Telecommunications Amendment Bill: deliberations

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
12 October 2001
TELECOMMUNICATIONS AMENDMENT BILL: DELIBERATIONS

Chairperson : Mr N Kekana

Relevant Documents:
 

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 document containing the amendments proposed by the Department formed the basis for discussions of the session. The Committee discussed Clauses 6 to 18. In their discussions on servitudes the Committee agreed that in this case it would be preferable to refer to the parent company and not to the subsidiaries in legislation. Eskom argued that the clause should refer to Eskom Enterprises, as this is the incorporated company, which houses all their telecommunications assets. The Committee also held extensive discussions on the meaning of Virtual Private Networks and whether it should be omitted from Clause 11 in order to eliminate confusion. The proposed definition of public switched telecommunications service in clause 11 of the Bill was considered, and the decision was reached to delete the proposed section 36A(2) of the Bill.

The submissions regarding clauses 12 and 17 of the Bill were approved.

The provision of Voice over Internet Protocol in terms of clause 15 of the Bill was discussed, and the granting of this service to Value-Added Network Services was debated. It was contended that they needed this service to effectively compete with the other service providers, however it was decided that they would not be granted this service under the current dispensation.

The discrepancy in the proposed section 40A of the Bill dealing with the granting of licences was clarified.

The decision was taken to amend clause 18(c) of the Bill to provide that the authority alone shall determine the terms and conditions of the requisite licence.

MINUTES
Clause 8
The Chair referred to the suggestion that S35 (4) and (5) should be inserted after S34 (a)(iii), i.e. line 7 of page 10.

Ms M Smuts (DP) suggested that the words ' and the application of S35 (4) and (5)' should be inserted after line 7 of page 10. The Minister would then be able to ascertain how S35 (4) and (5) would be applied.

Ms Smuts continued that the reference to S35 (5) did not make sense. She had been under the impression that they were dealing with the Invitation to Apply (ITA).

Ms Vos suggested that the provision should state that the Minister should consult the Authority on the ITA.

The Chair suggested that the Clause should remain where it is.

Clause 6 (S32 B)
The Committee dealt with the issue of servitudes. They referred to Document B, which stated that the new proposed subsection 5 should follow S32 B (4) (e). Mr H Smuts, the legal advisor, read through the clause. He explained that the clause refers to Eskom. However subsection (i) states that certain clauses apply to Transnet as well.

The Chair asked why the wording had been changed this way. Previously there had always been a reference to Eskom and Transtel. He also asked why the terms Esi-tel and Transtel were not being used.

Mr Smuts said that this approach was preferable, as Esi-tel and Transtel had no legal persona.

The Chair asked if this meant that Eskom and Transnet would now replace all references to Esi-tel and Transtel.

Mr A Busse (Eskom) suggested that the phrase 'Eskom Enterprises' should be used.

The Chair argued that they were trying to avoid references to subsidiaries and were moving toward only using the name of the parent companies.

Mr Smuts asked if Eskom Enterprises was not an incorporated company. If this were the case then it would not be wrong to use the term 'Eskom Enterprises'.

The Chair stated that 'Eskom and Transnet' would be used with regard to servitudes. However when dealing with the set-aside it would be preferable to use 'Esi-tel and Transtel'.

Mr Busse argued that Eskom Enterprises is an incorporated company in which all Eskom's telecommunications assets are housed. It is the non-electricity-regulated business of Eskom, i.e. its business includes Nuclear power, Aviation, Information Technology (IT), Water, Telecommunications and consulting. The IT section has a share which is part of Eskom Enterprises and not of Eskom itself.

Mr R Pieterse (ANC) stated that Eskom is the generator, transmitter and distributor of electricity while Eskom Enterprises does everything else.

Transnet stated that the term 'Transnet and subsidiaries' is too broad. They therefore proposed the term ' subsidiaries licensed in terms of this Act.'

The Chair referred to discussions regarding Private Telecommunications Networks (PTN's). In terms of S41 'Telecommunications' had referred to PTN's maintained by Transnet and Eskom. Esi-tel was equated with Transtel. If there was a problem with this terminology it is best to use the names of the parent companies.

Mr Busse argued that there is no telecommunications section under Eskom itself. They therefore preferred the use of 'Eskom and subsidiaries'.

The Chair asked if they wanted it to refer to 'Eskom and telecommunications subsidiaries'.

Mr Busse suggested the use of the term 'Eskom and subsidiaries in which telecommunications are housed'.

Clause 9
Mr Smuts stated that the words ' if there are compelling reasons' precede the word 'reject'.

Ms Smuts suggested that it was better for the words 'including women' to replace 'and women' in subsection 5.

Mr Smuts suggested the use of 'or by women'.

Ms Vos said that women belong in the historically disadvantaged group. If one uses the word 'or' one is separating them from the historically disadvantaged groups.

The Chair agreed that 'including women' is preferable'.

Clause 10
Ms Smuts said that the clause was problematic because it gives the Minister a free hand to override normal licensing procedures. If it is the intention of the clause that auctions should be allowed, then it should say so specifically.

The DDG argued that the reference to the Minister was in relation to the ITA and nothing else.

Ms Vos argued that this should be clarified in the clause.

Ms Smuts said that this had been drafted on the instructions of the Department. He could see how the clause was very wide, as no parameters were set.

The Chair stated that someone has to decide as to the licensing irrespective of whether an auction or 'beauty contest' method of deciding was used. The person making the decision could obviously not be the Regulator.

The DDG stated that the form and criteria would be set out in all ITA's.

Ms Smuts said that one cannot normally skip S35. There is a problem with the decision-making process.

The Chair said that he failed to see the problem. If members wanted changes they were free to come up with suggestions.

Clause 11
Ms Smuts stated that the term 'fixed mobile service' was inaccurate. The words 'fixed mobile connection' should replace it, as it is not a service or a license.

The Chair stated that the term referred to a form of connecting to local access services. He asked why 'services' could not be used. The aim is to show that telecommunications services can be provided by fixed mobile facilities in the local exchange. This issue can be looked at later.

Ms Vos said that it is necessary to specify that the reference is to the maintenance and repairing of one's own public switched telecommunications network (PSTN).

The Chair failed to see why this was necessary.

The DDG could see that there was a possible interpretation problem. If (h) means that public switched telecommunications service (PSTS) would repair only the links that they provide then it was not a problem. If however it refers to the repairing of PTN's or someone else's network then there would be a problem. The Department had read it as referring to one's own network only. However if the wording were misleading it would have to be redrafted.

Ms Smuts asked if the phrasing of (h) prevented Telkom from outsourcing.

The DDG denied that this was the case. This phrase was not restrictive.

Telkom stated that the wording was not confusing if one just understood it to mean that each operator maintains its own network. Thus the licensee maintains the network which it is entitled to operate.

Mr M Van den Bergh (SAVA) stated that the fact that the reference to VPN's remains could lead to a misleading interpretation.

The Chair referred to S36A (1) a-e and asked if there were any problems (apart from the grammatical error in (e)). The Committee indicated that there were none.

The Chair asked if subsection (1) provided that Telkom could provide these services exclusively.

Mr Smuts said that this was not the case.

Mr Van den Bergh said that these form part of Telkom's services anyway. With regard to the reference to equipment in (i) he stated that this was unnecessary, as it does not require a license.

The Chair argued that when (h) applies it refers to equipment as well. Subsection (g) refers to the 'supply' of telecommunications equipment. He asked what the problem would be if one retains (h) but not (g).

Dr Cielli (Telkom) said that the equipment could refer to the distribution frame in the basement of a building. Although it is installed in the premises of the customer the equipment is not necessarily customer premises equipment (like a handset or a modem).

The Chair asked how one could distinguish between (g) and (h). He asked if (g) was not built into (h).

Ms Vos argued that the use of the words 'of any kind' in (i) opened up the possibility for a large amount of litigation.

The Chair asked if the word 'supply' is not too general.

Mr Smuts agreed that it was.

Mr Pieterse suggested that one should specify that up to a particular point the equipment belongs to Telkom.

The Chair asked what problem Telkom would have if (g) were omitted from the clause dealing with PSTS's. He asked if they would be satisfied if (g) was excluded.

Telkom responded that this would not solve the problem. If (h) can be amended to include what is in (g) then there would be no problem.

Ms Smuts referred to (iii) and stated that a PTN was a piece of wire while a Virtual Private Network (VPN) is a software-based intervention. Telkom, under its Value Added Network Services (VANS) license, looks after its VPN's. One has to remember that a VPN is not a PTN and make sure that one does not re-introduce the confusion.

The Chair asked if reference to VPN's should be omitted.

Dr Cielli said that the clause does not refer to the provision of VPN's, but to the installation of telecommunications circuits. He therefore failed to see the problem.

The Chair asked Ms Smuts what is the problem with the clause (other than the issue of VPN's).

Ms Smuts replied that she had no other problem with the clause.

The Chair asked how the clause would be affected if 'VPN's are omitted from it.

Telkom responded that the fact that VPN's is a form of PTN's would be lost.

The Chair asked if the definition of PTN's includes reference to VPN's.

Mr Smuts replied that it does not.

Mr Van den Bergh explained that VPN is a type of technology. PTN can be based on VPN technology. VPN is just one way of delivering a PTN service.

The Chair said that he was hesitant to delete everything that comes after (h). He considered the possibility of retaining everything except references to VPN's and the 1800MHz-frequency band.

Afternoon session:
Dr Cielli (Telkom) inquired as to the position of the current definition of Public Switched Telecommunication Service (PSTS) in the proposed clause 11 of the Amendment Bill.

The Chair replied that it would remain unchanged.

Ms M Smuts (DP) recommended the adoption of the proposal by the Independent Communications Authority of South Africa (ICASA) in this regard. The committee was urged to reach some form of finality on at least some issues during this formal and substantive discussion as it would be a "dereliction of [the committee’s] duty" if some degree of finality is not reached during this session.

The Chair stated that the ICASA proposal would not be transposed verbatim into the Amendment Bill, but that it would rather be considered and a definition that makes sense would be agreed upon. The definition was then referred to the State Law Advisor (SLA) for consideration.

Ms S C Vos (IFP) agreed with the proposed ICASA definition, as it solves the problem with the term "fixed-mobile service".

Ms Smuts called for the term "fixed-mobile service" be reformulated to read "fixed-mobile access", so that the confusion surrounding the issue may be resolved.

The Chair responded that this issue would be revisited at a later stage. Clarity on the precise meaning of the proposed section 36A(2) on page 12 of the Bill was requested.

Mr T Beale, Vodacom, informed the committee that the corresponding provision in the Telkom Act dealing with PSTS’s expressly excludes the provision of mobile telecommunication services, which consequently prevents Telkom from providing such a service. Furthermore a Value Added Network Service (VANS) licence could still be acquired via section 40 of the Telecommunications Act 103 of 1996 (the principal Act), as well as a Private Telecommunications Network (PTN) licence via section 37 of the principal Act. Telkom would consequently not be relieved of its obligations to acquire the radio frequency spectrum licence. The provision should be formulated in the positive to clarify matters.

Dr Cielli (Telkom) agreed with this suggestion and recommended the provision be deleted. A section 37 licence is only needed in terms of the provision of a mobile telecommunications service, which does not fall within the Bill’s definition of PSTS.

The Chair agreed with the submissions and called for the proposed section 36A(2) to be deleted.

Clause 12
The Chair then considered the proposed amendments to clause 12. He noted that there were no objections to them and consequently the amendments were approved.

Clause 15
The Chair agreed with the proposed amendment.

Ms Vos suggested that clause 15(a) of the Bill be amended instead.

The Chair inquired why the phrase "supplied by PSTS licencees" could not be inserted instead, because this would relate to Telkom and the Second Network Operator (SNO). This phrase should thus be inserted after clause 15(a)(2) of the Bill and subsections (a) and (b) should be subsequently deleted.

Mr M van den Bergh (SAVA) suggested that subsection (a) that deals with the Minister’s discretion be retained.

The Chair agreed with this proposal, and called for the proposed section 40(2)(a) of the principal Act to be retained.

Ms Smuts approved of Ms Vos’ earlier suggestion that a phrase dealing with the "knowledge" of the provision of Voice over Internet Protocol (VoIP) by such licencees in line 37 on page 13 of the Bill.

The Chair stated that he failed to see any need for an amendment of the current section 40 in the principal Act.

Ms Smuts replied that the insertion of this phrase is vital here because VoIP is so difficult if not impossible to police. For the section to make sense it must stipulate that the holder of a VANS licence cannot "knowingly provide" subsequent use of the service.

The Chair then suggested that the term "shall permit" should be used instead as it does imply knowledge of subsequent use, and that all that needs to be proven is that the licence holder did not in fact permit the use of the service.

Ms Smuts insisted that the problem with this argument is that it ignores the fact that the licence holder does not know that the service is being used without express permission, because the use of VoIP is so difficult to police.

The Chair called for clarity from the SLA.

Mr Smuts replied that the term "permit" does indeed connote knowledge of, in this case, the usage and stated further that the courts would "read in" this component.

Mr M van den Bergh stated that VANS need VoIP to compete effectively with Telkom and the SNO, even if on a limited basis only. Furthermore, Telkom is currently providing this service to a market that is "fundamentally uncompetitive".

Dr Cielli (Telkom) replied that the allegations of unfair competition leveled against Telkom are unfounded, as Telkom has been granted a licence to provide this very service.

The Chair stated that the recommendation that the VANS be allowed to provide VoIP on a limited basis needs to be discussed further.

Ms Smuts agreed with the proposal as to deny VANS this service would handicap them because Telkom already offers voice and data protocal, whereas VANS are currently only allowed to offer data. VANS should be allowed to provide VoIP on a limited basis if possible, so that the service may be effectively policed.

The Chair acknowledged that the policing aspect is important.

Mr M van den Bergh informed the committee that VoIP is not the only device by which voice may be delivered, but that voice is actually delivered by VANS. Once again, if VANS are denied such service then only two VoIP service providers - only Telkom and the SNO - would have the whole of South Africa as its market and this would not be in the country’s best interes.

The Chair recognized that this issue needs to be resolved. The provision has to be formulated carefully as it has significant implications for both Telkom and the SNO.

Mr de Vries noted that only in the VANS market would Telkom and the SNO receive competition.

The Chair requested clarity on the precise manner in which the limited provision of VoIP would be policed by the regulator.

Ms Vos inquired of the Director General (DG) whether the Competition Commission had been consulted in this regard.

The DG replied that it had, even though its input is not credited at the end of the Bill.

Ms Vos then suggested that the service not be provided on a "limited basis" but rather that "VoIP not be used to bypass the PSTS", as this formulation would then actually define the term "bypass".

The DG stated that the competition tribunal had been consulted before the draft Bill was tabled on the 26 July, as well as on the policy considerations behind the Bill. What precisely is entailed in granting VoIP to VANS, especially the licencing concerns and procedure? Input needs to be sought on this matter from foreign jurisdictions.

The Chair responded that by allowing VANS to provide VoIP the best interests of the customer are served as a better product and greater choice is provided, which does not in any way "significantly erode" the value of the PSTS. Unfortunately the reality of the situation is that the Bill’s definition of PSTS does include VANS to an extent, and even though the latter is granted a separate licence it is primarily a PSTS. He noted futher that from this it is evident that PSTS’s do indeed have an advantage over VANS. Furthermore VANS are also on the PSTS network, and could thus generate revenue for the PSTS. It is uncertain which route the committee would take in this regard, because if it decides to allow VANS to provide VoIP it would effectively changing the law and subsequently "creating a new policy environment altogether". The committee decided to "move beyond" allowing VANS to provide VoIP.

Mr M van den Bergh pointed out that the White Paper on the Telecommunications Act did allow VANS to provide VoIP and that the PSTS have been providing it since 1996.

The Chair replied that the White Paper does not explicitly make such allowance, but did note that it does recognize the Chair’s earlier point that VANS could generate revenue for the PSTS. No current provision of law allows VANS to provide VoIP, and this committee would not venture beyond the existing policy framework and alter this law. The current policy framework might indeed change in the future, but the committee has presently been as flexible as possible within the current policy framework.

Ms Vos inquired whether there is any room to maneuver within the current policy framework to fix an exact definition of the term "bypass ".

The Chair replied that the key concern here is not a precise definition of "bypass", but rather whether VANS should be allowed to provide VoIP.

Clause 16
Ms Vos requested a re-evaluation of the term "teledensity" in the proposed amendments.

The Chair replied that the SACF had provided a definition, and suggested that it be considered for possible inclusion in this clause. He noted that there were no objections to the first proposed amendment for this clause.

Ms Smuts questioned the reasoning behind the second proposed amendment.

Mr Smuts replied that "any" would be inserted to indicate "any at all".

Ms Vos asked why the proposed clause 40A(4) of the Bill referred to the granting of licences by the Minister, whereas subsection 2 provides that the licence be granted by the authority.

Ms Smuts suggested that the phrase "on the recommendation of the authority" be inserted in subsection 4 so that the authority is not undermined or bypassed completely.

The Chair inquired as to the procedure to be followed here.

Ms Smuts replied that essentially the authority would recommend that the licence be granted and the Minister would then actually grant the licence in accordance with this recommendation.

The Chair rejected this proposal.

Mr Smuts informed the committee that there is indeed a drafting error in the proposed clauses 40A(2) and (4) of the Bill, as the two subsections do conflict. The DG is requested to provide clarity on this.

Ms Smuts attempted to solve the present dilemma by informing members that the White Paper stated the Minister would grant such licence, whereas the Bill provides that the authority must issue the licence.

The Chair stated further that the current formulations provide that the authority "issues" and the Minister "grants" the licence create a distinction between the two processes. The confusion would be resolved by replacing the word "grant" with "issue".

Ms Vos inquired of the SLA whether, in terms of ensuring that this provision is not (ab)used as a "front" for big business, a reference to a clause such as the proposed section 35(4) on page 11 of the Bill is not needed to make the intention of the section more explicit.

The Chair agreed that a similar section needs to be inserted here.

Ms Vos urged for emphasis to be placed on the phrase "especially women" in this regard.

The Chair agreed and suggested that "and" in the proposed section 35(4) be retained here as well, and called for clarity on the precise meaning of the phrase "prescribed terms and conditions" in the proposed section 40A(6)(b) of the principal Act.

The Chair then inquired what precisely the meaning of the third proposed amendment in this clause would be, if enacted.

Dr P Doany (Cell C) drew the committee’s attention to the potential problem in granting licences to so many service providers (Telkom, the SNO, Vodacom, MTN, Cell C and the SMMEs) within the same spectrum.

The Chair replied that the under-serviced area spectrum is basically "empty", and that this concern would not pose a problem.

Dr Doany then highlighted the potential problem if the SMMEs and Telkom were to service the same under-serviced area. He suggested that the duplication of services here would not be cost effective at all, and that either the SMMEs or Telkom should service the area, not both.

The DG informed Dr Doany that these areas may not have coverage, even though the spectrum covers these areas.

The Chair agreed with the DG’s statement - the reason for this is the fact that the teledensity in such areas is so low.

Dr Doany insisted that such licences not be provided indiscriminately, but only to those areas where it is needed.

The Chair then considered the fourth proposed amendment for this clause.

Dr Doany stated that it would not be cost effective at all to allow the SMMEs to interconnect with all the operators.

The DG replied that the SMMEs would be allowed to choose which operator to interconnect with, as far as the suitability of the terms and conditions attaching to such interconnection is concerned.

The Chair agreed with the fourth proposed amendment.

Clause 17
The Chair noted that no objections were raised to the proposed amendments relating to clause 17.

Ms Smuts recommended that line 15 on page 15 of the Bill be deleted along with lines 21 to 23 on page 16, as it would be unrealistic to expect all licensees to reciprocate the interconnection to the big businesses.

The Chair disagreed with Ms Smuts’ interpretation of the relevant provisions, and saw no need for their amendment.

Dr Cielli attempted to provide clarity and stated that the provisions do not mean that the traffic or payment between the two parties has to be the same, but only that the actual provision of the service has to be done mutually or on a reciprocal basis.

The Chair agreed with this explanation and drew the committee’s attention to the proposal by Sentech regarding interconnection that calls for interconnection to be transparent, non-discriminatory and fair. This issue will be revisited at a later stage.

Ms Smuts requested that lines 44 to 46 on page 15 of the Bill be deleted as this provision creates the untenable situation in which the Minister then rules that the authority controls the matter, when in fact the dispute should be regulated by the authority from the outset.

Mr M Markowitz, advisor to the ICASA chairperson, informed the committee that in its written submission ICASA requested that ICASA alone should be allowed to impose terms and conditions should the parties not agree.

Clause 18
The Chair questioned the need for clause 18(c) of the Bill at all.

Mr Smuts agreed and replied that once the authority has pronounced on an issue, that is the end of the matter and the decision is final and binding. The Minister need not, or should not, be involved in the process at all.

Dr Cielli agreed with these proposals.

Mr Markowitz further informed the committee that the current section 33(7)(2)(b) of the principal Act provides that the authority prevails here.

The Chair agreed with the suggestions, and called for the matter to be reconsidered.