Telecommunications Amendment Bill: deliberations

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
11 October 2001
TELECOMMUNICATIONS AMENDMENT BILL: DELIBERATIONS

 

Telecommunications Amendment Bill [B65-2001]
Summary of Submissions of Public Hearings
Proposed Amendments to the Bill - A – handed out at 11 October meeting
Proposed Amendments to the Bill - B – handed out at 12 October meeting

SUMMARY
The Committee discussed Clause 30. They criticised the mobile operators for the cost involved in unlocking a consumer's phone to enable him/her to switch from one network to another. The mobile operators denied allegations that the cost was so high in order to discourage consumers from switching networks.

Issues regarding the practical implementation of number portability were considered.

The establishment of a Telecommunications Museum under section 33 of the Bill was discussed, and the participation of Telkom here was requested.

Section 36 of the Bill was debated, and the ability of Parliament to withdraw regulations was discussed.

The independence of ICASA under the suggested amendments to the ICASA Act in the schedule to the Bill was discussed, and clarity on the meaning of "independence" here was requested.

The proposed amendments submitted by the department were skimmed through, and key concerns were flagged for detailed discussion at a later stage when substantive reform of the Bill is considered.

MINUTES
Clause 30
Ms M Smuts (DP) stated that the Independent Communications Authority of SA (ICASA) had made an argument on this issue previously. She suggested that they should be allowed to argue it further.

The Chair said that they had had enough time to do so.

The Chair continued that the cost of introducing number portability was an important issue. The mobile operators had agreed among themselves that they would also assist in this regard by facilitating certain changes.

Ms S Vos (IFP) referred to an article in the Business Day and said that the changes to be introduced by the operators were not without cost to the consumer. One operator was quoted as saying that that it would cost the consumer approximately R900, 00 to switch from their network to another.

Mr T Beale (Vodacom) stated that they charge approximately R200, 00 to unlock the customer's phone.

Mr G De Vries (MTN) stated that they charged R560, 00. The Regulator had approved this amount.

The Chair asked how much it costs the operator to unlock a phone. He asked why it is so expensive.

Mr S Nyoka, the CEO of ICASA denied that the Regulator had approved this amount. In fact ICASA has received many complaints from consumers on this issue.

The Chair explained that consumers get locked into certain networks in two ways:
-Firstly, when a consumer purchases a phone, s/he is granted a subsidy on the price of the phone. S/he is given a phone that is locked into a particular network.
-Secondly, if a consumer then wishes to upgrade his/her phone s/he also becomes locked into a network.
He asked what the consumer is paying for when attempting to switch networks and why this should be so expensive. Was it being used to discourage consumers from changing networks?

Mr R Pieterse (ANC) stated that the Committee should just legislate on the issue, as they owe it to the consumers to do so.

Mr Beale said that the purpose of locking the phone is to recover the subsidy. Also, it enables the operator to cover the administrative cost involved. The main reason is however to prevent the subsidy from travelling to their competitor. He was unsure as to how exactly a phone was unlocked but was certain that it was done by virtue of software. This does not apply to phones that are purchased on a contract basis, as the normal termination of contract laws apply.

Mr De Vries agreed with the reasons given by Vodacom. They emphasised the fact that the charge was not there to prevent a consumer from switching. Some subsidies granted to consumers were far larger than R200, 00 or R560, 00, as some telephones cost R3000, 00. They, too distinguish between contract and prepaid phones the way Vodacom does.

The Chair noted that there is clearly a need for consumer education in SA so that consumers are able to exercise their rights. It is important to build some sort of consumer protection into the Bill. Although there is a commitment by mobile operators to unlock phones this will only be done at a cost. Why was it not possible to have three SIM cards to one phone?

Mr Pieterse argued that the behaviour of the two operators was anti-competitive, as they were making it difficult for Cell C to penetrate. The consumer has fewer choices, as they are not allowing the new competitor to enter on an equal footing.

Ms Vos argued that issues such as number portability and carrier pre-selection have to be addressed if one wishes to support the concept of managed liberalisation.

Mr E Magashule (ANC) said that there is in effect no real subsidy, as the cost of the airtime is inserted into the hardware cost. As Parliament represents the consumer they should consider legislating on this issue.

Mr De Vries suggested that the Committee should hold public hearings on the issue so that everyone (from suppliers to customers) can be present.

The DG stated that transparency is important. He compared this issue to a person purchasing an item on hire purchase. In the latter case the price is clear and the interest is calculated in a transparent way. The consumer is familiar with this practice. The same type of transparency is necessary in this case.

The Chair asked ICASA what they had done about the complaints, which they had received from consumers.

Mr S Nyoka, the CEO of ICASA said that there had been seven complaints. The contents of these had been forwarded to MTN and Vodacom. They are currently awaiting dates for the hearings so that parties can adjudicate on the matter.

The Chair said that the Committee would hold hearings on matters affecting consumer rights. They would have to invite consumers to address the Committee.

The Chair requested clarity on the precise practical implementation of "number portability".

Ms M Smuts (DP) inquired about the staggering of the fixed line costs incurred in implementing number portability.

An ICASA representative replied that at the commencement of the provision of this service a corporate or business number would be used as a toll-free line. She stated that the purpose of having this line would be to "level the playing fields" to cushion the arrival of the Second National Operator (SNO) into the telecommunication market. She continued that once the user has dialed the number, s/he will be met with a recorded voice message that will then inform the user of the procedure to be followed in order to change from the current service provider to other. She suggested that this is a good option, but informed the committee that the fact that two separate calls had to be made to the service provider (one to hear the recorded message and a second to change to another service provider) would be both inconvenient to the customer and costly to implement. She stated that a study should be conducted in 2002/2003 to determine the exact costs involved here.

Ms S C Vos (IFP) inquired as to the precise cost factors involved here, and asked whether the user would have to pay for the particular phone to be unblocked as well as the recorded message service.

Mr T Beale, CEO of Vodacom, responded that no set price has yet been decided because Vodacom does not see the provision of this facility as a "revenue generating measure", and further informed the committee that when it agreed to offer this service to Cell C it did so for a nominal fee. He stated further that a small administrative charge for the recording of the customer’s the name would also probably be requested. He continued that the provision of this service should be confined to at least a 3 month, but no longer than a 6 month period so that users do not "tie up" the line unnecessarily. He stated that if users required the service beyond this period an additional cost would have to be levied.

The Chair thanked Mr Beale for his submission and recognized that the provision of this service was a definite "plus" for consumers as it afforded them more choice and consequently fostered competition.

Ms Vos suggested that a written submission regarding the cost, time frame and any other relevant considerations involved be sent to the regulator.

The Chair agreed with this proposal.

Dr Cielli, in response to Ms Smuts’ concern, stated that the distinction created between the costs incurred by residential and corporate lines is irrelevant here, because once the cost has been incurred the origin of the call is of no consequence. He continued that this distinction does not in any way materially alter the costs, timeframe, nor the investment involved.

The Chair then turned to consider the term "carrier pre-selection" (CPS).

Ms Smuts suggested that the proposal by ICASA be adopted here as it is both "do-able" and facilitates competition within the market.

Ms Vos agreed with this suggestion.

The Chair inquired as to the costs involved in implementing this service.

Dr Cielli replied that it is not possible to fix a single amount as the implementation is not a simple task at all. He stated, in reference to number portability (NP), that a variety of technical implementations could be employed. He continued that the Amendment Bill makes specific mention of a database to be used in this regard, and suggested that this implies that a technological solution using a database is being imposed on the service providers by the legislature. He suggested that the implementation of a database is the most expensive option because it involves the establishment of a full-fledged intelligence network throughout South Africa, together with a database. He stated that when this approach was adopted in the United Stated the service provider(s) imposed a flat monthly NP rate of $65 per month for the first five years of its operation on all the United States customers, whether they were users of the NP service or not. He regretted to inform the committee that despite this relatively steep monthly rate, upon completion of the implementation, a cost of hundreds of millions of dollars was incurred yet not even 50% of the implementation cost has since been recovered. He stated that no similar cost study has been conducted in South Africa as this exercise alone is costly, and is therefore only undertaken if absolutely necessary.

The Chair replied that the current wording of section 31 on page 21 of the Amendment Bill implies that such a study will be conducted. He stated further that the determination of the costs involved is a vital issue here, as this amount must then be factored into the ICASA budget.

The Chair expressed concern at the impact of NP on the pre-paid subscribers, as only recently a system has been implemented to capture the names and details of such cellular subscribers. He stated that section 31 of the Amendment Bill does deal with this difficult issue but requested further clarity on the matter, especially what precisely is entailed by "capturing pre-paid subscribers". He suggested that perhaps the retailer of these pre-paid vouchers should assist in the process and be obliged to capture the names and numbers of pre-paid subscribers, as this all has a direct effect on the successful phasing in of NP. He stated that 2005 would probably be the most realistic due date, having due regard for all the issues involved and the responsibility placed on the service provider, the regulatory authority, the budgetary limits imposed on the authority and the complex privacy concerns regarding "directory services" in section 31 of the Amendment Bill.

Ms Vos recommended that the definitions of "carrier selection" and CPS proposed by ICASA be inserted in the Bill.

The Chair then turned to consider the proposed section 32 of the Bill.

Ms Vos raised a concern with the request for "written" comments, as well as the omission of a hearing from the provision.

Ms Smuts strongly recommended that ICASA be granted a separate and independent regulation-creating power, as it would make it impossible for ICASA to function successfully under the present regime created by the Bill. She suggested this amendment to bring the Bill in line with the Independent Broadcasting Authority Act (IBAA).

The Chair replied that these issues would be returned to at a later stage, and called for comments on section 33 of the Bill.

Ms Smuts inquired whether Telkom already had such an institution at the V & A Waterfront, and stated that it was a "nice idea" but that ICASA simply does not possess the finances to meet this directive.

Ms N S Mtsweni (ANC) suggested that Ms Smuts has misinterpreted the section as subsection 3 stipulates calls for the "…content of the museum… [to] be transferred..", and does not necessarily call for the erection of a new building.

Ms Smuts took this point.

The Chair informed members that the SABC also has such artifacts and suggested that it would be in the interests of the telecommunications industry and department to have one museum housing all these artifacts, because the majority of such museums are not readily accessible to the general public. He inquired whether Telkom is prepared to transfer these artifacts to the museum, and said confirmation from them is awaited.

The Chair called for a reminder of the content of section 101 of the Telecommunications Act 103 of 1996 (the principal Act) referred to in section 34 of the Bill.

Ms Smuts reminded the Chair that it dealt with the creation of an offence.

Ms Vos drew the committee’s attention to the comments submitted by ICASA regarding the current difficulty in monitoring usage of the service, and consequently recommended that section 101 of the principal Act be amended.

Ms Smuts stated that ICASA proposes imprisonment of up to 2 years or a fine of R500 000.

The Chair replied that this section would be considered in greater depth at a later stage.

The Chair requested the Director General (DG) to provide clarity on the meaning behind section 36 of the Bill.

The DG responded that the South African government has come to the decision that no limitations regarding the ownership of mobile telecommunication services would henceforth be imposed. He stated further that a regulation was passed to "cap" such local ownership with the intention of encouraging foreign investment, and that section 36 of the Bill now seeks to repeal such regulations. He continued that a copy of these regulations as well as the recommended reform would be provided.

The Chair urged the DG to ensure the copies reach this committee as soon as possible. He then inquired of the DG whether the proposed amendment implied that a mobile telecommunication service provider could now take full control if it wished to do so.

The DG answered in the affirmative.

Mr M Markowitz, advisor to the ICASA chairperson, on a technical point questioned whether Parliament could in fact withdraw a regulation, and called for clarity from the state law advisor (SLA). He suggested that perhaps the section should provide that the regulations are "hereby repealed" because they have already been passed by Parliament, or must a regulation be passed to repeal these regulations.

The Chair asked the SLA whether section 52 of the principal Act would remain in the statute books, and also inquired why competition law principles do not apply here. He also asked why ICASA is given such wide-ranging powers here.

Ms Smuts strongly disagreed with the Chair’s submission that competition law be employed here as it would indeed have the completely opposite effect on ICASA and effectively erode its powers. She submitted that if this were allowed more and more powers and leverage would with time accrue to the competition tribunal.

The Chair accepted these concerns and suggested that any further discussion of this issue be postponed until the SLA advises this committee on the current legal position.
The Chair then turned to consider the proposed schedule commencing on page 22 of the Amendment Bill. He suggested that the reference to Sentech (Pty) Ltd (Sentech) in the second portion of the schedule be dealt with in the discussion on multimedia. He then called for comments on the submissions regarding ICASA.

The DG replied that this portfolio committee and the National Assembly have to reach an agreement on the process of appointment of members of the panel, proposed on page 23 of the Bill. He stated that the processes involved have to be constitutionally sound and that principles of democracy have to be adhered to, and that during the process leading to the nominations ICASA has to be consulted and must consent to the names suggested.

Dr S C Cwele (ANC) urged for the enhancement of the legitimacy of the counsillors as well as their independence from ICASA, and asked whether there are any measures in place to ensure the panel is sufficiently representative.

Dr Cwele then suggested that a possible conflict of interests or charges of bias or prejudice may occur in this committee being responsible for choosing a body (ICASA) with which it is so closely involved.

Ms Mtsweni requested clarity on the process whereby the President elects an expert under the proposed section 5(a) on page 22 of the Bill.

The Chair replied that Parliament has since directed that this power be taken away from the executive and afforded instead to ICASA, and called for this committee to be as objective as possible here.

Ms Smuts brought it to the committee’s attention that the constitution provides that bodies established under its chapter 9 shall function independently and can only be removed via a majority vote of Parliament, as provided by section 194(b) of the constitution. She stated further that this portfolio committee cannot usurp this power of Parliament nor can it defy the constitution, as the constitutional court decreed in the Certification Judgment that the primary means to ensure untarnished independence is to provide for proper removal and appointment procedures. She agreed with Dr Cwele that the provision under the proposed section 5(1A) of the ICASA Act does indeed erode this independence.

The Chair called for an examination of the body’s independence, because a law that allows the body to be "a law unto itself" cannot be condoned by this committee. He stated further that such a law cannot allow the easy removal or dissolution of a chapter 9 body’s members or powers. He noted that the constitution does not specifically provide a procedure for the appointment of the regulator, and therefore urged for the provision dealing with this to be worded carefully. He suggested that the only way to reach an accurate definition of "independence" is to ask the constitutional court. He stated that the "experts" referred to in the proposed section 5(1A) of the ICASA Act must not be "active" in the telecommunication industry, as this would jeopardize the independence of the panel. He called on the Deputy Director General (DDG) to formulate such a provision.

Ms Smuts agreed with the Chair and informed members that the constitutional court judgment referred to earlier did define independence, and also when it dealt with Independent Electoral Commission.

The Chair replied that unless a better formulation is presented to this committee, the proposed section 5(1A) of the ICASA Act is not approved.

Ms Smuts then suggested that the repeal of section 15 of the ICASA Act proposed on page 24 of the Bill is surely unintentional, as this section deals with the provider of the regulator’s finances. She noted further that section 16 of the ICASA Act requires the counsil to furnish the Minister with information and particulars on this.

The DDG, Mr P Pongwana, informed the committee that sections 15 and 16 of the ICASA Act should have already been removed along with the other provisions dealing with the relevant issue.

Ms Smuts suggested that surely section 15 should be retained.

The Chair replied that this issue would be revisited at a later stage

The Chair then turned the committee’s attention to the proposed amendments of the Bill submitted by the department henceforth referred to as "Document A". He suggested that the committee use the time remaining in this session to "skim" through these proposals, and to "flag" key concerns to be analysed in much greater detail at a later stage when substantive reform of the Bill is discussed. He then turned to consider the proposed amendments under clause 1 of the Bill

The Chair suggested that the term "licenced entities" under proposal 2 be clarified.

The Chair suggested that under proposal 3 the use of the term "another country" in the proposed section 1(a)(b) of the Bill be clarified by the SLA. He stated that to provide absolute clarity and certainty here a clause has to be imported here to amend the Sentech Act 63 of 1996, and noted that once Sentech is given the green light by Parliament the clause regarding Sentech on page 22 of the Bill can be removed and section 1(a)(b) can be inserted there.

The DDG supported proposal 4.

The DDG expressed a problem with proposal 6 regarding the definition of fixed mobile service, because there is no element of mobility.

The Chair accepted this point.

The DDG disagreed with proposal 8 as the problem arises when a single user moves from one mobile phone to another.

Ms Smuts stated that again the problem with the definition of "fixed-mobile" is complicating matters unnecessarily.

The Chair relied to the DDG’s submission by stating that the provision does not deal with mobile phones exclusively, and that this issue has to be reconsidered later.

The DDG maintained that the shift from "fixed wireless" to "fixed mobile" was aimed at including an element of mobility.

Mr V C Gore (DP) required clarity on the position of users that subscribe to two different licencees.

The DDG replied that as far as the provision of a local access telecommunication service by operators is concerned, interconnectivity cannot currently be limited.

The Chair requested clarity as to whether this catered for small/medium/micro enterprises (SMME’s). He stated that this issue would be considered at a later date.

Ms Smuts referred to proposal 10 and informed the committee that "end office" was amended earlier under proposal 5.

The Chair noted this and called for the two proposals to correspond.

The Chair called for a definition of "service" under proposal 11.

Ms Smuts suggested that proposal 12 does not solve the problem with the issue of the convergence of the terms "broadcast" and "telecommunication".

The Chair replied that this issue would be revisited.

The Chair noted that proposal 15 is an attempt to define a Public Switched Telecommunications Service (PSTS).

The Chair suggested that proposal 19 is an attempted definition of Value-Added Network Service (VANS).

The Chair turned to the proposed amendments of clause 5 and suggested that proposal 1 be discussed together with the term "multimedia", as well as the distinction between Sentech as an interim telecommunication service operator and its role as a multimedia service provider.

The Chair stated that the SLA’s opinion is needed for clarity on the proposed amendments relating to proposal 4 of clause 6 dealing with servitudes. He noted that this issue has a "major effect" on the SNO and the value of the set-aside for the SNO to enable it to install equipment. He stated that foreign investors will scrutinize this clause, and if it is problematic such investors would be warded off.

Ms Vos suggested that the phrase "calculated with reference" in line 12 of page 9 of the Bill be substituted with "determined".

Mr Smuts, from the office of the SLA, replied that the SLA would look into this matter.