Electronic Communications Amendment Bill [B38-2007]: briefing by Department

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
26 October 2007
ELECTRONIC COMMUNICATIONS AMENDMENT BILL: BRIEFING BY DEPARTMENT

Chairperson: Mr I Vadi (ANC)

Documents handed out
Electronic Communications Amendment Bill presentation
Electronic Communications Amendment Bill [B 38-2007]

NOT RECORDED

SUMMARY
The Department explained that the aim of the Bill was to provide a framework for the licensing of public entities.

Members expressed concern that the wording of the amendments was too wide. They did not think that the amendments went far enough to clarify the limits on the Minister’s role in the licensing process. In addition, members were concerned that there was no limit on the number of public entities that could be licensed in order to address problems within the industry.

The Committee will hold public hearings on 31 October 2007.

MINUTES
The Chair indicated that the briefing would not be followed by much discussion at that meeting. The Committee would get the opportunity to discuss the Bill the following week.

Briefing by Department of Communications
Ms Mashile Matlala (Acting Chief Director: Department of Communications) said that the licensing of Public Entities was currently captured in the Electronic Communications Act (ECA). The Bill aimed to provide a licensing framework in terms of which licensing would take place by the Regulator. The Department had not at the time of drafting the Act anticipated licensing additional state-owned entities (SOEs).

Ms Matlala said that although the ECA had been enacted in 2005, not much had been implemented since then. The Department was however in the process of developing policies in terms of Chapter 4. The Department was currently developing a business plan, which would encompass their various interventions.

Government would in future be able to decide if there was a need for additional infrastructure after which they would identify a suitable entity for this purpose. This entity would then be licensed by the regulator in accordance with guidelines provided by the Minister.

Although the issue was raised because of the need to license Infraco, the purpose of this Bill was to provide for the licensing of public entities generally. The term ‘public entity’ was defined in the Public Finance Management Act.

Discussion
Ms D Smuts (DA) expressed concern that the amendment was too wide. She said that policy guidelines by the Minister were not legislative instruments and could therefore not conflict with existing legislation. The clause as it stood was too widely drafted and enabled the Minister to draft policy guidelines. This conflicted with the law which provided that the Minister could not have anything to do with licensing. If the clause was left as such, it would allow the Minister to do much more than just create the framework for licensing.

Mr R Pieterse (ANC) said that it should be very clear that the issue of licensing would remain the responsibility of the regulator. One however had to guard against tightening the legislation too much as this would create problems in the future.

Ms Matlala referred to the provision as it currently stood in the Bill and said that the department was not ‘married to their solution’. This could be further discussed. She agreed that there were challenges regarding the licensing of public entities. One should remember that before a public entity was licensed both the Minister and the regulator were consulted. The policy framework would contain the reasons for licensing these entities. The Department felt that Cabinet approval was also necessary to ensure that all departments understood the process and were able to make comments on the objectives of licensing the entities. While it was the Independent Communications Authority of South Africa (ICASA) that issued licences, the public had to give input on the matter.

Ms Smuts said that the fact that Infraco would not always be in state hands meant that it would not be fair to give it a favourable start. This SOE should therefore compete on the same playing field as other operators seeking to be licensed. Creating a privileged animal would undermine the ECA and ICASA.

Mr M Kholwane (ANC) agreed, saying that once the State owned less than 75% of Infraco, it would no longer be a public entity. It was important to bear this in mind, to avoid being ‘taken for a ride’.

Mr Kholwane asked if the Department could provide the Committee with a summary of the public submissions.

Ms Matlala replied that the submissions could be sent to Parliament once the closing date had passed.

Mr K Khumalo (ANC) commented that these amendments had not been foreseeable when drafting the ECA. They had arisen from the Infraco situation.

Ms Matlala said that there was never an intention to amend the ECA. The necessity for these amendments had emerged from the Infraco discussions. The Department would not amend the ECA to provide for the licensing of Infraco alone, so it was decided to amend it for the purpose of licensing any public entity. This would avoid the situation where different departments would have to amend the ECA each time they wished to license a public entity.

Mr Khumalo said that if the intention of the Bill was to reduce the cost of services (which was the reason Infraco was being licensed), then it was important for the legislation to say so.

The Chair asked if Infraco, in its capacity as a public entity, would get preferential treatment. This would probably not be a problem as long as the cost of services was reduced as envisaged by the Department of Public Enterprises.

Ms Matlala felt that the reduction of costs should not be mentioned in the legislation, as this might not be the only reason for the establishment of a public entity. Another reason could be the provision of universal service and access (as in the case of Sentech). She was not sure if all the possible reasons for licensing public entities should be listed in the Bill.

The Chair asked if the licensing of public entities was meant to be a closed-book process.

Ms Matlala responded that there would be public input before the finalisation of the process. ICASA would have discretion to conduct public hearings on the proposal. In addition the public entity applying for the licence would still have to submit business plans, which would be subject to public scrutiny.

Mr Khumalo asked what would happen in the situation where two operators colluded to fix prices of their services. He asked if this would entitle Government to establish a public entity each time to counter price-fixing. Where would it end? At what point should the State allow the industry to become vibrant and develop on its own? He felt that this intervention might be necessary in the short-term, but there should be a deadline after which there should be no government intervention. The legislation was currently too open with regard to the number of State-owned Enterprises (SOEs), which could be established and licensed.

Mr Kholwane referred to the Objects of the Bill and said that the issue of competition was not the only issue on which one should focus. As a public representative, he would not be satisfied with anything less than accessible services to his community.

Ms C Nkuna (ANC) was not convinced that Infraco would not become another Telkom. One should prevent the situation where the law had to be amended due to the failure of the industry.

Ms Nkuna felt that the issue of reduced cost of services could go into the regulations to the ECA.

Ms Smuts reiterated that the Bill was too wide. It allowed for an unlimited number of state-run telecom SOEs. She thought that the country had left that era behind. It was important to note that one was not looking at industry failure but at policy failure.

The Chair announced that public hearings on the Bill would be held on Wednesday, 31 October 2007. They would start at two o’clock and would continue for as long as it took to complete the hearings.

The Chair adjourned the meeting.