ICASA’s Readiness for Electronic Communications Act

COMMUNICATIONS PORTFOLIO COMMITTEE
20 June 2006
ICASA’S READINESS FOR ELECTRONIC COMMUNICATIONS ACT

Acting Chairperson: Mr G Oliphant (ANC)

Documents handed out:
ICASA presentation on readiness to deal with provisions of Electronic Communications Act (ECA)
ICASA Amendment Act [A3-2006] and Electronic Communications Act [A63-2005] in operation 19 July 2006

SUMMARY
The ICASA Chairperson made a presentation on the impact of the Electronic Communications Act, and described the implementation strategies planned by ICASA. There would be three phases, to be completed respectively within 30 days, 24 months and 36 months of the Act coming into operation. Public awareness campaigns would be held at all phases. Other operations and projects would run concurrently and some of these were listed. Mr Mashile tabled lists of the numbers and scope of licences that were due for conversion. He stated that additional funding would be required, since the conversion processes had not been catered for in the MTEF. It was estimated that a further R57.5 million would be required. Challenges facing ICASA included the financial, human and capital resource requirements listed, the high staff turnover and the fact that ICASA operated in a highly litigious environment. ICASA summarised that the additional funding was required so that it could realise its policy objectives and successful implementation of the ECA. A meeting with the Minister would be held shortly to discuss the requirements further. Members raised queries on the timing of the declaration of essential services and addressing the high costs, the high staff turnover and the media reports on the organisation’s staffing difficulties, exit reports from departing staff, pricing issues and the challenges that had been faced by the Under-Serviced Areas licences. Progress on E-rates for schools, the 800 Spectrum, Digital TV and the World Cup were raised. It was agreed that the Acting Chairperson would, as a matter of urgency, take steps to have the appointment of the retiring ICASA Councillors extended for a further 45 days.

The Deputy Minister addressed the meeting. He noted that ICASA was facing challenges externally and internally and stated that any solutions would need to address both short and long term issues. It was clear that ICASA needed support and time to address the problems properly.

The Committee approved the programme for the third quarter, the minutes of meetings from beginning of March to 9 June, the Annual Report for the period January to March 2006, and the Business Plan and Budget of the Committee for 2006-2008.

MINUTES
Mr Paris Mashile (Chair, ICASA) reported that ICASA welcomed the Electronic Communications Act (ECA) as well as the ICASA Amendment Bill. The most fundamental impact of these pieces of legislation would be the repeal of the Telecommunications Act, the amendment of the Broadcasting Act, convergence of the processes, replacement of existing licensing arrangements with a single licensing regime and enhancement of the powers and dispute settlement abilities of the Regulator. The objectives of ECA Act included the delivery of affordable services, encouraging investment, encouraging the development of a competitive sector, fostering a range of broadcasting that responded to the needs of the communities, bridging the digital divide and facilitating convergence. The ECA would impact upon ICASA in the fields of research, enforcement, promotion of competition, convergence license drafting, and effective communication with consumers.

There would be a phased implementation process, prioritising key policy and organisational imperatives, adopting a strategic approach, attempting to achieve seamless transition and undertaking parallel processes to achieve the objectives of the ECA. Certain processes needed to be achieved within 30 days of the Act coming into force. Mr Mashile listed these issues, which included auditing of licences, identification of exempt services, mapping the licence process, establishing the Complaints and Compliance Committee. He stated that ICASA had all matters either finalised or in hand. Public awareness campaigns had been held and a stakeholder meeting would be held on 28 June. The second phase required compliance with further listed issues within 24 months, and this included matters such as the frequency spectrum band planning review, review of policy, audit of existing position papers, notices and regulations and realignment of procedures. Once again, there would be public consultation and a public awareness campaign. The third phase, requiring compliance within 36 months, would include redrafting position papers, notices and regulations, and a first review of the list of communication facilities.

The current applications pending at the time the Act came into force would be considered submitted under the new ECA. Other considerations and planned activities would include mobile pricing, the Telkom and Swiftnet amendment processes, broadcasting ownership, community television ITA, and broadcasting issues. This assumed that the necessary resource allocations were made and that there had been organisational redesign and restructuring.

The licences due for conversion were listed, in the categories of broadcasting, television, authorisations under the Broadcasting Act, Broadcasting Signal Distribution, and different categories of network, multimedia, mobile and wireless licences. There were a number of licences due for conversion also in the engineering and technology division.

Mr Mashile advised that additional funding would be required. The budget for 2006/07 had catered for some of the issues that had to be attended to before enactment of the ECA, but the conversion process required additional funding that had not bee included in the MTEF. It was estimated that a further R57.5 million would be required, broken down into R4 million for support functions, R4.8 million for the Complaints and Compliance Committee, R11.8 million for licences, R21.9 for postal regulations and R15 million on capital expenditure. This was an estimate, likely to change as the full financial impact of the restructuring became apparent.

Challenges presently facing ICASA included the financial, human and capital resource requirements listed. In addition there was a high staff turnover as ICASA was unable to retain skilled staff. The competitive obligations of ICASA, together with the fact that it already operated in a very litigious environment, were likely to pose further challenges.

ICASA therefore requested additional funding in order to realise its policy objectives and successful implementation of the ECA. A meeting with the Minister would be held shortly to discuss the requirements further.

Discussion
Ms D Smuts (DA) commented that one of the most urgent matters was the reduction in the cost of telecommunications. ICASA would play a critical role in the expanded economic regulation. She noted that ICASA would need to list essential services, but irrespective of those it must also declare the local loops, sub loops and submarine cables as essential services. This seemed to be a very pressing issue because it attracted significant market power. Ms Smuts was concerned that the review of the list of communications facilities appeared only in the third phase, and she asked if it would really take three years to engage with this listing. She enquired where economic regulation fell in the list of priorities, and pointed out that once essential services had been declared, the significant market power could also be declared.

Mr Mashile replied that the matters mentioned were indeed urgent and important and cost reduction was a factor to be considered by ICASA. Essential services had been considered as a “one-stop-shop” and where there was no competition the price must be regulated to avoid monopolistic practices. The essential services could be used as the basis for other services to latch to, and thus the submarine cables must be included. Prices must be cost oriented in that there should be a fair return on whatever investment had been made. ICASA was aware that broadband was under-utilised owing to the high costs, and that reduction of costs would lead to resuscitation, which in turn would impact on other areas in the economy. ICASA aimed to attract other investment and the cost issues would certainly be addressed. He informed the Committee that the three phases would run concurrently and that multiple teams would be working on the issues, aiming to finalise all matters within the three-year period. There was a lot of preparatory work to be done in addressing significant players, market studies, unbundling of the local loop, and interconnectivity but ICASA would intervene in disputes.

Ms Smuts asked why reference had been made to two Councillors for postal regulation, as she believed one might be sufficient.

Mr Mashile confirmed that the document referred to the two additional Councillors to be appointed to the Council. There was also a need for additional staff and possibly advisors as ICASA aimed to build a team that had complementary skills. The amounts could be reconfigured across various portfolios. He commented that there were no dominant players on the Council, that it worked in a very collegial way, and outside influences were minimised.

Ms Smuts understood that ICASA had recently lost four General Managers, which must have reduced its capacity, and that three experienced Councillors were due to retire at the end of June. She asked whether exit reports were available across all levels, as she believed that copies of those reports would be useful to the Committee in considering ICASA’s position.

The Acting Chairperson pointed out that the Committee had taken a decision not to discuss media reports about ICASA, but he noted Ms Smuts’ concerns and stated that they did relate to the state of readiness of ICASA.

Mr Mashile replied that ICASA operated in a market economy and skilled people sold their services to the highest bidder. It was true that ICASA did have some difficulty in retaining skilled staff once they had been trained, but this could be due to salary, environment, personal development or other issues. ICASA had now decided to appoint a General Manager, Human Resources, as lack of expertise in this area had been a hindrance in the past. Once again, ICASA would be competing with other salaries, but would, during the last week of June, be holding interviews for the positions of Chief Financial Officer, General Manager-Telecommunications, and General Manager-Legal.

In regard to the exit reports, Mr Mashile stated that these were designed to ensure that ICASA learnt and was able to improve its processes. The exit reports had been collated and given over for analysis to an independent person, who would make recommendations on improvement of processes and systems. These would be made available to the Committee. In answer to the Chairperson’s questions on timeframes, Mr Mashile confirmed that he would also find out when the analysis was likely to be available and advise the Committee.

Mr R Pieterse (ANC) thanked the Councillors for the work they had done. He wondered what the Committee would gain from the exit reports, as he personally did not believe it should become involved in the running of ICASA. He asked whether the problem of high turnover was indeed related to funding, or if there were other issues. He enquired how ICASA could position itself as the preferred place of employment in the sector. He pointed out that ICASA must be bold enough to stand up to challenges and ask the Committee for assistance if it did require it.

Mr Mashile commented that funding was not the sole issue causing people to resign and the exit reports would specify in each case why the person had decided to leave, and would provide some valuable lessons, rather than working on assumptions.

Mr Pieterse perceived ICASA as unwilling to stand up to Telkom on the pricing issues, although he noted the comments on mobile pricing.

Mr Mashile commented that ICASA had been inundated with queries on the pricing. It had a mandate to reduce costs and parts of its attempts to do so included the mobile pricing hearings. ICASA had also investigated handset subsidies. ICASA would prefer competition to be the driving force rather than regulation, because it did not wish to constrain the provision of services, but rather to ensure that consumers received value for money. The existence of competitors meant that prices would be reduced and the ECA provided precisely for that. ICASA would have to monitor the market. ICASA would like to see separation of the wholesale and retail network services. Interconnectivity was a major cost issue, but served as a baseline and must be the subject of a commercial agreement, although ICASA would have to step in if there was danger of market failure. Mobile connectivity was another issue which could be a catalyst for competition.

Mr Pieterse asked whether sufficient research had been done in phase one of implementation so that mistakes were not repeated in the later phases. He was worried that ICASA might be faced with further challenges. He asked if ICASA had informed the Minister of the challenges and potential difficulties, and he asked specifically if there should not be more attention paid to the Under-Serviced Area Licences (USALs) to avoid repeating the same mistakes again.

Mr Mashile responded that USALs were designed to fulfil an important mandate where the market forces had failed to provide services. ICASA also had a duty to build up SMMEs and give opportunities to the previously disadvantaged; USALs were one method of doing so. However, they operated in a very competitive environment and needed to be innovative in order to attract a niche market. USALs could succeed by reducing the cost of provision of infrastructure of services, such as using a common database, or giving coverage on the broadcasting spectrum. It was impossible to determine, at the start of a project, who the successful parties would be. ICASA did investigate how it could assist the USALs to ensure that the dominant players did not override them.

Councillor M Mohlala (ICASA) added that after the licensing process, ICASA would gather the information, analyse the successes or difficulties, and forward this to the Minister for her information. A workshop would be held the following Friday, which would also give a better indication to the Minister of the way forward.

Mr Kwolwane (ANC) asked when it was likely that the staff problems, particularly the numbers of acting staff, would be concluded. In regard to the exit reports, he enquired whether the Committee required individual reports or overall conclusions.

Mr Mashile replied that the current situation was a step along the process of attempting to stabilise ICASA. He reiterated that ICASA was finalising the appointment of the General Manager for Human Resources, and that interviews would be held the following week for three managerial appointments

Mr Kwolwane asked what had been achieved in e-rates for schools.

Mr S Mamaragane (Acting General Manager, Telecommunications, ICASA) responded that the e-rate had followed the Minister’s determination of 2004, and involved the Departments of Education, Telkom and Internet Service Providers. The necessary regulations had been published in 2005 by ICASA. These required the Department of Education to act as funder. Workshops had been scheduled with that Department and Telkom for August, and there would be nationwide publicity campaign. ICASA had done what it needed to do, and it was now in the hands of other role-players.

Mr Kwolwane proposed that the Portfolio Committee should engage in the matter at some future date, and that it should be flagged to ensure that it was not lost.

Mr Kwolwane asked if the Public Service Commission had been involved in any issues, and he enquired what stage the discussions with the Department of Communications on funding had reached.

 Mr K Khumalo (ANC) expressed his concern about the Committee’s finding, only two weeks after hearing a presentation from ICASA, that the CFO and the CEO had been suspended, although there had been no hint of the problems at the meeting. He was aware that some of the problems might have arisen with the departure of the previous staff. He was also aware that the ICASA Amendment Bill had pitted some Councillors against others. Whilst problems were not uncommon in an organisation of ICASA’s size, he would like to know if ICASA considered itself competent to perform all its tasks. He queried in particular why e-rates had not been implemented some time ago, the progress in sharing the Channel 65 and 800 Spectrum amongst new providers, the progress on digital TV and the state of preparedness for the 2010 World Cup. He also queried how far implementation of the mobile number possibilities had progressed. Finally he asked what the implications were of so many Acting staff appointments on the proper implementation of the PFMA. He felt overall that there should be a proper media strategy to avoid the type of sensationalism that had recently arisen, and to avoid individual views of Councillors being expressed.

Mr L Mtimde (Councillor, ICASA) stated that the list of projects was not a closed list, and E-rate and digital broadcasting were ongoing. There was also ongoing work in regard to the 800 Spectrum. He stated that ICASA respected and were open with the Committee. The reports in the press had referred to the usual differences of opinion that one would find in any Council, and differing views were to be expected prior to decisions being taken. In fact one should measure ICASA’s performance on the final outcomes. The Chair spoke as the representative of ICASA, not in a personal capacity. All Councillors recognised and acted by their responsibilities. At the time of appearing before the Committee the problems that led to the suspensions had not been fully realised and were not in the public domain. ICASA was fully equipped to perform all its tasks, provided that the question of the additional funding was settled. Without that it could not do so.

The Acting Chairperson asked ICASA to elaborate a little more on the 800 Spectrum.

Mr Mashile replied that a hearing had been held the previous month, at which a number of issues were raised by those affected. The submissions had been analysed and a finding would be available within the next few weeks, based on the public process.

Ms N Bulbulia (Councillor, ICASA) reported that ICASA was optimistic that mobile number facilities could probably be introduced this year. A media briefing would take place in the week. There had been challenges but ICASA was on track to deliver. ICASA looked forward to the challenging, yet opportune times ahead. ICASA saw the integration of the postal services and the ECA as great opportunities with tremendous potential.
It would look closely at economies of the sector, and was working to be the preferred institution for employment. Exit interviews were being held for all people leaving and handover reports were required.
 
Mr Mashile added that ICASA operated largely via Committees. Managers and staff would investigate information gathered in order to fulfil strategic objectives, ensuring that they matched policy and were within the law. Councillors also conducted research to compare their work with comparable other countries. General Managers ensured that the Committee had the necessary skills and training to give significant input. The role of the CEO involved administration, human resources and audit. The problems giving rise to the suspensions had been referred to independent outsiders, and an external presiding officer was currently conducting the hearing. There had been delays but ICASA was determined to observe all proper processes.

Mr Mashile, speaking to the question of Digital TV, reported that the ECA impelled ICASA to utilise this scarce resource effectively and efficiently. There was no doubt that moving to digital would loosen up the spectrum because it was possible then to use multiplex techniques to have – for example – six operators to one spectrum. However, the digital route would involve a period of transition, and it might be necessary to have converters from digital to analogue, unless it would be possible to find economies of scale. ICASA could not afford to sacrifice public broadcasting if people could not afford the service.

In regard to the World Cup, the digitalisation process would have to be understood within the broad context of the Department. One of the ongoing projects related to digitalisation. A final date of 2015 had been set and this would include the 2010 digitalisation.

The Acting Chairperson reported that there would be a further meeting with stakeholders during the next quarter to assess this particular state of readiness.

Mr Pieterse reported that the Committee had confidence in the integrity of Councillors and asked for assurance that if the funding was provided, then ICASA would be able to implement the ECA fully.

Ms Smuts remained concerned that the Chair had publicly expressed the view that ICASA could not exercise control over pricing. She was also concerned at reports that several good candidates were not prepared to make themselves available for nomination to the Council. She felt that the exit reports were still important, and that she would like to see specific rather than generic comments. She wondered if exiting Councillors would also be prepared to give exit reports directly to the Committee. Finally she noted that exiting Councillors were permitted, in terms of the ICASA Act, to extend their terms of office for 45 days and whilst she was not aware whether the Councillors would be available, she suggested that they be asked to stay on.

The Acting Chairperson noted that the Committee had agreed to get the exit information as a “package” from the independent panel. He suggested that the Committee discuss with the Chair of ICASA the way in which it could be utilised. The purpose was not to sensationalize, but to identify possible areas for improvement.

Mr Khumalo remained concerned that matters must be driven forward. He commented that it would be unfortunate if Councillors had any sense that they and their work were not fully appreciated. He stressed that the Porfolio Committee would render assistance where asked.

Mr M Mohlalonga (ANC) stated that he would prefer to receive the independent analyst’s report on the exit reports, not individual reports. He stated, in regard to exit reports by Councillors, that those Councillors were appointed by Parliament, and although this system had not applied before there was no reason why the reports could not be requested now. He agreed that a media strategy was important and should be developed. If Councillors were willing to speak to the Press, they should equally be willing to speak to the Committee. The media reports suggested that there was not a unified front from the Council and he enquired whether there were other crises which the Committee should be aware of.

Ms L Yengeni (ANC) commented that she hoped that the Council would find a unified way forward.

The Acting Chairperson did not wish to engage further on the question of the media reports as this fell outside the stated business of the Committee for the day. He suggested that if necessary another meeting could be set up to discuss these issues.

Mr Mashile stated he would welcome the opportunity for further elaboration. He stressed that although the Councillors had differences of opinion, these were not personalised, there was a professional approach, and such differences were not unique to ICASA.

He summarised that in respect of the exit reports, the Committee should find a way forward to obtain reports from exiting Councillors and the matter should be dealt with holistically. The filling of vacancies would also be monitored. The lessons learned from the USALs should be noted and used to ascertain the way forward. The Committee recognised the synergistic relationships between policy, law and the Regulator. ICASA fulfilled responsibilities also under the World Trade Organisation agreements. It had to ensure that there was competitive and universal access, that resources were effectively allocated and regulated independently. ICASA fully recognised that if it undertook to do something it must account and prove that it had acted properly in terms of the funding received for that undertaking. He agreed that it would be extremely helpful to obtain the 45-day extension of Councillors’ appointments.

The Acting Chairperson indicated that the extension had not been invoked before, and that presumably the President, who made the appointments, would need to appoint for the extended period. Members discussed the issue briefly and it was resolved that the Acting Chairperson be mandated to expedite this matter to have the appointments made, but that nothing further could be done at present in terms of the new appointments.

Mr Mtimde expressed his appreciation to the Portfolio Committee for the opportunity to serve on the Council.

Address by Deputy Minister of Communications
The Honourable Deputy Minister of Communications, Mr Roy Padayachie, stated that he was pleased with the ICASA reports which indicated that it had planned how to cope with the transition. He believed that there was good understanding of its huge responsibility and sound plans for execution and delivery. He was aware that the media had depicted ICASA as on the brink of institutional collapse. It was true that ICASA was currently grappling with issues arising from the pending legislation which would in the short term create an environment of uncertainty, where operators and existing licencees were concerned about their future. The external factors of change and development had clashed with internal factors. In all discussions on the legislation and the ICASA Amendment Bill the executive and legislative branches had been aware that they must safeguard the institutional integrity of Chapter 9 Institutions. It was clear that support was needed and must be found. Difficulties had been precipitated by a combination of rapid change, departure of Councillors and staff needs, which indicated that they were temporal. There might well also be a need, in the longer term, to have the institution configured differently. Plans for ICASA would have to address both short and long term issues. In addition the Chapter 9 Review process and the discussions on the Constitutional amendments would also go some way to finding support so that the leadership of ICASA could be given the necessary time and space to address their difficulties.

Approval of Committee Programme for Third Quarter
The draft programme had been circulated to members. The Acting Chair pointed out that it made provision for oversight visits to Limpopo and Gauteng and other visits could possibly be included too. ICASA would however take precedence. It was resolved that the programme be adopted.

Approval of Committee Annual Report for period January to March 2006.
The Acting Chairperson referred to the pack of reports circulated amongst members. It was resolved that they be approved for sending to Parliament.

Approval of Committee Minutes
The Minutes had been circulated to members. The following Minutes were approved and adopted:
- 12 May – subject to substitution of “Acting Chair” for “Chair”
- 17 May – subject to correction of the reference to the Competition Commission, to the election of the panel and deletion of the reference to the PFMA.
- 18 May
- 23 May – with Ms Smuts abstaining, as she had not received the Minute
- 9 June – Ms Smuts requested amplification of the reference to those attending the meeting on behalf of the Cape Town City Council. Ms Smuts further suggested an amendment to the note of the discussions on section 41 expressing the views of Telkom. She further commented that the closing remarks by the Deputy Minister were given great prominence, perhaps at the expense of the main issues discussed. Mr Khumalo stated that the Minute did not seek to put emphasis on any points and he considered that they recorded accurately what was said. The Committee in fact took no decisions. The Chairperson agreed with this view. Ms Smuts abstained, but the remainder of the Committee approved the Minutes.
- 7 March
- 8 March
- 15 March

Approval of the Business Plan 2006 to 2008 and Budget for Committee
The Acting Chairperson announced that a budget of R600 thousand had been set but an additional figure of R300 thousand had now been inserted, as this was the figure spent during the previous year in obtaining legal expertise on the Electronic Communications Act. The budget and business plan were approved.

The meeting adjourned.