Telecommunications Amendment Bill: briefing

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SELECT COMMITTEE ON LABOUR AND PUBLIC ENTERPRISE

SELECT COMMITTEE ON LABOUR AND PUBLIC ENTERPRISE
23 October 2001
TELECOMMUNICATIONS AMENDMENT BILL: BRIEFING


Chairperson : Mr Fenyane

Relevant Documents:
Telecommunications Amendment Bill [B65-2001]
Telecommunications Amendment Bill [B65B-2001] [As amended by Portfolio Committee]

SUMMARY
The Deputy Director General (DDG) of the Department of Communications briefed the Committee on the latest draft of the Telecommunications Amendment Bill, the background to the Bill, the reasoning behind the significant amendments and the relevant input from members of the telecommunications industry.

The DDG answered Members’ questions regarding the position of Telkom under the Amendment Bill, as well as the tension around the granting of a multimedia licence to Sentech and the possibility of future convergence of the telecommunications and broadcast media.

MINUTES
Mr P Pongwane, the Deputy Director General (DDG) of the Department of Communications (the Department), informed the committee that this briefing will focus exclusively on the significant and problematic amendments to the Bill on a clause-by-clause basis. The members are free, however, to question the Department on any provision in the Bill if needed.

Clause 1
This clause deals with the definitions of terms that permeate the Bill. The first problematic term in this clause was the proposed definition of "carrier-of carriers", with objections claiming that these were limited to the Public Switched Telecommunications Services (PSTS) and mobile cellular telecommunications operators alone. For this reason the proposed definition has been amended to include "under-serviced area licences" within the definition.

The Chair requested the DDG to indicate the precise lines in clause 1 of the Bill that have been amended, and inquired whether a final draft of the Bill is available.

The DDG replied that this document is presently being prepared by the State Law Advisor (SLA) for scrutiny by this select committee. Furthermore the document is not a final draft, but only contains the most recent amendments to the Telecommunications Act 103 of 1996 (the principal Act), and should only be used as an indication of the changes effected.

The Chair was sensitive to the labourious process braved by the Department, and noted that this select committee eagerly awaits this document. The DDG was asked to proceed with the briefing.

The DDG proceeded to inform members that the term "under-serviced area licence" was inserted in line 14 on page 1 of the Bill after "licence", and after "or" in the next line "vice versa" was inserted. Furthermore, the phrase "in the Republic" was inserted at the end of line 2 on page 3 of the Bill. The issue here was that the "carrier-of carriers" would be able to direct traffic from within the Republic to a destination outside South Africa and the inclusion of the term "vice versa" merely allowed for this traffic to be redirected back into the Republic.

The Chair apologised to the DDG for interrupting the briefing, but suggested that a brief summary and background to the amendments in the Bill be discussed so as to provide clarity for members. The detailed discussion of the substantive reform would then be dealt with at a later stage of these deliberations.

The DDG agreed with the Chair’s suggestion, and informed members that the amendments to the Bill, as well as the reasons for them, will now still be discussed on a clause-by-clause basis, but in far less detail. The briefing will resume at clause 2 of the Bill.

Clause 2
The DDG informed members that this clause deals with the objects of the principal Act and the proposed subsection (r) was inserted to "facilitate convergence" of the broadcasting and telecommunication functions. In fact, a document provisionally titled the "Multimedia Act" is being prepared and deals directly and exclusively with this concern.

Clause 3
The DDG informed the committee that this clause deals with the provision of a multimedia service including the practical considerations in this regard, such as the establishment of an infrastructure to provide this service.

Clause 4
The DDG informed members that the Independent Communications Authority of South Africa (ICASA) approached the Department and suggested that the process of the adjudication of applications for the licence contemplated in this clause was unnecessarily lengthy. For this reason ICASA requested the Department to shorten this process via amendments to the Bill, and highlighted two areas of the process that caused the protracted proceedings: firstly, the provision of public hearings regarding the issue of licences. Secondly, the fact that the regulator has to formulate recommendations after such hearings which then have to be presented to the Minister for final pronouncement is causing much concern and unnecessary delays, as witnessed with the processing of the Cell C licence. ICASA consequently recommended that phrase "intended recommendations" be reduced to mere "recommendations" which would then be decided on by the Minister.

Clause 5
The DDG stated that this clause dealt with the granting of an 1800mHz frequency licence and third generation spectrum licence. During the drafting process government announced that these were aimed at aiding Cell C exclusively, whereas they should be targeting the other existing major telecommunications operators, such as the PSTS operators, the mobile cellular telecommunications service providers and the Second National Operator (SNO).

Furthermore, this is regarded as an extremely valuable spectrum and the issue regarding the cost involved in the provision of this spectrum has to be decided upon. In the United Kingdom this service was provided at a mammoth cost of 22,5 billion Pounds, but the service provider(s) now bear a huge debt and cannot effectively implement the third generation spectrum licence as a result of their hasty decision to implement the service. The South African government then decided that its investors and telecommunications industry cannot be allowed to suffer the same fate as its British counterparts, and for this reason the use of auctions to find a service provider was rejected and the licence was instead allocated an existing telecommunications operator.

Clause 6
The DDG informed members that this clause deals with the application for a PSTS licence. The South African government is yet to decide on a "set aside" for the benefit of Transtel and Esi-Tel, but a stakeholding of up to 30% of the SNO has been allocated to Black Economic Empowerment (BEE).

The proposed section 32B of the principal Act deals with the granting of certain servitude rights, and the reason for their incorporation in this clause is they are personal rights and can consequently only be transferred via legislation.

The proposed section 32C of the principal Act deals with the nature and role of Sentech (Pty) Ltd (Sentech) in the Bill, as a wholly owned state enterprise. This section was amended to reflect that Sentech is recognised as a "multimedia service provider" and as a "common carrier". Yet the problem experienced with this section is that section 1 of the principal Act defines "multimedia service" as a "digital broadcast service", and it was argued extensively that by granting a licence to provide a telecommunications service to a broadcasting body such as Sentech would inevitably elicit constitutional criticism. Indeed, a proper understanding of the precise meaning of a "multimedia service" clearly recognises the necessary convergence of these two mutually exclusive services. This proposed section was also criticised for seemingly affording Sentech the exclusive rights to provide a multimedia service.

The principal Act does impose an obligation on Sentech, as a common carrier, to provide the service throughout the Republic. The South African government decided in favour or Sentech as provider of this service as it already possesses a well-established infrastructure throughout the rest of the African continent, and would thus assist South Africa in "bridging the digital divide" and establish sound links throughout the African continent. The problem currently facing the local telecommunications industry is that all traffic involving the African continent has to be routed via Europe but, with the aid of Sentech, such traffic would be routed within the African continent.

Clause 7
The DDG informed the committee that this clause attempts to accommodate the Sentech licence within the general telecommunications service licencing procedure.

Clause 8
The DDG stated that this clause details the types of service licences and invitations to apply, as well as the relationship between ICASA and the Minister in this regard. The primary problem in this clause is that in terms of the Independent Broadcast Authority Act of 1993 (IBAA) ICASA would have to make regulations regarding the issue of such licences that would then be published in the Government Gazette, and ICASA alone decides whether the licence should be issued or not. Yet in the Telecommunications Act 103 of 1996 ICASA is called upon to make recommendations regarding the issue of the licence and these recommendations would then have to presented to the Minister who would, in turn, have the "final say" on whether the licence is granted or not.

Clause 9
The DDG informed members that this clause deals with the processing of the licence from the ICASA recommendations to the stage when the Minister then finally decides on the outcome. The corresponding section in the principal Act requires ICASA to present the "recommendation" to the Minister, and also places a duty on the regulator to notify the applicants of the outcome of the licencing procedure. This clause shortens this procedure, pursuant to the request from ICASA itself, and provides that ICASA must now make recommendations to the Minister who can then, in turn, perform any one of the four functions listed in the proposed section 35(3)(a) to (d) of the principal Act.

Furthermore, the consideration of BEE in the licencing procedure has been further emphasised by this clause, and requires the licencing body to promote empowerment and particularly the advancement of women within the telecommunications industry.

Clause 10
The DDG informed the committee that the principal Act only competitive bids are allowed in terms of applications for the requisite licence, but the Bill now provides for various other types of licencing in an attempt to remove this vacuum. A possible example includes the allocation of spectrum licences via auction, if necessary.

Clause 11
The DDG informed members that this clause expands the definition of PSTS in clause 1 of the Bill, and the proposed section 36B of the principal Act details the network to be used in providing this service.

Clause 12
This clause amends the previous section 37 of the principal Act as it now Cell C has been included as a mobile cellular telecommunication service licencee, together with Vodacom and MTN.

Clause 13
The provision of "national long distance telecommunications services" has not yet been liberalised, and currently only Telkom and the SNO have been licenced to provide this service. The Bill now requires the Minister to decide, after 7 May 2002, whether this service may be provided by any other operators.

Clause 14
This clause deals essentially with the same issues as its predecessor, but in this case it governs the local access network.

Clause 15
The Bill amends the definition of Value-Added Network Services (VANS) by deleting the phrase "electronic transaction" and reinserting "value-added SOMETHING ". The input from the industry representatives was invaluable in broadening the definition of VANS in the principal Act, as well as the ensuing reformulations of the definitions of "resale" and "facilities leasing" in the principal Act. Furthermore, section 37 of the principal Act was amended to now states that Telkom and the SNO are no longer the only providers of VANS.

Clause 16
The phrase "under-serviced area licencees" is inserted by the Bill by this clause and defines these areas as areas "having a teledensity of less than 5%", and further defines "teledensity" as "the ration of fixed lines per 100 hundred people". The corresponding provision in the principal Act was expanded to allow the provision of Voice over Internet Protocol (VoIP), to which the South African VANS Authority (SAVA) objected.

Clause 17
This clause deals with Private Telecommunication Networks (PTN) which are not services that are sold or provided to the general public, but are rather used for personal or private services. The definition and provision in the principal Act were expanded and clarified by the Bill and now incorporate Virtual Private Networks (VPN) within its definition. This inclusion was feverishly debated in the Portfolio Committee deliberations as the amended provision implied, it was suggested, that VPN are in fact PTN, which could not be accepted.

The South African government decided that, for educational purposes, public schools should be linked to the PTN to promote "E-Learning"

Clause 18
The DDG informed members that this clause details the powers of the regulators, especially those relating to "interconnection", "facilities leasing", and the latter is concerned with the provision of services by PSTS licencees to, for example, VANS or for resale. The South African government has issues policy directives providing that the SNO can use Telkom services and infrastructure to provide its own services to its customers. The aim of this allowance is to provide healthy competition in this area of the telecommunications market, but the finer details of this relationship is governed by the agreement concluded between the two parties on the matter.

Clause 19
The DDG informed the committee that this clause deals, essentially, with the same issues as clause 18.

Clause 20
The DDG informed members that this clause gives effect to the government policy directive instituting a 50% discount on access to telecommunication facilities and services for all public schools. The aim of this "education rate" is to make these services, especially access to- and use of the Internet, more accessible to learners in South African schools.

Clause 21
This clause deals with the sensitive issue of "consumer protection". It is important to note that the principal Act does not mention this concern, and for this reason the Amendment Bill has now, via this clause, granted the regulator the power to make regulations on this matter.

Clause 22
This clause represented an attempt at establishing a Mediation and Arbitration Commission for the Telecommunication industry, and its functions would be the resolution of disputes, such as the issue of "resale", between the various telecommunications service providers. The amendment proposed the establishment on an "Appeals Tribunal" to deal with such disputes, yet the Portfolio Committee decided against the establishment of both the Commission and the replacement for the Appeals Tribunal. Consequently the entire clause 22 of the Amendment Bill has been deleted, and the Portfolio Committee reasoned that this issue would best be dealt with via the amendment of the ICASA Act of 2000 that should occur in the early part of next year.

Clauses 23 to 28
The clauses deal collectively with the establishment of the "Universal Service Agency" (USA), and the reason for its incorporation is that the principal Act refers exclusively to the "Authority" and not the USA. The Amendment Bill now expressly provides for this board that would have an overseeing this function. The current contribution to the Universal Service Fund (USF) stands at 0,16, but it was decided that this figure be increased and "shall not exceed 0,5" of the annual turnover of the telecommunications service providers. These funds would then be transferred to the USF that would in turn be managed by the board of the USA. The purpose of the USA is to provide universal service of telecommunication facilities to the general population, especially those contemplated in section 66(1) of the principal Act.

Clause 29
This clause deals with the provision of "emergency services", and it was decided by the Portfolio Committee that these services would be provided free of charge. The purpose behind this decision was a concerted effort to establish channels of communication between the South African Police (SAP), the emergency rescue services and these proposed call centres to effectively deal with the reported emergency. It was further agreed that the designated number to be provided for the reporting of these emergencies is "112", and that a domain name would also be provided for online reporting of such emergencies. The employment of a Global Positioning System (GPS) service was recommended to identify the precise location of the person in distress, as well as to come to the assistance of differently abled persons.

Clauses 30 and 31
These clauses deal with "number portability" and "carrier pre-selection" respectively, and was the focus of much heated debate during the Portfolio Committee deliberations. Number portability will be introduced in 2005, and the primary concern in this regard is that the provision of this service by the operators is rather costly as it necessitates the establishment of an "intelligent network" to successfully provide this service. Furthermore, it also affects consumers as they ultimately bear the cost of the provision of this service. Yet it is an important service in the telecommunications industry as it allows one mobile cellular telecommunications service consumer to use the same number "for life’. Carrier pre-selection essentially allows the SNO to "gain market entry" and consequently increases competition between the service providers. This service will also be provided in 2005.

These clauses have, however, been removed from the Amendment Bill as these issues will be dealt with as matters of policy, which therefore obviates the need for their inclusion in the Bill or the principal Act.

Furthermore, the proposed section 89B of the principal Act deals with "directory services".

Clause 32
This clause assists the regulator in that it shortens the prescribed period during which the regulator normally has to formulate regulations. The principal Act required the regulator to publish its regulations in the Government Gazette for 3 months, but this provision has been amended by the Bill and has now been reduced to only 1 month. Furthermore, the regulator is now required to consider the objects of the principal Act when making these regulations.

Clause 33
The DDG informed members that currently TCM are scattered between various telecommunication operators.

Clause 34
This clause now renders the reporting of "hoax calls" to the emergency centres an offence by amending section 101 of the principal Act.

Clauses 35 and 36
These clauses repeal outdated or irrelevant legislation.

Schedule
The schedule calls for the amendment of the Sentech Act in terms of its licence, it also repeals Act 143 of 1993 in terms of the provision of emergency services. The proposed amendments to the ICASA Act have been deleted as it was decided that the matters would best be resolved by the amendment of the ICASA Act in the early next year.

Memorandum
This merely contains a clause-by-clause analysis of the Amendment Bill.

The DDG concluded the briefing by calling on members to present questions.

Discussion
Ms B N Dlulane (ANC) questioned the rationale behind the removal of the ICASA hearings, and voiced her disagreement with the decision taken by the Portfolio Committee in this regard.

Mr Z S Kolweni (ANC) inquired as to the "peripheral responsibilities" of Telkom regarding the provision of telecommunication services, and the possible impact this might have on its current mandate.

Mr M J Bhengu (IFP) stated that the impression created by the amendments that Telkom’s monopoly over the local telecommunication market is being entrenched by the Amendment Act, and that its competitors are effectively being "squashed". Is this in fact the intention of the legislature in drafting the amendments?

The DDG responded to Ms Dlulane’s question by stating that the amendments proposed by the Bill do not entirely remove ICASA’s right to hold hearings, but rather affords it the discretion to hold public hearings should it see fit to do so. The reason for granting it this discretion is that various problems with the hearings were experienced during the Cell C licencing procedure, and for this reason ICASA itself requested the discretion so as to avoid holding those hearings that do not necessarily contribute to the licencing process.

The DDG then turned to Mr Kolweni’s concern and suggested that Telkom itself would perhaps be in a better position to answer this question, but did state that government does evaluate whether the provisions of the Telecommunications Act in fact achieve their stated objectives in terms if best serving the South African consumers and economy. Furthermore, the South African government decided against the complete "open[ing] up" of the telecommunications industry as this would both disadvantage the economy and Telkom shareholder, but would also adversely affect the state’s own shareholding in Telkom. For these reasons "managed liberalisation" was introduced as a compromise to best serve the interests of the consumers, the economy and the players in the telecommunications industry.

The Telecommunications Act also imposes a strict penalty on Telkom if it does not fulfill its obligations under this Act, and the licencing of the SNO is intended to provide competition for Telkom and will affect its "profitability".

The DDG replied to Mr Bhengu’s question by stating that Telkom had no improper involvement in the drafting of the Amendment Bill, and in fact it is the South African government that has the final say in this regard. It is common knowledge that not all interested parties will be satisfied with the final draft of the Bill and indeed Telkom itself raised several concerns with the Amendment Bill regarding number portability, carrier pre-selection and resale, among others. It is thus evident that Telkom’s monopoly is not entrenched by the Bill (but rather that Telkom’s monopoly is entrenched by the South African government).

The Chair then presented the DDG with three concerns of his own regarding the Amendment Bill. Firstly, the mobile cellular telecommunication service providers argued that the definition of "fixed-mobile service" in the Bill will stifle competition as it makes the entry of Cell C into the market that much more onerous. The philosophy behind this concern has to be discussed in greater detail. Secondly, it was understood that the current 900mHz spectrum is being so "overused" that the operators have requested the new 1800mHz spectrum to accommodate the huge influx of traffic. Consequently, would the granting of this 1800mHz spectrum licence to Cell C not give it, as an "infant operator", a competitive edge over the existing mobile cellular service providers. Thirdly, what precisely is the intention behind providing for two different regulation-making procedures in the Telecommunications Act of 1996 and the Independent Broadcast Authority Act (IBAA).

The Chair then stated that the DDG would not have to answer these questions immediately, but that they would be returned to at the next session of this select committee.

Mr M V Moosa (ANC) requested the DDG to provide clarity on the issues regarding the granting of a multimedia service licence to Sentech (Pty) Ltd (Sentech), as well as on the proposed definition of VANS in the Bill.

The Chair allowed the DDG to respond briefly, as these substantive issues will be dealt with in great detail during the next session.

The DDG responded to the second question posed by Mr Moosa by informing the honourable member that the VANS definition has been amended, and now closely resembles the definition proposed by ICASA. The PSTS licencees and VANS had disputed the formulation of the third in the Bill’s definition regarding the application of technical resources, and an agreement was reached that the phrase "managed data services" would be inserted as a compromise.

The DDG then answered Mr Moosa’s first question by stating that the proposed definition of "multimedia service" in clause 1 of the Amendment Bill has been changed from "digital broadcast service" to now refer to a telecommunications service. Yet this revised definition in no way undermines or negates the current definition in the IBAA, as these two Acts would now operate concurrently. Sentech will be granted a licence to provide multimedia services as a common carrier, with the purpose of establishing an infrastructure to provide this service to the general public on a "reasonable, equitable and non-discriminatory basis". The decision was taken during the Portfolio Committee deliberations to include the multimedia licencing under the proposed section 34(2)(b) of the principal Act because it is a "major licence". This decision also allows other licencees, especially at infrastructure level, an Invitation to Apply (ITA), and they can also use the Telkom and SNO infrastructure to provide this service.

The primary objection raised by the VANS is that the Bill does not allow them to provide multimedia services, and Multichoice argued that the service is not currently "interactive", but is merely a broadcast service. For these reasons the Portfolio Committee resolved to provide that Sentech would not be the only provider of multimedia services in the Republic, and that the IBAA and ICASA Act would not be violated by granting a multimedia licence via the Telecommunications Act.

Mr Moosa then inquired whether the phrase "digital broadcast service" in the Bill’s multimedia definition could not simply be replaced by "telecommunication service" in an effort to effect convergence of the two media, so that there would be just one process to regulate it and its licencing procedure.

The DDG replied that there are so many differing views on this issue of convergence, and informed members that the proposed Multimedia Act and Electronic Transactions and Communications Bill will grapple with precisely this issue. It is worth noting that foreign jurisdictions have decided to steer clear of integrating the two media, and the study done by Price Waterhouse Coopers in this regard suggests it would not be a feasible option in the local telecommunications and broadcast industries either. For this reason a Multimedia Act has been proposed that would probably only focus on those areas of convergence that need consideration, such as Internet TV. Thus the IBAA and the Telecommunications Act as amended still remain separate pieces of legislations, and the provisions in both laws dealing with this topic have to be constitutionally sound. It is thus still debatable whether convergence of all areas is necessary, or whether it should only address those areas needing convergence, such as multimedia services.

The Chair thanked the DDG for his highly informative and declaratory briefing, and adjourned the session.

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