Broadband Infraco Bill: deliberations

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
29 AUGUST 2007
BROADBAND INFRACO BILL: DELIBERATIONS

Joint Chairpersons: Mr Y Carrim (ANC) ; Mr C Wang (ANC)

Documents handed out:
Broadband Infraco Bill General Explanatory Note
Infraco Bill Public Comments And DPE Responses
Public Comments received by the Department
Broadband Infraco Bill [B26-2007]

Audio recording of meeting

SUMMARY
Members met with the Department of Public Enterprises, the State Law Advisors office, and representatives from the Department of Communications to discuss amendments to specific clauses in the Broadband Infraco Bill.  It was decided that the purpose of the meeting was to focus on issues where there were no conflict and contentious issues such as licencing would be discussed at a closed meeting. The Department was asked to meet with all stakeholders to reach conclusion. A new draft of the Bill was tabled. The long title had been amended, but the State Law Advisors indicated that they did not believed that there should be any reference to licensing. The matter would be discussed further to reach an acceptable wording. The preamble now included reference to electronic communications networks and services, and there was some discussion on whether under serviced and underdeveloped areas should be mentioned. Under the definitions section it was noted that there were now new changes defining an Electronic Communications Facility, the Electronic Communications Service and a Utility Rate of Return. Discussion on other definitions would stand over to discussions on licensing. The Objects Clause 2 was discussed, and it was noted that Neotel had commented on this section. A new sub clause (d) would be added to deal with expropriation, although it was not strictly speaking necessary. Clause 3(1)(a) was amended by a technical amendment.

MINUTES
Broadband Infraco Bill: Deliberations
The Chairperson opened the meeting by stating that in areas such as licensing, where there was no resolution on the principles, the Committee would hold a closed meeting. At this stage the Members would confined themselves to going through the Bill without amending the definitions, which could then be looked again when the Committee was considering the objects of the Act.

The Chairperson stated that Neotel had some issues with regard to the commercial arrangement. The Committee did not have the capacity to fine-tune the commercial agreement. However given the degree of relevance that the commercial agreement had to the Bill, the Committee encouraged the Department to meet all stakeholders to reach a conclusion. It should also be noted that Neotel had pruned down their initial submissions as they were concerned about the length of time it would take to approve the Bill.

Ms Sandra Coetzee, Deputy Director General: Legal, Department of Public Enterprises, took members through the latest version of the Bill, where she highlighted key changes. She stated that this marked version of the Bill had been drawn up in collaboration with the State Law Advisors, and has been submitted to them for comment. The material changes related to the licencing arrangements and the scheduling in terms of the Public Finance Management Act (PFMA).

Long Title
Ms Coetzee stated that the Long Title communicated the purpose of the Bill. The certified version of the Bill had contained specific wording that related to licencing. However, the Department of Public Enterprises (DPE) had now decided to re phrase the wording, using more generic language,  to provide for the licencing of Broadband Infraco.

Mr Enver Daniels, Chief State Law Advisor, Office of the Chief State Law Advisor, stated that placing the wording around licencing in the long title did pose some constitutional challenges. To put references to licensing in the long title could be interpreted as suggesting that Infraco should be licensed, and that it must then be licensed in a particular way.  Licensing issues should be dealt with in the Electronic Communications Act (ECA) and not in this Bill. He would be happy with the wording of the long title in the certified Bill, but not this amended title.

Mr Phatang Nkhereanye, Senior Manager: Regulatory, Infraco, concurred with Mr Daniels, as the intention of the Bill was not to create licensing difficulties. He too believed that the licensing should be left to the ECA.

The Chairperson stated that the meeting was not a public hearing, but that, given the complexity of the Bill, the various stakeholders would be given a chance to make contributions.

Ms Coetzee stated that she gladly accepted the advice given by the State Law Advisor, and that the matter still required further discussion.

The Chairperson requested that the State Law Advisor should provide a short memo summarising his argument.

Ms Coetzee requested that the State Law Advisor’s memo should also take into consideration the Department’s position with regard to the various constitutionality concerns, as there would be many interpretations of the long title.

Ms Mashila Matlala, Director: Policy, Department of Communications (DOC), stated that the purpose of the deliberations was to deal with the matters that had already been agreed upon, and she suggested that therefore the issues pertaining to licensing were completely separate to the matters at hand.

Ms Portia Molefe, Director General, DPE stated that there had been some resolution with regard to the licencing issues, and the details would be disclosed at the closed meeting.

Preamble
Ms Coetzee stated that the changes to the preamble included the reference to electronic communications networks and services.

Mr Hendrikse asked whether a consensus had been made to refer both to underserviced and underdeveloped areas.

Dr S Van Dyk (DA) added that the Department should provide further clarity on the wording of the underserviced and underdeveloped areas.

Ms Coetzee stated that the new wording meant that Infraco would expand to the underserviced and underdeveloped areas.
 
Ms Matlala stated that the wording did not make any difference, because Infraco would be receiving a national licence, so therefore the roll out targets would be defined by the licence that would be issued by Independent Communications Authority of South Africa (ICASA).

Mr P Hendrikse (ANC) responded that the intention of the preamble was to provide an indication of why the Bill was brought to parliament. Hence it had limited legal force.

Ms N Kondlo (ANC) stated that there would be no harm in placing references to underserviced and underdeveloped areas in the preamble.

Dr Van Dyk stated that the aim of the Bill was to bring down telecommunications costs; therefore there was no need to refer to the underserviced and underdeveloped areas.

Mr E Kholwane (ANC) responded that the issue of underserviced and underdeveloped areas raised the issue of affordable access.

The Chairperson stated that the issue needed to be discussed with the State Law Advisor. Another question that arose was whether the State could force an independent regulator to perform a particular action. 

Ms Coetzee stated that even though the ECA covered the issue of underserviced and underdeveloped areas, the key question was whether a private entity would have discretion  as to whether it wanted to invest in underserviced areas.

A representative from Neotel stated that she disagreed with the Department’s interpretation, because the operators did not have discretion whether they wanted to invest in underserviced areas. This was a licensing obligation placed on the operators.

Ms Coetzee responded that Infraco had to invest in the underserviced areas, irrespective of their licence conditions.

Mr Paris Mashile, Chairperson: ICASA, stated that there were terms and conditions which were generic to all licences and which had to be fulfilled. As far as communications was concerned, ICASA would clearly state which areas were underserviced or un-served.

Mr Wang stated that the issue was over and above the terms and conditions, and the terminology needed to be re-examined.

Mr Hendrikse requested for all operators to provide their footprints, in order to determine whether they had complied with the terms and conditions as stipulated by ICASA.

Mr Kholwane responded that there was no contradiction, in that the operators had a tendency to ignore the rural areas. The government had therefore decided to establish a State Owned Enterprise (SOE) that would serve those areas. It should however be noted that ICASA had its own set of guidelines that had to be adhered to.

Mr Nkhereanye stated that if Infraco’s mandate was to service the underserviced areas, then it would be operating as a third service provider

Mr Wang replied that it was not the intention of the Bill to establish a third service provider.

Mr Kholwane added that the operators could not roll out infrastructure in the rural areas, therefore it was the responsibility of government to do so.

Definitions
These would be discussed in more detail at a later stage, but Ms Coetzee noted that there were now changes relating to the definition of an Electronic Communications Facility, the Electronic Communications Service and a Utility Rate of Return. 

Mr Hendrikse questioned the repetition of definitions in the Bill and asked for clarity

Ms Coetzee stated that the repetition did not usually occur but the matter would be looked into.

A representative from ICASA stated that whatever wording that has been chosen should be in line with the ECA, in order to prevent conflict.

Mr Wang stated that he was worried about the use of “utility rate of return”, as it was a financial term, and was not necessarily relevant to the Bill.

Ms Molefe responded that the Department was trying to find a definition that would clearly describe Infraco’s role in the telecommunications sector. Infraco was a provider of basic infrastructure and there was always a rate of return that the utility was allowed to earn.

The Chairperson stated that he did not see any problem with including this in the Bill, and had no objections whatsoever.

Clause 2: Objects of Act
Dr Van Dyk asked whether the Transnet assets were included in the object of the Act.

Ms Coetzee stated that the Transnet assets had already been sold to Eskom as an interim step in consolidation.

The Chairperson said that when dealing with the Objects the Committee should not just look at changes, they should look at each clause in order to check whether there had been any amendments.

Ms Coetzee stated that the Department had prepared a summary of all the comments, clause by clause, and this indicated what the Department had responded to by changing the wording. In relation to clause 1, the comments related to the alignment of the terminology. There was no comment on the clause in relation to Objects of the Act.

The Chairperson asked the Department whether it was dealing with the comments received together with what was brought forward to the Parliamentary Committee.

Ms Coetzee stated that there was a large degree of overlap, but there were slight differences.

The Chairperson stated that the Department had received comments in relation to section 2 on the Objects of the Act, and these comments came from Neotel. They had raised the issue on pages 41 and 42 of the Neotel submission. As a matter of policy, the Committee had already taken a decision to refuse these requests. The Department must then comment whether the issue of expropriation could be seen as an object.

Ms Coetzee concurred with the Chairperson and said that a clause (d)  could deal with the matter.

Mr Daniels stated that the issue of expropriation was not necessarily needed in the Objects of the Bill, but it should be included for greater clarity.

The Chairperson stated that the Committee would accept clauses 2 (a), (c) and would also accept the inserted clause (d). The only clause that would not be accepted would be clause sub clause (b).

Clause 3
Ms Coetzee stated that the clause dealt with the transfer of assets from Eskom to the State.

Mr Hendrikse proposed a technical amendment of clause 3(1)(a), proposing that there should be a comma inserted after the word “Eskom.

Ms Coetzee stated that she saw no problem in inserting the comma and would consult with the State Law Advisor.  It should be noted that the Department would adopt editorial suggestions if it did not change the meaning of the clause. It should also be noted that the wording in clause 3(1)(a), under assets, should be changed so that licensing was specifically excluded. The rationale was that Eskom still needed their Private Telecommunications Network (PTN) licence to operate some of their activities.

Mr C Gololo (ANC) proposed that there be an amendment of clause 3(1), so that “the Minister” was reflected as “the Minister responsible for Public Enterprises”.

Mr Wang responded that the Minister had already been covered in the definition, and it would therefore be unnecessary to amend the clause.

The Chairperson asked the Department to state whether the consideration payable under clause 3(1)(b) had already been paid.

Ms Coetzee responded that the funds had been paid but the amount would only be released once there had been consultation with the relevant authorities.

Mr Wang stated that the Committee would accept clause 3, with changes in clause 3(1) as suggested.

(a)

The meeting was adjourned