven full time staff were black and one was a woman. Of the six, two were African and four coloured; two were women and four men. 95% of contractors were black, 30% women and 30% African. CCT looked actively to change its racial profile, and had targeted African women for its bursaries in the ICT sector. The programme targeting 130 youth had concentrated on previously disadvantaged and 60% of that intake was black. CCT held a strong philosophy of “growing technical skills” amongst women.

Mr M Mohlalonga (ANC) asked what types of jobs were available through call centres, and whether they were full-time, quality and sustainable. He asked how many more jobs were likely to be created through a decrease in costs.

SACCCom replied that the industry had already employed around 60 000 people, and SACCCom had positioned itself as the niche service provider for technical support, helpdesk, financial services and insurance service functions. IBM had recently created 1050 jobs for engineering technikon graduates, and the Durban project was also geared towards technikon graduates. The jobs were very sustainable and high quality. Where there had been redundancy, the majority of employees had been employed in other similar programmes within one month.

Mr Mohlalonga asked UniNet who owned the infrastructure, since the PTM licences belonged to the licence holder. He also asked how reliable and secure the networks were. He queried whether the security and quality would be reduced as more people were connected.

Mr Sooful (CCT) stated that the final process on networks had not been determined and there were various models under consideration.  It was likely that municipalities would own networks, and have one or more operators. In terms of speed and efficiency, CCT was not only looking to wireless but would be likely to use a combination, which in all respects would comply with legal requirements. 

Mr Jarvis (UniNet) replied that higher speeds were possible on the 5.4 gHz bands than with ADSL powerlines. Security was excellent, using military grade encryption. Wholesale access was still possible since UniNet encrypted the data, and not the mobile signal. All municipal traffic was automatically encrypted. In respect of costs, he pointed out that the municipalities would typically be able to offer free “basic services” such as limited internet access and access to information sites, but that companies and businesses could then subscribe to premium services.

Mr Mohlalonga noted that there had recently been cost reductions announced by Telkom, including reductions in ADSL lines, but he believed that this was too little, too late. He found Telkom’s absence of clear indications on cost reduction disappointing. He did not believe that Telkom had a strong argument in relying upon the Telecommunciations Act.

Mr S White (Telkom) reiterated that Telkom’s pricing would be reduced as the market opened and as the base of operations grew.  The reliance upon the Telecommunications Act was dealt with separately (below).

Mr A Gore (ID) also referred to Telkom’s reliance upon the Telecommunications Act. He asked why ICASA had not taken action to resolve the situation, and a precise indication of how ICASA viewed Telkom’s arguments.

Ms L Cassie (ICASA) responded that Telkom had contented that the Ministerial determination did not alter section 41(2) of the Telecommunications Act but widened the market. Currently PTNs were entitled to cede or assign their licences, which had enabled VANS to obtain facilities from others. The Knysna municipality held a PTN licence, UniNet a VANS license and Telkom a PSTN licence. ICASA believed that the PTN licence, in terms of the Ministerial determination, could be sublet, and the VANS licence holder (UniNet) could obtain facilities from the PTN licensee. ICASA did not believe that there had been a contravention of the Telecommunications Act.

Mr J Tlokana (Telkom) stated that Telkom believed that this was an area of omission, and that the Ministerial determinations had not enabled the PTNs to sublet or resell, since it had not altered the provisions of section 41(2)(a) of the Telecommunications Act. Telkom believed that VANS could not obtain facilities from licence operators other than PSTN. Mr J Smit (Manager, Spectrum Strategy, Telkom) added that Telkom alleged that the frequency spectrum was assigned to it in 1992 to rollout in rural areas, and that when ICASA introduced the use of wireless LAN there were regulations to ensure integrity of the spectrum. Telkom was experiencing interference to its existing services. It had therefore requested ICASA to take action, as it believed that operation of the wireless hotspots was in contravention of the regulations.

Mr Gore also requested clarity from ICASA on the 2.4 and 5.8 spectrums. He noted that no reference had been made to the 3.5 spectrum, which he understood had been taken up by Telkom and some other players. He asked if municipalities would be given the opportunity to apply in this spectrum, and whether any had done so.

Mr D Jarvis (UniNet) replied that the 2.4 spectrum should be used indoors. UniNet complied fully with the 100 milliwat requirements for the Wimax fixed lines, but it also required 300 hotspots, of which the majority were done on the 5.4 spectrum.

CCT replied that they were still busy with the process, as the ICASA regulations required them to specify the equipment used before applying for the licence; CCT was still in the process of tendering on equipment. With regard to the comment earlier on “cherry picking”, he stated that there were four municipal networks, all of which were based in areas which the commercial operators had refused to service as they considered them non-viable - for instance, no ADSL lines were available from Telkom in certain areas. He considered that local government was the one institution that would not indulge in “cherry-picking”.  Mr R Naidoo (Telecoms Advisor, CCT) added that the 2.4 or 5.8 spectrum was not really an issue, and neither was congestion. Frequency was likely to become an issue only when there were many vendors.

Mr M Mchunu (ICASA) replied that there were no municipal licenses on the 3.5 band, as this had been reserved for Telkom, Sentech and other end users. There might be provision for space on this band. However, applications had been received in the 2.6 band, and Tshwane Municipality was currently testing in this spectrum.

Mr R Pieterse (ANC) commented that the call centres provided substantial employment to youth and the disabled, yet were located in places that were not easy for communities to access. He asked why the jobs had not been taken to the people. Safety concerns, particularly for those working shifts, would prevent many from taking jobs at those call centres.  He further enquired whether the profits from those call centres would leave South Africa or be invested in the country.

Mr Mfele (SACCCom) responded that existing infrastructure was under-utilised in most cities and therefore most operators found it convenient and cheap to utilise such infrastructure at present. However, in time there would be partnerships between local municipalities and operators to take the jobs to the location of the municipal offices. In regard to profits he stated that if the operators were registered overseas the profits would be sent overseas, although tax would be paid in South Africa. A major driver of the projects was the use of SMMEs within call centres, so that most of the operations would move to local operations.

Mr Pieterse commented that Telkom was clearly driving a hard bargain in respect of its rates and that there should be stringent regulations looking beyond 2010, and an equal enforcement of rules.

Mr Pieterse commented that the UniNet models were interesting, but he enquired about areas such as Uniondale, and whether these could be “pooled” under other district municipalities.

Mr Soofal (CCT) indicated that the Municipal Services Act did permit one municipality to provide services to others. There was a local government ICT Forum that shared experiences. There was also participation with the Provincial Government and a broad base of telecommunications infrastructure was being developed across the Province, with the prime aim to connect all clinics and primary healthcare institutions.

Mr K Khumalo (ANC) welcomed the initiatives in job creation. He referred to obligation of municipalities to give service delivery and asked which of the residents in Knysna would benefit from the systems, and whether all imperatives were being covered. He asked whether economies of scale had an impact and whether, for instance, smaller municipalities would obtain a return on their investment. He commented that he would like to see laptop computers in use in informal settlements.

The Chairperson stated that the Committee would undertake investigations in local areas and further information on coverage and access by all communities could no doubt be obtained then.

Mr D Jarvis replied that the Municipality held a government mandate to facilitate local economic development and that this would be done equitably within the municipal boundaries, be they formal or informal sectors, rural or urban. He believed it was unrealistic to expect that laptops should be found in informal settlements, but devices costing under R800 would allow access to cheap voicemail and web services.

Mr Khumalo asked Telkom if they had considered the Ministerial determinations in conjunction with section 21 of the Telecommunications Act. He asked if there was any reason to stand in the way of municipalities if they offered opportunities for job creation, service delivery and commercial imperatives.

Ms Cassie (ICASA) commented that the issue raised dealt with contiguity of land and that Telkom regarded non-contiguous land as requiring PSTN licences. Ownership of municipal land was a difficult issue because public roads intersected many properties. ICASA regarded both land and roads as falling under the ownership of an arm of government and therefore would regard such intersected land as contiguous. If municipalities met the requirements as laid down in the Act, in regard to land and other issues, it would be able to register within the 2.4 to 5.8 spectrum.

Telkom did not hold the same view on contiguity as ICASA. Mr Tlokana stated that Telkom believed that wireless technical waves could not be restricted only to the land actually held by the Municipality, and therefore would cut across public, as opposed to municipal property, thus not meeting the requirements of the Act.

Mr V Gore asked ICASA how it regarded the illegal hotspots that were opening and causing interference, and whether these were being closed. He asked how many illegal wireless operators had been closed.

The Chairperson commented that these issues could be addressed during ICASA’s later presentation.

Mr D Jarvis commented that unlicensed operators and interference should become a non-issue in a properly regulated market. The industry would prefer to be self-regulated, with a properly empowered Regulator to police scarce resources. Standard practices used in the USA and other countries had ensured proper regulation that gave high quality service without interfering with existing telecommunications.

Mr Gore asked SACCCom how many deals had been lost to other providers due to the high costs of telecommunications in South Africa, whether it was possible to name the clients and which countries they had opted to use.

SACCCom undertook to provide a written response to Mr Gore’s question.

At this point the Chairman announced that there was no further time, but that any questions remaining unanswered could be addressed in writing.

The Chairman introduced the Deputy Minister.

Address by the Deputy Minister of Communications
The Hon. Deputy Minister Padayachie commented that the idea of laptops in all informal settlements was currently not realistic but should not be unthinkable for the future as the Ministry’s and Department’s assault on costs should include the costs of equipment. He was pleased to hear of the initiatives and was encouraged to see the levels of creativity as a consequence of the innovative legislation. The Cape Town and Knysna municipalities had produced excellent results, echoed also in other municipalities. The establishment of SACCCom was to be welcomed and government was committed to promoting BPO initiatives and industry in a designated priority area.

The Ministry and Department had taken the initiative in a number of areas to address the issue of costs, including reforming legislation, promulgating regulations for increased competition, and transforming the industry. The ECA would come into operation very soon and there should not be reliance upon the Telecommunications Act. Notwithstanding all efforts, South Africa still found itself faced with vastly higher telecommunications costs. If the reduction in costs would only be achieved with time, then the question was where to put the efforts to achieve reduction in an accelerated way. The Regulator had to fulfil a central role, and conditions for regulation had been opened up. Change would create opportunities, and as the business sector orientated itself with strategic opportunities, and the State expanded its role, the Regulator must be competent to do its job. ICASA must therefore be resourced, competent, and able to perform the functions asked of it.

The meeting adjourned.