Telecommunications Amendment Bill: hearings

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
26 September 2001
TELECOMMUNICATIONS AMENDMENT BILL : PUBLIC HEARINGS

Chairperson : Mr N Kekana

Relevant Documents:
 

Telecommunications Amendment Bill [B65-2001]
Cell C Powerpoint Presentation
Cell C Submission
American Chamber of Commerce in South Africa Submission
Internet Solutions submission
Orbicom submission
Vodacom submission
South African Communications Forum submission

SUMMARY

South African Communications Forum, Internet Solutions and Orbicom emphasised the importance of allocating sufficient resources to the Regulator. They all agreed on the need to improve its capacity.

MINUTES
Vodacom Submission
Mr Ntembu, Managing Director: Vodacom South Africa, addressed the Committee briefly on key issues applicable to the Bill such as market globalization, fees and commitments as well as the question of fixed normal tariffs and services. He appealed to the Committee to give due cognisance to the nature and type of business provided by service providers and that the aspect of commercial reasonableness be considered. The issue of process and principle of fairness were also mentioned.

Mr Tom Beale, spokesperson for Vodacom, spoke at length on these key issues:
The way forward
Amendment to S37: It was emphasized that the validity of this section was fully supported and that Vodacom had the necessary infrastructure suited to fulfil the needs of this section, additionally that Vodacom and MTN had both applied for licences respectively.

1800 MHZ and 30 Licences: Amendment to S30(A) and S30(B)
This clause provides for the creation of a radio frequency spectrum and 30 licences to each of the two fixed operators and three mobile operators. Mr Beale suggested that the clause be amended to facilitate management by a normal frequency plan.

Mobile Markets
The provisions of S32 and S37(d) were referred to simultaneously. It was requested that Parliament not retreat from self-provision and that the element of liberalisation not be eliminated.

Managed Liberalization
The concept of reselling of facilities had been discussed in brief.

Views on "Fixed Mobile"
Concerns were raised regarding the current definition and the fact that it lacked resolve. To eradicate the latter, it was recommended that the Service Providers’ own definition be referred to. Additionally that technology needed to be provided and aimed at the various under-serviced areas.

Criticism was also levelled against the language and terminology used in the current definition, noting in particular that the language expressly suggested that it excluded an SMME licence.

Dissatisfaction regarding Chapter 9 of the Bill was also raised supported by the argument that this particular chapter afforded special rights to fixed line operators.

Managed Globalisation
In dealing with this aspect, reference was made to S32(A) of the Bill. The view was expressed that competition was welcomed and that Sentech was fully supported in their initiative.

The definition of "carrier of carriers" was also discussed and defined in lay-mans terms to mean "an online service provider". The issue surrounding mobile operators having their own pre-selection carrier was also posed.

Portability
Full support was given for this aspect.

SMMEs
Strong support in aid of this initiative was emphasised. To ensure the effectiveness of this Bill, it was suggested that the amendments to S34(B) and S45 in the Bill be reviewed.

Concerns regarding licensing fees were raised and recommendations were made that PTOs also be accepted. Further, that the definition relating to "annual turnover" be extended to include licence turnover.

Services
It was stated that the utilization of existing services would prevail provided that fees and costs were commercially feasible.

Processes
Section 35(A) relating to alternative licencing methods was referred to in the discussion of this topic. Although supportive of the purpose and enactment of this section, it was recommended that the Minister consult the Board and that cognisance be given to the advice provided by the Board. Thereafter, a report should be forwarded to Parliament and an instructional capacity building plan be put into action.

Brief reference was made to S29 emphasizing the notion that public interest is to be serviced by public hearings.

Discussion
Ms N. Mtsweni (ANC) asked how competition and reselling of facilities would affect various service providers.

Mr Beale in answering this question referred to S32(A)(8) of the Bill. The following example was used to best illustrate his answer: "If SNO gets facilities from Telkom, Telkom could well resell it to the customer. If, however, Telkom were licenced they would prefer to sell themselves. We would want to assist Telkom in achieving this goal."

Ms N. Mtsweni (ANC) asked whether the introduction of Cell C would afford the ordinary consumer cheaper rates and tariffs?

Mr Ntembu replied that in terms of their licence, rates could be increased to facilitate the rise in the consumer price index. If, however, this did not take place within a one year period, it could automatically be rolled over to the next year. It was noted that to date Vodacom has never rolled over or chosen to exercise this option.

The Managing Director explained that increases were introduced that afforded the consumer an option/choice of either the current regime or per the second billing. To substantiate the cost-effective tariffs provided by Vodacom, Mr Ntembu said that in the past year only two packages have been increased: the Talk 500 package which has increased by 7.5% and the Frequent Talker package by 7.5%.

Regarding prepaid services, voice-call tariffs would not be increased making telephoning affordable. In addition Vodacom intended launching two new packages. The Managing Director emphasised to the Committee that in the past seven years tariffs have decreased.

The Chair commented on that the weakness of every regime was that customers were not aware of the various packages provided by service providers and that customer education needed to be addressed. This should be the central focus of all cellular networks. Customers needed to be assured that they were getting value for money and therefore a relationship needed to be established between the quality of service provided and tariff increases.

Mr R. Pieterse (ANC) asked if there had been discussions between Vodacom and other cellular operators regarding price increases. Secondly, regarding rural areas and under-serviced areas - now that Telkom and SNO had been afforded this opportunity – did Vodacom still see it as a challenge on their market?

Mr Ntembu replied that rate increases were not discussed with other cellular networks. On the issue of fixed mobile, Vodacom was assured of specific under-serviced areas.

The Chair asked about the extent of research done on fixed mobiles and the impact on both Vodacom and Telkom operators.

Mr Ntembu replied that no comprehensive research had been conducted to date and that the topic would be revisited at a later stage.

Ms S. Vos (IFP) asked if the Bill should be amended to invoke character competition and whether or not Vodacom possessed the necessary infrastructure and technology to accommodate one selection and character selection for mobile operators.

Mr Beale suggested that a feasibility study on technical capacity needed to be conducted first before answering this question.

Cape Information Technology Initiative (CITI)
CITI is an independent, not-for-profit, development agency supporting the growth of the IT cluster of businesses in the Western Cape. One of its aims is to boost bandwidth access. Mr Peter Franklin, representative of CITI, raised concern regarding voice-over IP’s. It was proposed that one bandwidth be granted to at least one non-governmental organization like CITI to enable effective linkage.

Discussion
Ms Vos asked if CITI would assist in allowing small businesses to set up websites.

Mr Franklin replied that this would not be possible as CITI focused on providing services to Information Technology companies.

The Chair enquired why CITI referred to itself as a non-governmental organization.

Mr Franklin replied that it was a S21 company - not for gain - and that services provided by CITI included shared services, shared receptionists and continuous online access to small entrepreneurs.

The Chair expressed his concern regarding the reliability of non-governmental organizations in relation to funding. He urged Mr Franklin to submit a written proposal to the committee to outline CITI’s activities.

Ms N. Mtsweni (ANC) asked for comments on uniformity and differentiation of tariffs amongst service providers.

The Chairperson of CITI, Mr Hanekom, replied that tariffs converge except when one service provider could ask a higher tariff than another.

Mr Kekana commented that the impact of these policies on SMMEs need to be addressed.

Cell C submission
Dr P Duran spoke of the problem with the use and understanding of the term "fixed mobile" and noted that it does not denote a service but rather a means of connection.

Dr Duran took issue with section 36(b) of the Bill, and suggested it be amended so as to include a reference to mobile communications at the premises of the customer.

Dr Duran proceeded to highlight various concerns by way of conclusion. He mentioned that the aim of was to bridge the digital divide, decrease the risk of unnecessary litigation arising from ambiguous provisions, the encouragement of fair competition in the telecommunications market-place as well as an honest attempt at levelling the playing fields within the market.

Dr Duran pledged support for the 1800MH licence as there was a desperate need to bridge the gap to provide local access and reach the customer.

Discussion
The Chair inquired as to the nature of the costs involved in full number portability.

Dr Duran responded that this would be accomplished via a recorded message that would be provided at normal charge to the user. He stated further that the cost involved would be spread across all users or individuals but questioned the number of people who might actually be prepared to do so. Dr Duran stated this meant in essence that people would be alerted to the user’s new number at no added cost to the user for a limited period of time.

Mr Tom Bill (Vodacom) agreed with Cell C that there would indeed be a short period during which people would be alerted but that this service would be cut-off at some point (probably 6-12 months). He acknowledged that the provision of the service would probably not be inexpensive, but noted that it would depend largely on the manner in which it would be operated in terms of a centralized database or information network.

Mr Beale stated that the service provider has to be sure of exactly the number of users who want to move across to another service provider so that the costs involved in such process could be spread across the market rather than prejudice it.

Ms S Vos (IFP) expressed uncertainty about the definition of "fixed mobile".

Mr R Pieterse (ANC) asked if Cell C has conducted any research into the feasibility of competing with a fixed mobile service, especially against Vodacom and MTN.

Dr Duran answered that research had been conducted which indicated that the market was indeed favourable for such investment. The term "fixed mobile" denotes a service which does not compete directly or indirectly with the mobile service provider market. The market was indeed willing to accommodate a third network operator (TNO), but that to ensure longevity within the market, would remain a challenge.

Ms Vos asked for n explanation of the term "multimedia service", and postulated that such a facility would surely offer many more useful and viable services in future.

Dr Duran replied that it definitely was an area with great potential for expansion. He continued to define the term as the use of voice, data and video input via a mobile telephone, which would need a sound network and equipment, both at a reasonable cost in order to make the service viable. The market at present was, regrettably, unsuitable for such a development.

The Chair asked if ‘per second’ billing would be the preferred choice, as this option seemed to offer better prices to the customer. Was Cell C expecting a "price war" in this regard especially from Vodacom, or would the two service providers conclude a gentleman’s agreement where each party would share in the benefits acquired and thus postpone competition to a later stage.

Dr Duran stated that ‘per second’ billing was indeed the preferred option and insisted that there would be no collusion between the parties.

Ms N Mtsweni (ANC) inquired about the handling of dropped calls.

Dr Duran replied that attempts have been made at compensating users for dropped calls, but such attempts were fraught with practical complexities as they were nearly impossible to trace successfully. In this regard per second billing would be the preferred option.

American Chamber of Commerce in South Africa (AmCham)
Mr McLaughlin noted that the purpose of his presentation was to examine the feasibility of the American Chamber of Commerce investing in a second network operator (SNO) in South Africa. He stated that South Africa does need an SNO to effectively compete with Telkom, and that the SNO would need worldwide support. He believed that only the best SNO offering the best terms would suffice, as this would be in the best interests of the consumer.

Mr McLaughlin stated that South Africa must, more importantly, express a genuine desire to broker a "good deal" for its consumers in its adoption of an SNO. Having carefully considered the South African offer, the American Chamber of Commerce in South Africa was unfortunately not in favour of the offer. The submission lists the reasons for this decision, as well as suggesting areas of reform.

Mr McLaughlin noted that the current offer would succeed only in warding off potential (foreign) investors. He suggested that the South African government change its view and policy as reflected in its offer, as well as introduce a strong and effective regulatory body in terms of the Bill that would control the market, resolve conflict and administer the exercise of its functions.

Mr McLaughlin cautioned against the failure to fully recognize and respect the independence of such a regulatory body which, he opined, was as important as the independence of the Houses of Parliament. He explained that AmCham believes that the regulatory environment created by the Bill is far too politicized.

Mr McLaughlin stated that the Bill breached several international agreements by which South Africa is bound. For this reason AmCham was unable to endorse the South African telecommunications market as being investment-friendly. As it stands, the market created by the Bill would not attract the calibre of investment South Africa deserves. He postulated that the South African government either ignored or failed to remember the provisions of its international agreements. The government must therefore rethink its position as the proposed Bill falls outside internationally recognized market norms. He foresaw numerous protracted and unnecessary legal battles being waged between local service providers if the Bill was not remedied.

AmCham had been prepared to take on a 30% stake in the South African offer in order to assist historically disadvantaged stakeholders, but it recognised that the Bill created a "huge burden" for any new entrant to the telecommunications market. He suggested that to remedy this shortcoming, Telkom should be bound to a similar restraint.

The concept of Black Economic Empowerment would need to be carefully structured. He pointed out the Bill’s failure to protect an SNO which would be borrowing extensively from a Black Empowerment Forum for at least its first two years of operation.

Mr McLaughlin concluded by noting the primary areas of reform needed in the current Bill:
- The regulatory body established by the Bill "has to have teeth" and independence.
- Sufficient financial support has to be ensured to achieve this, as well as a revised law that clarifies the above-mentioned confusion in the Bill in order to afford an SNO a healthy opportunity to succeed.
- The violations of the World Trade Organisation agreements have to be remedied.
- Details regarding the incorporation and treatment of historically disadvantaged groups under the new law have to be furnished, as well as long-term expectations in this regard.

Discussion
Mr S Abram (UDM) asked Mr McLaughlin to define the term "regulator’s teeth", as procedure to achieve this does currently exist. He pointed out that the Schedule in the Bill amends Act 13 of 2000 to further amend this procedure by affording the executive the power to establish such a regulatory body, which will act with full independence. He asked for the suggestion of additional measures should these be insufficient.

Mr McLaughlin replied that AmCham believed that the current provisions failed to afford sufficient independence, power and a suitable budget to the regulatory body to allow it to properly exercise its functions. The precise details of these concerns were dealt with in the report.

Ms M Smuts (DP) asked Mr McLaughlin to skim through the WTO undertakings that he suggested had been breached by the South African offer.

Mr McLaughlin reiterated that all the AmCham concerns were fully detailed in the submission but highlighted the paragraphs on "universal service agency" and "equal treatment". He noted that the latter is considered the most hallowed principle in international relations. The proposed licence agreement violated this principle and the offer thus had to be re-evaluated as soon as possible.

Mr McLaughlin was asked to explain the comment about the currently politicized regulatory framework.

Mr McLaughlin replied that wherever possible political control of business enterprises should be avoided and that independent regulation rather than the exercise of ministerial power was preferred.

The Chair thanked Mr McLaughlin and encouraged further talks with AmCham in order to better the South African offer. He thank AmCham for its input concerning the offer’s WTO violations.

The Director-General expressed firm doubts regarding AmCham’s suggestions of WTO violations, and stated that he had himself been actively involved in drafting and presenting the document to the governing body. He drew the committee’s attention to point 2.4.2.4 of the AmCham submission beginning "Although South Africa…" and said that the AmCham was not correct in this regard. He maintained that South Africa had not contradicted any provision in the WTO agreement as Value Added Network Services (VANS) existed the world over which were not discriminatory in nature. There currently exists no provision of law declaring that foreign VANS are being disadvantaged. He insisted that the licencing in this regard is done exclusively by ICASA and that government was not involved at all.

The Director-General concluded that these public hearings were not the appropriate forum for AmCham to raise its concerns. It should have raised these issues at the WTO sittings. The South African government had not received any formal correspondence from AmCham in this regard.

The Chair stated that one of the most important considerations when looking at policy concerns or matters of law is ensuring transparency, as well as the avoidance of any discriminatory law in sculpting a policy-driven regulatory framework. He continued that any grievances with the regulatory body should be directed to the courts.

South African Communications Forum submission
The presenter stressed that the State has to create empowerment by virtue of funding. No meaningful empowerment can take place without State funding.

Discussion
Ms M Smuts (DP) observed that the comments made by the SA Communications Forum (SACF) concerning the Regulator were remarkably similar to the Bill. She asked if the proposals on this issue had come from the SACF.

The presenter answered in the affirmative. There has to be a clear line of accountability in terms of policy in respect of the Regulator. Once the Regulator has been appointed there is a relationship between the Regulator, the policy makers and Parliament.

Ms S Vos (IFP) referred to the statement by the SACF that more resources should be made available for ICASA. She asked if this means that ICASA lacked capacity in their opinion. She asked if the SACF concurred with the statement of a previous presenter that ICASA lacked authority, experience and resources.

The presenter stated that it is difficult to operate with limited resources. This matter should be discussed with the Minister and the Department. Mechanisms have to be put in place to ensure that this happens.

An ANC member asked if skills were lacking as well.

The presenter argued that if resources should be made available it would be possible to acquire skills. It is constantly losing people with skills to the industry. Thus there has to be a retention mechanism (which would require financial backing).

Mr Abrams (UDM) asked if the fact that the Minister appoints the panel is contrary to the concept of an independent Regulator.

The presenter denied this, saying that the independence of the Regulator would be made possible through a good relationship between the Regulator and policy makers.

The Chair asked if the selection of experts from the industry could give rise to a conflict of interests.

The presenter said that this would not necessarily be the case, as it is the role of the National Assembly to ensure that those who are appointed have the necessary integrity.

The Chair said that it was problematic that Parliament was expected to give up its powers.

Ms Smuts agreed, saying that this could lead to constitutional problems.

On the issue of empowerment, the presenter argued that the words ‘up to’ 30% should be removed, as the provision needs to be made more definite. A definite percentage would give a black empowerment group a greater chance of being financed.

The Chair stated that he hoped black empowerment groups would experience true empowerment and not become millionaires on paper only.

Internet Solutions submission
Mr B Dawson emphasised the need for a stable regulatory environment and sufficient resources for ICASA. It is also necessary to maximise the value of Telkom in order to secure adequate financing for black empowerment groups. There is also a need for the creation of a competitive environment. In addition the Bill should focus on creating an enabling environment for Small/Micro/Medium Enterprises. The Bill should focus on extending universal service and upliftment. It is also necessary to identify and realise the opportunities emerging out of the electronic environment.

Mr Dawson then proceeded to read his presentation document. No discussion followed due to time constraints.

Orbicom submission
The presenter read the submission and referred to the following issues in particular:
-The Bill should not make it possible to issue "any licence to any player" in legislation. Due process has to be followed.
-There has to be a clear definition of ‘multimedia’.
-With regard to Sentech’s exclusivity, one needs to look at the historical investments in the industry, i.e. there are many players who have invested in the industry already. One should not penalise these people for having taken risks. When the digital system was introduced, Orbicom had invested in the digital arena. They took the risk and are now being penalised. There needs to be a process that rewards progressive thinking.

Discussion
Mr M Moosa (ANC, NCOP) asked about the extent of Orbicom’s investments in the digital arena. What would the ramifications be if Sentech were to be granted exclusivity?

The presenter said that this was impossible to calculate in the absence of a proper definition for ‘multimedia’. If it simply refers to infrastructure, this would be a particular type of investment. If however it refers to encryption and encoding, then it refers to another type of investment.

Ms Vos asked what services Orbicom already had in the pipeline in the digital arena.

The presenter replied that Orbicom had already invested in whatever services there are in this arena. Not all their services are interactive. They are working on the introduction of interactive television.

Mr V Gore (DP) stated that certain definitions in the Bill are obsolete. He referred to the use of technology to achieve a Public Service Telecommunications Network (PSTN). PSTN refers essentially to circuit switched technology. The other types of technologies referred to are essentially packet switched. He asked how one gets around this.

The presenter stated that they wanted to operate using both. The presenter stated that historically there had been very clear definitions of different services. With the advances in technology these distinctions are blurring. The answer is not to legislate on technology. Legislation should be technologically neutral. The intended licencee should decide on the technology it wishes to use.