Telecommunications Amendment Bill: deliberations

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Meeting report

Justice and Constitutional Development Portfolio Committee

LABOUR AND PUBLIC ENTERPRISE SELECT COMMITTEE
30 October 2001
TELECOMMUNICATIONS AMENDMENT BILL: DELIBERATIONS

Chairperson:
Mr S Fenyane

Documents Handed Out:
Telecommunications Amendment Bill [B 65-2001]
Telkom's Comments on latest proposed amendments (see Appendix 1)
Sentech's Comments (provided later; see Appendix 2)

SUMMARY
Telkom explained its concerns over the latest proposed amendments.

Although Sentech also wished to present its concerns, the Chairperson ruled that Sentech could do so only in writing. The Chair explained the proceedings were not public hearings and Telkom had made special arrangement to address the Committee.

The Director General explained how and why the Bill provided accurately on telecommunication issues.

MINUTES
Telkom's input on the Bill as comment
The Telkom representative read the submission outlining Telkom's concerns. As the written document was not readily available to committee members, very little discussion and questioning ensued.

Sentech's request to comment on the Bill
After Telkom's presentation, the Chair was informed that Sentech had also sent a delegation to address the Committee. The Chair however held that Sentech would not be allowed to address the Committee. He noted that these proceedings were not a public hearing. A hearing had been afforded to Telkom specifically. This procedure was allowed in terms of the rules of Parliament. There was nothing irregular about letting stakeholders, whose interests were to be negatively affected, air their concerns before Parliament. He added that allowing Telkom to speak, did not make the meeting a public hearing.

Some Committee members interjected and reminded the Chair of a similar exception which had been made for COSATU in the past, where they had come before the Committee - not in a public hearing - and they were allowed to make a submission. It was pointed out that in light of the fact that an organization had traveled so far to address Parliament, the least that could be done was to hear them. The members asked why this could not be done here again because surely it would be waste of time for the Sentech representatives to come all this way and not present their case.

Mr Fenyane reminded the Committee that he had not made a ruling with regard to COSATU but instead had asked the Committee if they wanted to hear from COSATU. The Committee had said that they did. However, in this example there was a danger of opening the doors to a completely new set of public hearings. Mr Fenyane also spoke of rich and poor industry players. Rich industry players could afford to send as many people as they wanted while players not as well endowed could not afford to do so. This would thus be unfair as Sentech and other industry players at the present meeting would be able to present while others, long returned to their home towns would not be able to.

Mr Fenyane added that the Committee had limited time which had been carefully budgeted. To change the agenda would be to disrupt the schedule and throw everything out of sync. It was thus important to continue on their planned course.

Mr Fenyane's final decision as chairperson was that Sentech would not be allowed to make oral submission but they would be allowed to make written submissions that would receive as much consideration and attention as an oral submission.

Director General's input on the Bill
The Director General, Mr Andile Ncgaba, addressed the Committee on the Bill from the perspective of the Department and stated why the Department was pleased with the formulation and general form of the Bill.

First the DG outlined the history of this Bill. He told the Committee how the first such legislation was the 1958 Post Office Act. This Act dealt with both postal and telecommunications issues. Before this there was the 1952 Radio Act, and prior to that the 1949 Cable and Wireless Act. There was also a 1943 Act that removed telecommunications from the provincial sphere and placed it in the National sphere of government.

The DG then moved on to the present Bill saying that the wording of some of the definitions was "remarkable" and that these definitions would be extremely important in the times to come. For this reason, attributing a precise and appropriate definition to these words was essential and this goal had been achieved in the Bill. He did however add that the Department had some concerns that would have to be remedied through the addition of some new concepts.

The DG, at the request of the Chair, commented on the definition of the term 'fixed mobile' which the Chair noted was an area where the Portfolio Committee had struggled to come to an agreement and achieve a definition that would cater for all concerns. The DG said that he "loved this part" and that the Committee had done well to capture the meaning of the term. He explained that fixed mobile communications was a system applied quite well by MTN in Uganda. This was in his opinion the most dynamic system on offer in the communications industry to date and would be capable of taking phone services to ordinary people everywhere.

The DG explained that fixed mobile technology worked similar to the usual cellular technology but on a geographically limited scale. This meant that if somebody wanted a mobile phone - but as they moved around almost exclusively within Soweto - they would need mobility only within this area. Fixed mobile technology would allow for this allowing an individual to call anywhere in the world and receive calls, as long as the phone was being operated within their area, in this example, Soweto. The DG's example showed how this technology was similar to the ordinary cordless phone and would operate only within that phone's cell.

In response to the Chair asking the DG to explain what he meant by the concept of a cell, the DG said that the cellular network that enables people to use their phones was composed of overlapping cells. Each cell had a mast in the middle. This mast was then the aerial which cellular phones communicated with when transmitting their signals. Fixed line phones are also slowly being replaced with mobile phones and some people want only limited mobility as explained above. Low income earners have phones with national mobility which they do not need but which they certainly pay for. Fixed mobile technology then provides mobile communication, limited in geographical scale.

The DG continued that the definition of 'fixed mobile' accommodated for that which he had mentioned but there were a few words which the Department would want this Committee to add to the definition.

The DG moved on to the definition of 'multimedia' saying that this was a very important provision for the future as the services mentioned in the definition would become available in the near future. These services included video on demand, pay per view and internet television. These services were a reality as Sentech already had the technology to provide such services. The Department's attitude towards these services was positive. This was because there were a lot of poor people who were being left behind as they did not understand new technology such as the internet and they could not afford a computer. Providing internet over the television was thus a good thing as these people would probably already have a television.

The DG then told the Committee that the GSM 900 MHz band had nearly been exhausted and for this reason it was important to legislate regarding the other available band, namely the 1800 MHz range. This new cellular band would be given to the cellular service providers as well as a smaller portion being given to Telkom and the Second National Operator (SNO). The DG explained that although it seemed strange that the fixed line operators were being given cellular frequencies it was necessary as it would be these companies providing the fixed mobile services.

Another important issue was that of the third generation cellular technology such as that recently unveiled in Japan. The cellular phones currently being used were second generation phones while the new ones - enabling video communication - were third generation. These new phones would have a small camera and would allow people communicating to actually see each other.

The DG said that in the United Kingdom the licence to provide this service was auctioned off for billions of British Pounds. This amount was paid up over a very short period of time. The result of this was that the service providers buying the licence had no capital left to put the necessary infrastructure in place. The chain of events ensuing had resulted in the consumer bearing the ultimate cost. For this reason the Department follows the opinion of Australia where it is felt that such a fee or cost should be paid over a length of time. The DG also gave the example of countries where companies were allowed to share networks and other infrastructures.

The DG then went on to canvass over the rest of the Bill. Another important issue which was raised, perhaps in response to Telkom's submission, was the subject of the telecommunications museum and the expropriation of Telkom property. The DG explained that the Department had spoken to the Department of Arts, Science and Technology, and had come to the conclusion that this was a very important component of history that should be held in State hands. This would be good for the country as it was an important part of out heritage. The museum should thus be created in a manner that would make it available to all people. The DG noted that he had in his office a very old letter that was sent from one post-master to another detailing the process around postage. The Department had very old artefacts, such as stamps and old phones, in its possession. All of these would be displayed in the museum for the benefit of all South Africans.

The DG spoke well over his allotted time and the meeting had to adjourn with no further discussion taking place.

Appendix:
TELECOMMUNICATIONS AMENDMENT BILL [B65B-2001]

TELKOM'S COMMENT TO THE SELECT COMMITTEE OF THE NCOP ON
COMMUNICATIONS
The latest proposed amendments to the Telecommunications Amendment Bill raise a number of issues, which are of considerable concern to Telkom SA. These amendments to the Act pose not only a direct challenge to the post exclusivity telecommunications regime crafted by the Government, and would if passed by the House in their present form lead to its unravelling.

Sentech's Licence
The Chairperson of the Communications Committee in his speech to the House of 25 October 2001 stated that one of the intentions of the bill is to grant Sentech "... a licence to build a common carrier backbone infrastructure to provide multimedia services". The intention, it would seem being that a network of "...high speed and capacious..." quality would be built to provide "...seamless, high speed connectivity to Internet Service Providers (ISP's).. as an alternative to the existing Telkom network.
Clause 32C (1)(b) in turn provides that Sentech shall provide ".. multimedia services to any person who requests such service11.

Whilst this may seem innocuous, the effect of this policy and legislative change, which stands in stark contrast to what has gone on before and constitutes a material change therefrom, is that it effectively positions and licenses Sentech to provide the services that a third PSTS operator would provide.
In the first instance in terms of the stated policy framework, Sentech multimedia licence right would have had the right to provide multimedia services directly to end-users. This has now been expanded to a right to PSTS right to provide services to telecommunications service providers. It should be noted that ISP's are for all intents and purposes VANS. Current law and the policy framework for the licensing of the SNO provide that VANS providers must obtain their telecommunications facilities from PSTS licensees. The multimedia licence right is also open ended in scope and can easily be construed as a right to provide to VANS both local, long distance and international services in a manner that would be contrary to both policy and the PSTS licensing framework.
Licensing multimedia services as proposed would not only undermine the licensing framework of PSTS operators but in addition the viability of the PSTS operators, particularly that of the SNO, to whom the margins afforded by services of this nature will be critical to its survival.

Fixed Mobile Telecommunications Service.
Whilst there is considerable capacity for confusion over this concept, it should in the first instance be noted that in accordance with policy, the fixed mobile service is an exchange bound public switched telecommunications service. It affords the user of the service, mobility within the confines of the exchange area and prohibits call handover from one PSTS local exchange area to another. It is accordingly not a mobile cellular service nor may it be defined with reference to mobile cellular licence rights, particularly a cell bound limitation on handover. It is a PSTS service which can only be defined with reference to the parameters of a PSTS licence right.

Carrier Pre- Selection
It would, in addition seem that a different position is being taken on Carrier Pre Selection from the one, which was originally mooted. It is argued that "...we should all support the latest concession that the period of implementation be shifted to the end of 2003". The policy position had been that Carrier Pre Selection was an issue which merited close scrutiny, firstly because the costs, more particularly which parties were to bear the costs, associated with the countrywide adoption of the service were not known. Accordingly that a study was to be initiated in 2003 to examine the costs and benefits of its adoption, with a view that should its introduction be viewed in a positive light that the service would be introduced at the earliest in 2005. A cautious approach to Carrier Pre Selection was also mandated by the fact that the primary goal of post exclusivity telecommunications policy has been to ensure that facilities base competition in PSTS provision is the norm rather than the exception. This is recognised as the most effective manner in which competition in the sector would ensure that telecommunications infrastructure was built and a substantial increase in the teledensity of the country could be assured. Any derogation from this principle, which the introduction of an open ended form of Carrier Pre Selection would represent, would undermine facilities based competition. There would be in essence no incentive to build a network where the capacity to exploit the existing network existed or was created. In order to operate from day ONE the SNO has full access to Telkom's network over two years.

Accordingly the policy position has been that the SNO's network would have to be substantially complete before Carrier Pre Selection could be considered. The building of two substantial PSTS networks was also recognised to be the foundation basis for the introduction of a service based TNO operator in 2005. Any policy, which undermined facilities based competition threatened in the fullness of time to undermine service based competition, ironically with respect to which Carrier Pre Selection was an important and very necessary pre condition.

ICASA's expanded powers
The Telecommunications Amendment Act vastly increases the scope of ICASA's powers. In addition to its power to make regulation on any matter, which in terms of this Act shall or may be prescribed by regulation, ICASA is afforded the power make regulations on "any matter necessary or expedient for the regulation of telecommunication activities" and "any matter or procedure or form which may be necessary or expedient to prescribe for the purpose of this Act'1.
It suffices to say that Telkom is firmly of the opinion that these provisions of the Amendment Bill (Section 96 (1)(b) and (c) are unconstitutional. They accord the Authority, an administrative body, legislative power which does not constitute delegated authority to make subordinate legislation within the framework of a statute but is the assignment of plenary legislative power. Telkom has sought advice from Counsel on the matter, which it wishes to make available. Should the advice not be acted upon Telkom will seek legal advice on how to protect its rights in the circumstances.

The Expropriation of Telkom Property
In Section 96A of the Amendment Bill provision is made for the Director General to establish and manage a museum that"... depicts the evolution and the history of the telecommunications sector in South Africa". To this end section 96A(3) provides that "the content of the museum housed in the Telkom Museum on Telecommunications History shall be transferred to the museum established in terms of subsection (1)".

It is not certain on what basis this is to done. The artefacts, which are housed in the Telkom Museum, are by no means the assets of the state, with respect to which provision may be made for the transfer of artefacts housed in one museum to be transferred to another museum. They are the property of a public company, Telkom SA, and the attempt by statutory means to divest Telkom of its property and the right vested therein can only be regarded as acts of expropriation.

Concurrent Powers.
Provision is made in Chapter X of the Telecommunications Amendment Bill for the establishment of 112 Emergency Centres. These are defined as "communication service centres by means of which the user of a public telephone system has the ability to reach an emergency centre by dialling the numeral 5 112 to in order to request an emergency service". "'Emergency Centre" being defined for the purposes of the Act as "...in respect of any locality, the relevant police, fire, ambulance or traffic authority or coast guard services for that locality..."
It should be noted that Schedule 5 of the Constitution, provides that ambulance, traffic and parking services are functional areas of exclusive
provincial legislative competence. It accordingly is by no means certain that the national legislature may legislate on matters, which are clearly within the competence of provincial authorities. Further even if it were to be argued that the proposed legislation affected such powers only indirectly the concurrent action of the provincial legislatures with what is intended would surely be necessary.

In similar vein it is sought in Section 41(10)(a) of the Amendment Act to establish with the "...concurrence of the Minister of Education..." "an entity to construct and operate an educational network". This entity will, it is contemplated, "...be deemed to have been granted a private telecommunications network licence to link all public schools and public further education and training institutions..." Education is in terms of Schedule 4 of the Constitution a functional area of concurrent national and provincial legislative competence. It is by no means certain whether the exercise of this concurrent legislative competence has taken place in the framing of this legislation and at the very least, with the view to the fulfilment of constitutional mandates, this matter would require investigation.

Conclusion.
An act of such import and wide ranging scope will almost inevitably invite close scrutiny both with respect to its content and the manner in which it has been framed.
Telkom has sought to alert the NCOP to a number of these issues, as detailed above. It should however be noted that the matters which Telkom has sought to alert the NCOP to speak to amendments introduced at a very late stage to the legislative process which affect both principles embodied therein and equally important constitute amendments that would render the Bill constitutionally invalid. For these reasons Telkom would urge the Council to carefully consider whether these amendments can be regarded as permissible under its rules.

Appendix 2:
SENTECH COMMENTS: TELECOMMUNICATIONS AMENDMENT BILL

Sentech wishes to provide further comments on the Telecommunications Amendment Bill.

  1. INTERNATIONAL GATEWAY

Sentech values the imminent telecommunications license it is to be awarded under the Amendment Bill, to provide international telecommunications services. However, as it currently reads, the Bill limits Sentech's services to PSTS's and mobile operators. We fail to see any justification for this except that the Bill continues to entrench Telkom's monopoly and to limit Sentech's opportunity in competing with Telkom. We submit that this restriction runs against the spirit of the Bill, which is, the liberalisation of the Telecomms sector and to benefit the consumer.

It is our view that as a carrier of carriers, Sentech should be allowed to provide services to all licensed telecommunications operators. Such a provision will give Sentech's carrier of carrier licence immediate value.

To provide international telephony services to other licensees such as VANS, ISP's and SMMEs does not derogate from the stated policy, which is that Sentech may not, under the conditions of the 'Carrier of Carriers' license, terminate services directly to end-users.

Additional reasons for our submissions are:

  • Sentech has adequate infrastructure and resources at its Honeydew Teleport, ready for this activity. By only being allowed to provide services to the five potential users currently included in the definition, would lead to under-utilisation of this infrastructure and would make it very difficult for Sentech to have a viable business plan for its international gateway service.
  • By allowing Sentech to provide international gateway services to other licensed operators the potential for developing Africa's connectivity increases and becomes more viable. This is fair since Telkom and the SNO are also in a position to carry VANs, SMME's and ISPs on their platform.
  • With both Telkom and the SNO operating their own international networks, it is very unlikely that they would route outgoing traffic through Sentech on a regular basis instead of utilising their own infrastructure.

Sentech therefore requests that the definition of "carrier of carriers" to also include all licensed operators, including VANs, ISPs, SMME's, etc.

  1. CARRIER PRE-SELECT
  2. Carrier pre-selection should be introduced from May 2003. If not, it is Sentech's submission that this would present a potentially serious problem in terms of the selling and marketing of international voice and data services to the South African public.

    We believe that the public should have choice of preferred carrier. This is necessary to the service levels and will enable competition.

    Carrier pre-selection will enable end-users to benefit from the three international carriers instead of the duopoly (Telkom and SNO).

  3. MULTIMEDIA SERVICES

Sentech is already offering and/or demonstrating multimedia type of services on its DTH and terrestrial platforms. This includes enhanced semi-interactive electronic program information (EEPG) and internet on TV display. For this, Sentech has developed, standardised and implemented systems for clients to offer multimedia services on Sentech's platforms in a common carrier type of approach.

Due to the commonalties between satellite and the planned terrestrial networks (both will use the international DVB - digital video broadcasting - standard as basis), the same basic infrastructure will be used for much of Sentech's multimedia offerings on digital terrestrial television and the other delivery means being considered.

Sentech is already operating a digital terrestrial television transmitter in Johannesburg as a pilot demonstrator. It further plans to roll-out this demonstrator to include more metropolitan areas and a few rural areas. The significance of covering rural areas is to develop and test services to under-developed areas as a contribution to bridging the digital divide. It is imperative that South Africa follows world trends in terms of digital broadcasting.

Sentech sees its future digital terrestrial television offerings as an opportunity to provide services to rural community centres and to support the government's policy in this regard. Together with the SABC as public broadcaster, this infrastructure could form an excellent medium to address universal access issues.

We trust that these comments will assist in finalising the Amendment Bill.

23.10.2001

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