Digital Migration: State of readiness: Briefings by broadcasters, Sentech, SA Bureau of Standards, manufacturers

Meeting report

SABC briefing on digital migration
Mr Richard Waghorn, Chief Technical Officer, SABC, said that Digital Terrestrial Television (DTT) brought stakeholders together. A project plan was on track. The Department of Communications (DOC or the Department) would run a soft launch in 2012.

There had been a Digital Video Broadcasting (DVB -T1) technology trial in November 2008. Currently conversion to DVB-T2 was about to proceed. It would be extended to Cape Town early in 2012. 17 channels were planned, and an interactive video service. Current channels TV1, 2 and 3 would be included, and a 24 hour news channel that would feature coverage of Parliament, as well as a sports channel. There would be ramping up from the soft launch over the following two to three years. Costs had been submitted to the DOC for the Medium Term Expenditure Framework (MTEF). The SABC would make 18 radio stations available. Interactive services would be made available over time. FM challenges had been overcome. The SABC was responsible for DTT infrastructure. There was a business plan for a new digital play-out centre. The SABC engaged with Sentech on tariffs for DTT signal distribution. Sentech would convert to DVB-T2 by March 2012.

The DOC had asked the SABC to tender for procurement of a set top box (STB) control system. A broadcaster forum would deal with DTT platform management. SABC Marketing had developed a business case for marketing a free-to-air DTT platform.

Discussion
Ms J Kilian (COPE) remarked that there was still a substantial amount of technical work to be done before rollout, and everything was based on funding assumptions. She said that the presentation was “slick”, but still based on assumptions. She asked when confirmation would be required. She noted that in the past the SABC had to be bailed out in the past.

Mr Lumko Mtimde, Board Member, SABC, replied that it would be necessary for the Board to discuss funding. The SABC plans were conservative but he claimed that the SABC had resolved its challenges.

Ms Kilian asked about a shortfall for planning that year. She asked if there was confirmation from Sentech that it would cost the current phase.

Ms Kilian also observed that many programmes were planned to run. She asked if the SABC had the staff complement to run channels like the 24 hour news channel.

Mr Mtimde replied that the SABC had the human resources to carry out programming plans, and these were ready to be used. There was skills development for the digital future.

Mr N Van Den Berg (DA) asked if it would be possible to encrypt set top boxes (STBs), to force people to pay TV licences.

Mr Waghorn responded that the SABC would procure a vendor for that. TV signals would be video scrambled and would have to be decoded. There would be set top box control to protect the industry. Technology installed in boxes could prevent them from being taken out of the country.

Mr Van Den Berg advised the SABC that it should be concerned about financial health, as its track record over the past few years had not been good, and it was still in the recovery stage. He felt that the presentation was too good to be true, and he reminded the SABC that the Portfolio Committee had been told some untrue stories in the past, and whether the Committee could now be assured that what it was hearing was correct. He asked if the SABC was ready to carry out the wonderful plan. He forthrightly asked the SABC if it was being honest.

Mr Mtimde responded that the SABC had never been in trouble. Challenges were confronted. With the current stakeholders, the SABC could cope with digital migration. All different angles would be covered, to find a path to resolution. It would not be an easy process, but the SABC had the commitment and leadership required to become the broadcaster that South Africans expected it to be. He implored the Committee to trust the SABC and reiterated that the SABC was technically ready for rollout. On the DTT platform, TV1 and TV 2 were manageable. He noted the statements that there were assumptions around funding but said that SABC had submitted its budgets. In the event of a negative response, there was another plan in place.

Ms W Newhoudt-Druchen (ANC) asked what problems were foreseen in the dual elimination period, and if the software was ready.

Mr Waghorn replied that dual elimination costs had to be discussed again. Set top box (STB) software was standard.

Ms Newhoudt-Druchen asked about close captioning. In existing systems, if someone spoke IsiXhosa, there were English titles, but not vice versa. There was no close captioning without limitation. She suggested that the bid winner had to build in close captioning.

Mr Waghorn answered that a captioning digital migration policy would be included in specifications for the STBs. There were enough people on board who were capable of creating subtitles.

Ms Newhoudt-Druchen asked when public awareness programmes would start, and whether programmes would be accessible to deaf people.

Mr Mtimde replied that there were other variables that made it as yet impossible to go all out with public awareness. There could be more certainty for guidance after engagement with the Ministry.

Mr Waghorn added that the SABC had airtime on TV 1, 2 and 3 as a strategic tool. Airtime would be used to encourage people to buy set top boxes. Airtime had been used successfully by the BBC to launch the digital switchover in 2002. He had personally been involved in that process. It was important to inform people at the right time, to avoid creating market expectations.

Ms N Michael (DA) agreed that the presentation read nicely, and was well planned and “slick”. However, she felt that the Committee must also be told of areas where things could go wrong. The SABC should be able to foresee any glitches with these projects. She asked if the SABC Board was meeting frequently enough about the matter.

Mr Mtimde replied that the SABC was meeting frequently enough, and was in fact holding more meetings than it usually did, to deal with the context of the current challenge. There was certainty about policy and regulation. The Independent Communications Authority of South Africa (ICASA) had proposed a parallel plan. If all went well, there would be regulatory amendment, which would put the SABC on track.

Ms Suzanne Vos, Board Member, SABC, added that subcommittees were meeting every week to look at risks, and some tough questions were being asked. The Board demanded that there be a constant consideration of consequences. She said that the government guarantee had not been in the nature of a bail-out.

Ms Michael remarked that decisions about digital migration were being taken at Auckland Park, and that the regions could easily be left behind. She asked if there could be recourse to a common denominator, so that no one would lag behind.

Mr Mtimde responded that it was unfortunate, but that some regions could lag behind. There were uncertainties. Regulatory and policy questions had to be addressed. The SABC would want to be more certain before it could come up with a definitive answer.

Ms Michael remarked that many South Africans were already living below the breadline. She asked if the STBs would be expensive. She noted that some would be subsidised, but there would always be claims that those who did not receive them for free were struggling. She asked how much those that had already become obsolete had cost.

Mr Waghorn replied that the cost would be between R650 and R700. The final cost would depend on the type of components included. In other countries, STBs had been expensive at first, but costs had rapidly gone down. In the BBC, costs had decreased from 99 to 40 pounds in one year.

Ms Michael remarked that digital migration was the future, but no one quite understood what was going on. The SABC advertised events like elections, and she wondered if the same would be done for digital migration.

Ms Michael asked if the blind community would be taken into account. There apparently were frequencies at which blind people could hear more clearly.

Mr Waghorn responded that he was not aware of that. Audio descriptions could be provided to add an extra dimension.

Ms T Ndabeni (ANC) said that some of her questions might be out of order, yet she had to ask them. She asked if the procurement of STBs was the best mechanism for digital migration. Elsewhere, the option had been to equip television sets with all that was needed, and that might still be more cost-effective.

Mr Mtimde replied that there had to be policy and regulatory engagement with the governance board. He admitted that other options had to be explored.

Mr Waghorn added that integrated digital TV was an option, but the advantage of STBs was that existing sets could be adapted. Penetration would be quicker, because these had a shorter life cycle. The SABC did not procure STBs itself, although it would issue tenders for the sale of STBs by others.

Ms Ndabeni asked if the SABC had enough capacitated personnel, and wondered if it was correct to say that only 30% or 40% of the community in South Africa might have been reached with STBs by 2014.

Mr Mtimde replied that the SABC shared the concern about capable leadership for the project. Gaps were being dealt with.

Ms Ndabeni asked about content management, in terms of the cultural and Constitutional background.

Mr Mtimde replied that there would be an opportunity to deal with that. Content management of languages and cultures was covered in terms of licences. There was an obligation to include as much as possible. There might initially be capacity limitations, but it would be possible to grow step by step.

Ms Ndabeni asked the SABC Board about the appointment of the Chief Executive Officer (CEO). It had previously been stated that the Minister required a letter, and the Committee was of the opinion that everything had been processed for the Minister to act.

Mr Mtimde answered that the letter had been submitted to the Minister. The appointments of both the CEO and Chief Financial Officer (CFO) had been prioritised. The Board would engage with the appointing body.

The Chairperson asked when the appointed persons would commence work.

Ms Killian noted that the SABC Executive Committee was responsible for this, and asked what exactly was causing the delay.

Mr Mtimde replied that recommendations to the Minister had been processed and submitted. The delay was caused by the process, not by the Ministry. Requests had been made to the National Treasury, and were being processed. The Board would announce the appointments.

The Chairperson asked if a curriculum vitae for the proposed Chief Financial Officer was available, and said that the Committee was getting concerned. He asked what the process would cost, and what had been requested from the Treasury.

Mr Mtimde replied that answers to those questions could be supplied in two weeks time.

The Chairperson asked what the impact on the public would be, if the process was to start small and grow.

Mr Waghorn replied that the contact cost, without news and sport, would be R1.6 billion. R90 million had been budgeted for marketing over the following three years. The digital playoff centre would amount to a contact cost of R145 million for 15 channels over three years.

The Chairperson said that it would be necessary to return with exact figures.

eTV Briefing on digital migration
Ms Lara Kantor, Regulatory Strategy, eTV, said that a large scale compulsory migration to DTT was not in the interests of eTV. South Africa had seen delays with digital migration since 2008, and now the project had lost momentum. Platform credibility had been damaged. The broadcasting environment had become more competitive. eTV would commit at own cost. Most South Africans used analogue-terrestrial TV, with about 8 million sets in the country. There were only about 100 000 M-net users. A quarter of South Africans were reached through the digital satellite system (DSTV). Those users would not be impacted upon by DTT.

There were currently a number of different TV markets. The migration to DTT caused concern about large audiences. Three out of four South Africans would need access to STBs. Planning for DTT had to focus on building a strong free- to-air DTT platform. The SABC and eTV would invest in new channels to build a platform. Important factors to consider were functionality of the box, affordability and accessibility, and the robustness and reliability of the box. It had to be a tested product with a mark on it. There had to be good consumer marketing, and sustained implementation.

Ms Kantor noted two roadblocks. As long as there were delays around decisions about STB control, there would be no benefits to eTV to enter. If there were debates about cost and ownership, eTV could not launch. The second roadblock concerned the possibility of amending ICASA regulations. She noted that these external processes had to be finalised.

Mr Golding referred to the ICASA briefing on the previous day, and said that eTV did not want to tamper with spectrum allocation. No channels would be considered until there had been investment in the TV market. It first had to be seen how the public responded to eTV and SABC channels. Tampering with the spectrum would have negative effects on migration. Market studies had to show viability, as new entrants could cause delays. Individual groups wanted TV stations. eTV wanted to be constructive, and enter for the benefit of government and the people. It urged that the potential blockages be dealt with.

Discussion
Ms Newhoudt-Druchen asked if eTV was ready for migration, and what the total cost to eTV would be. She remarked that programmes had to be made accessible to the disabled community. She asked about M-Net objections to migration.

Mr Van Den Bergh predicted that the further this process went, the lower morale was likely to fall. eTV had identified two problems, but other avenues could be closed later on. He felt that there was something sinister about the ICASA spectrum reduction.

Ms Kilian thanked eTV for identifying roadblocks, and suggesting the steps that had to be taken. She asked Mr Golding how the spectrum allocation issue was going to be dealt with. There was a tight framework and legal challenges. She asked for suggestions as to how ICASA might usefully deal with the matter. Investments in DTT1 had been a loss. She asked what was presently required of a regulator.

Mr Golding replied that certain issues that still needed to be dealt with, if the time frames were to be met, had been identified. It was essential that the STB requirements did not become even more uncertain. M-Net was posing objections and presented an obstacle. If they agreed with the proposals, they could go ahead, and the STB could be made. HE said that ICASA had done great work, and that the regulations were adequate for eTV to launch. The experiences of the regulator, broadcaster and government would be pooled. ICASA had been pressurised by people who wanted to challenge and debate the spectrum issue. He felt that it was in order to simply proceed with the process.

The Chairperson asked why consensus could not be reached with M-Net.

Mr Golding replied that M-Net held the view that STBs should not have mechanisms that restricted satellite access. There was a suggestion that boxes had to be encrypted, so that they could not be taken out of the country. Boxes were currently viewed as too expensive, and lacked flexibility.

Mr Maxwell Nonge, Business Development, eTV, added that encryption was a control mechanism. Boxes from outside would not be able to work in South Africa, and this was one way to protect the local industry.

Ms Kilian remarked, with regard to the protection of local industry, that boxes could also be manufactured for the international community, so that manufacturers would not be confined to South Africa.

Mr Nonge replied that South Africa would have its own specifications.

The Chairperson noted that Telkom operators used only those parts of the spectrum where they could make money. The regulator had to deal with the matter, and he suggested that whatever was not used should be reallocated. There were under-used spectrums in South Africa. New people were needed to enter and compete.

Mr Golding advised again that there should not be any rush to tamper with the spectrum. After the launch, ICASA could monitor how broadcasters used their spectrums. eTV was ready to proceed. He noted that the SABC took up 65% of audiences. It was a tough competitor and the dominant player. He would not have a problem, in principle, with new players in the market, but there had to be proper evaluation. He urged that the process be started up. If eTV was satisfied that the two roadblocks identified were being dealt with, there was a chance to move on. He noted that eTV did not want to present obstacles to ICASA, but would be honest about obstructions.

Department of Trade and Industry (DTI) and South African Bureau of Standards (SABS) briefings
Ms Nomfuneko Majaja, leader of the delegation from the Department of Trade and Industry, noted that a decision had been taken that locally-manufactured STBs should be provided in South Africa, rather than imports. The local content of STBs had to be standardised, and the South African Bureau of Standards (SABS) would be responsible for that.

Mr Bright Amisi, Acting Executive: Standards, SABS, confirmed that the SABS was an entity of the Department of Trade and Industry (dti), and could publish national standards. Consensus had to be reached on the different contending arguments around STBs.

Mr Amisi noted, in regard to the standardisation of digital migration, that there would be frame structure channel coding and modulation for a second generation digital terrestrial television broadcasting system (DVB-T2). The SABS viewed DTT migration as being in line with its objectives of standardization. The standards development process had been expedited to accommodate that national priority.

Ms Majaja added that the Industrial Policy Action Plan (IPAP) would translate the policy framework into an implementation plan. There had to be actions and plans to address challenges.

Discussion
Ms Kilian noted that eTV had said that there was a long process ahead, and there was frustration among free-to-air broadcasters about the lack of consensus. She now heard the dti suggest that unanimity was not essential, and she asked what other criteria there were. She asked what could provide sufficient consensus.

Mr Van Den Berg said that it seemed that a standard was being chosen for viewers and the question was whether they would be happy with it.

The Chairperson asked how encrypting would impact on the work of approving the standard.

Mr Amisi responded that consensus about standards was important. Standards were volatile, and people had to feel that they were legitimate. It was in the interests of the country that technical soundness be achieved. The scope of standards was important, and the question was what should receive focus. Objections to standards had to be assessed, and in this regard he noted that the Department of Communications had raised policy objections. The industry was generally happy and every effort had been made to ensure that the SABS occupied neutral ground. Competitors could work together through the SABS. The first standard had proved to be satisfactory, and the second could proceed.

Ms Kilian asked the dti about the STB standard for free-to-air broadcasting.

Ms Majaja replied that the dti worked with other departments. The SABS had interacted with the DOC to find solutions for government.
  
Sentech Briefing
Mr Protas Phili, Chief Financial Officer, Sentech, noted that Sentech was identified as the signal distributor for digital migration. For the conversion to DTT 2, a target had been set, of 75% population coverage by 2012. The SABC had called for quality service. There had been questions about jobs created, and progress with work. The introduction of new transmitters into areas where there currently was an analogue signal would cause signal loss. ICASA would provide support for digital migration standards. There was a review of different models in terms of cost effectiveness. There had been a call for proposals by community broadcasters, to get other people involved on migration. The SABC had called for financial support for dual elimination, to assist migration and cost recovery. The Civil Aviation Authority had asked for a lower ceiling over Pietermaritzburg. Sentech would be ready for a launch for more than 60% of the population.

Discussion
Ms Kilian referred to a trial period of 60% coverage, which would be phased in. She asked how long each of the phases would take. If the Square Kilometre Array  project had transmission problems, there was little doubt that people’s access to broadcasting would be prejudiced. She asked how soon there could be dovetailing. She noted that Sentech seemed to be confident that there was funding to convert DVB-T1 to DVB-T2, and she asked for confirmation that funding was indeed available.

Sentech responded that the cost of upgrading to DVB-T2 was R400 million, which was included in the corporate plan. Access to TV would not be prejudiced. If terrestrial transmission was not possible, free-to-air by satellite would be resorted to. In areas without terrestrial cover, there would be a subsidy.

Ms Ndabeni drew attention to a statement on the Sentech website to the effect that Sentech promised to connect people to the world, and to communicate to the furthest reaches. She noted that there had been reference to phases in the briefing. Rural areas like the Northern Cape would only be covered in phase 7. She asked why cities had been prioritised. The President had emphasised that those who had never benefited had currently to be given precedence.

Mr Phili replied that sites in Limpopo had been approved since 2009, and had been included in the DTT plans. Universal access was at the core of the mandate, but there was a legacy to deal with. There was a broader public policy, shared by the SABC.

Ms Newhoudt-Druchen was concerned about the fact that STBs were not ready, yet it was getting close to the targets for rollout. She asked why there was no access to community TV in certain areas of four provinces. She asked if these areas would get access, when the migration took place.

Mr Phili responded that the role of Sentech in regard to the alignment was to ensure that when STBs did become available, there were areas that were ready for them to be installed and to work.

Ms Michael referred to the statement that access from outside the borders of South Africa had to be avoided. She asked how that would be done. During an oversight visit, she had in fact been able to watch a Blue Bulls game, on a TV set on an island in the Middle East, who was able to pick up SATV. One of the key issues, not yet settled, was how to ensure security.

Mr Phili replied that content security legacy issues were being cleared up. Sentech was dealing with legal issues at the moment. Satellite footprints extended beyond South African borders, and there had to be proper operating content and security procedures.

Ms Michael asked about the change at Pietermaritzburg, and why it was outstanding. Rules of operation had to be in place first.

Mr Phili responded that the Civil Aviation Authority had asked Sentech to assist in this area.

Mr Van Den Bergh asked how many transmitters there were in South Africa, and how old they were. It was relevant to the upgrading from DVB-T1 to DVB-T2. Some transmitters were old. He also asked about the 60% of South African people that Sentech planned to reach, and how many people would be reached by satellite, as well as the costs of reaching those in remote areas.

Mr Phil replied that there were 222 sites with 2 multiplexes each. There were 800 transmitters with redundancy at each site.

Top TV briefing
Mr Thato Mahapa, Senior Regulatory Manager, On Digital Media, noted that Top TV had a national reach. It targeted LSM 2 to 5, and up to LSM 9. On Digital Media, the parent company of Top TV, agreed that digital migration was a necessary development. It would create spectrum efficiency, allow for TV to reach a greater proportion of households, and would have a broad impact on rural and sparsely populated areas. He added that network roll out would take time. The primary concern of his company was universal access. He suggested that it would be wise to maximise the use of available technologies. He added that installation would create the space for job creation. He concluded by saying that content would be most important. He noted that no policy or regulations had yet been seen by his company. He asked if the regulations would be revised when SABC launched 18 channels.

Discussion
The Chairperson asked what would happen to the mass carriers after the digital migration.

Dr Marcia Socikwa, Councillor, Independent Communications Authority of South Africa (ICASA) said that at present ICASA did not have a policy and that all policies would be re-aligned to digital.

Ms S Ndabeni (ANC) asked why the only job creation mentioned was linked to installation. She queried if jobs could also be created around maintenance.

Mr Mahapa agreed that maintenance would also be another area of job creation.

Ms W Newhoudt-Druchen (ANC) asked for a definition of the acronyms ODM and LSM.

Mr Mahapa explained that ODM was the acronym for On Digital Media, and LSM referred to Living Standard Measures, and was a measure for disposable income that took into account various considerations including affordability.

M-Net and Orbicom briefing
The panel of presenters for M-NET and Orbicom consisted of Mr Nolo Letele, Executive Chairman, Ms Karen Willenberg, Director of Regulatory and Legal Affairs, and Mr Gerdus van Eedan, Chief Technology Officer.

Ms Willenberg spoke on behalf of Orbicom and M-Net, and noted that her presentation was informed by two imperatives – namely, the need to ensure that digital services offered would be affordable and that the government subsidy should be used in the most effective manner. She explained that until recently analogue TV transmitters sent signals to analogue TV sets, and that, worldwide, countries were now moving to digital signals. In the future, digital transmitters would send signals over the air to a digital TV. She noted that the best temporary step to ensure the switch over was successful would be a simple converter.

Mr van Eedan went on to explain that April 2012 was the start of the performance period, and from that moment a dual system would be in place, so that people could then watch TV on either an analogue TV set or a digital TV set. However, in January 2014 the dual illumination period would end, which meant that there would, from that date, be no further transmission for analogue TV. People who had analogue TV sets would be supplied with a converter or set top box (STB), which would convert the analogue signal to a digital one, to avoid having to purchase a new digital TV.

Ms Willenberg added that the price of digital TVs was falling, similar to what happened with cell phones. In the UK, most TVs were already digital. The government of Ghana expressed a concern that Western countries would dump analogue TVs in Africa. She said that South Africa was the first country in Africa to plan for digital migration but that it had spent ten years planning and anticipating the launch of digital transmitted television (DTT), but had yet to launch. In the meantime, Kenya, Uganda and Zambia had already launched their DTT. She expressed the view that some of the proposals had unnecessarily complicated the process, and a prime example of this was the proposal to encrypt the STBs. No other country that had migrated already had elected to go this route. She raised a further concern that by 2020 South Africa would be stuck with encrypted STBs, even when the broader public would have digital TVs.

She also pointed out the encrypted STBs would be more expensive and would have to be maintained. According to MNet’s calculation a simple converter would cost R350, but an encrypted entry level STB would cost R700, or double the price. The subsidy amount proposed was R5 million, although the encrypted STBs would cost R10 million. According to current proposals, 70% would be subsidized.

Ms Willenberg suggested that it would make more sense to approve the basic converter at a cost of R350. This would allow for 100% of the cost to be covered by government subsidy for the poorest households. She also recommended that the savings be invested as a subsidy for local manufacturers.

She also raised the concern that the unique encrypted STB was suitable for South Africa only and that this would be detrimental to local manufactures. She argued that the complexity of the STBs meant that no export market would be created and only the local market would be available to sustain the manufacture.

She reviewed the reasons set out in the policy for the complex STB. These included a need to bridge the digital divide, to provide e-government services, to ensure conformity, to prevent subsidised STBs from leaving the country, and to allow for stolen boxes to be disabled. She agreed that whilst it was necessary to bring Information and Communication Technology (ICT) services to many more people, cellphones would be a better access point to achieve the objective of e-government. She further maintained that encryption did not guarantee conformity, and this would be better served by having a strict conformity regime. It would not help the consumer if the STBs were to be disabled. Stolen boxes would more likely be sold within South Africa, and would be less likely to be sold outside the country.

She was also concerned that the process would not run on schedule and that the country would not be able to launch on the specified date.

She concluded by noting, however, that M-Net would be ready to launch.

Discussion
Mr N van den Berg (DA) could not fault the arguments being made by M-Net and felt that the encryption of STBs was not going to help the manufacturers of STBs. He added that M-Net could well also have made the comment that it would actually be cheaper simply for everyone to get satellite TV.

Ms J Killian (COPE) recalled an earlier discussion on the complexity of the STB, and asked if a more complex box would be better suited to e-government and interconnectivity.

Ms Killian asked for more information on the dumping of analogue TV sets in Africa and asked what advice M-Net could offer to curb this problem. Ms Killian felt that the calculations on cost could be a bit exaggerated but agreed that the subsidy could be better used to support manufacturing. She agreed that those manufacturing STBs locally should also be able to have the opportunity for export, pointing out that if this did not happen, South Africa would lose an excellent opportunity to create jobs. She shared the concern that the timeline was very congested and that legal interventions would place further stress on the process.

Ms Ndabeni asked what the simple converter contained, and what the main difference was between this and the more complex STB. She asked if the simple converter would be able to cater for the needs of the disabled, particularly including the ability to show sub-titles. She asked what benefit the simple converter would have for other broadcasters. She enquired if there would be international service providers who could partner with locals to transfer skills. She urged members not to be seduced by M-Net’s presentation but to consider it carefully.

Ms Newhoudt-Druchen mentioned that the Committee, on its recent visit to Brazil, was told that most people bought digital TVs and that there was little or no benefit for those who invested in STBs. She asked about the components that were able to fit into the simple converter, wanted to know if it would allow for interactive TV, and queried if it would be possible to watch a local TV channel from other countries. She asked if M-Net had still more concerns that it may not have voiced. She also asked if the current M-Net decoder was audio descriptive, and asked for clarification on the device, asking, in particular, if it would eliminate the need for dual illumination.

Mr Van den Berg asked if the simple converter that M-Net was proposing was a T1 or T2 converter.
 
Ms Willenberg said that time was of the essence. M-Net was not trying to pose difficulties or obstacles but was simply making its own position quite clear. Many broadcasters were just going along with the proposal, but did not think that it was the best option. M-Net was suggesting that the complexity be removed from the STBs. The changes she had suggested could be easily implemented. She added that M-Net had made its objections known to the previous Director-General of the Department of Communications (DOC or the Department). At that time, all the broadcasters had agreed on the principles. Now that the policy amendment was on the table for discussion, this created another window of opportunity for the presenters to voice their concerns again.

Mr van Eedan stressed that the size of the device proposed should not be deceptive. He said that he referred to it a converter because it fulfilled a different function to that of a STB. He said the converter could be seen as a temporary measure in the transition from analogue to digital but that it performed the core functions of the STB. He pointed out that the device he proposed was available in the American market. He mentioned that the converter was low cost and argued that this would be a better item for manufacturers to start to manufacture, which would also prepare them for the international market. The simple converter could have interactive services, and much of this would depend on the software. M-Net stressed that it was in favour of a strict conformity regime, but it did not feel that encryption was the correct way to go. The software was flexible, and subtitles could be accommodated. He clarified that subtitles and audio descriptive were features of the decoder, and that this service was sourced from the service provider. He further clarified that dual illumination was needed. Consumers must be given the opportunity to make the transition from analogue to digital over time.

Mr Letele added that Brazil was a good example of a country where STBs became redundant. He added that because programming was terrestrial, it would not generally be possible to pick up channels from abroad, and that South Africans would only be able to watch what was being broadcast in South Africa.

Ms Ndabeni asked if the amount of R350 included the software and all the things expected of the STB, and asked what the capacity of the memory of the simple converter would be. She also asked if M-Net would do away with the decoder.

Ms N Michael (DA) queried why other broadcasters were not supporting M-Net, saying that if the attributes of the simple converter were so good, she could not understand why other broadcasters were not also promoting the idea.

The Chairperson asked why, particularly in view of the financially difficult climate at present, the Department of Communications had not adopted a more cost effective method. He also sought clarity on M-Net’s statement that the deadline was not feasible. He asked if M-Net was referring to the possibility of court action or whether it had other risks in mind.

Ms Willenberg suggested that government should adopt stringent anti-dumping policies, to prevent analogue TVs being dumped in South Africa.  She reiterated that this was not the first time that these concerns were raised, and that in previous years other broadcasters had shared their concerns. When the Digital Migration Group started in 2005, broadcasters spoke with one voice and favoured the simple converter. However, the DOC published a policy that did not support the broadcasters’ argument. The fact that the policy was now being amended presented the opportunity for concerns to be addressed. She went on to explain that the simple converter would have universal coverage and that, as the device would be cheaper, it would be more easily accessible. She said that the South African Bureau of Standards (SABS) aimed to finalise the STB specifications by December, and that manufacture could not comment until the specifications were finalised. However, the lead time for the STB was six months, and if there was any litigation, this could also cause further delays.

Mr van Eedan explained that the price of the STB was inclusive of everything. A simple or a more complex converter would have the same memory function. Other markets may not have opted for simple converter, as it all depended on specification. He was unsure when decoders would be done away with, but said that this was linked to the internet and broadband that could support watching television.

Mr Norman Munzhelele, Head: Policy, Department of Communications, said that the Department had to have a balanced approach and not just support one stakeholder. Over the years the DOC considered many options. He pointed out that the digital migration process did not only look at the converter, but also at manufacture, and a device that would allow the government to communicate with its citizenry. He highlighted Mauritius as an example of a pure free market system, which did benefit other sectors. The DOC needed to consider the entire value chain, right through to packaging and distribution. It was not a simple issue, but a broader economic one, and the DOC would continue to engage with all stakeholders, including M-Net, on the issues.

Ms Ndabeni said that the presentation was persuasive. She asked who was going to design the converters, so that skills could be transferred.

Ms Killian was concerned that some of the comments made by the DOC were not in line with other presentations made earlier in the day. She said that DOC should not adopt a very rigid approach but should consider all the available options, and make sure that new manufacturers were able to benefit.

Mr Kholwane said that he noticed many “specials” advertising two TV sets for the price of one, and thought this was a sign of dumping analogue TVs on South Africa. 

Altech briefing
Mr Peter Balchin, Chairperson, Mr Joe Makhafola, Corporate Director, Mr Roger Warren, Managing Director: African business, and Mr Khathu Netshisaulu, Sales Manager: Sub-Saharan Africa, made the presentation to the Committee on behalf of Altech UEC.

Mr Balchin said that Altech-UEC had been established in South Africa for 16 years. Its head office was in Durban. This company was involved in the global electronics industry. ALTEC UEC specialized in the design, development, supply and support of integrated hardware and software solutions for the world wide digital multimedia industry.

Mr Netshisaulu provided more detail on the manufacturing ability of the company to support the digital migration. In order to manufacture the STB, a vertically-integrated approach of design, software and manufacturing was needed. To date Altech had manufactured in excess of 13 million STBs for both the local and international market. He added that over R60 million was invested over the last three years to upgrade the manufacturing technology capacity of the plant in Durban, and that this was now a world class facility. He mentioned that the plant produced an average of 2.3 million STBs per annum, and could produce 4.6 million STBs per annum within a 12- week lead time.

The current facility also had the capability to support in bound logistics, which referred to materials coming in, electronic assembly and plastic moulding. He also mentioned that there were over 600 employees in the manufacturing operation with broad experience and a deep skills base, which allowed for rapid cross training. He said that the employees understood international competitiveness and the need for quality products, gained over years of exporting products.

He added that distribution and logistics were potential areas for job creation and that his company would partner with smaller distributors, to ensure that the STBs were distributed widely. After sales service was equally important and he emphasised that Altech would be ready to manufacture and provide after sale support. He said that production would likely only take place nine months after the specification was released in its final form. This timeline took into account the components lead time, test lead time, and manufacturing lead time. However, he assured the Committee that Altech had the capacity, the intellectual property and the resources to deliver world class technology.

Mr Makhafola added that skills transfer and skills development were important and that it was important to use the digital migration and the ITC sector to empower historically disadvantaged people. He said that the use of funds from the Department of Science and Technology (DST) should be used to help the country transform. There were many opportunities in relation to the value chain.

Discussion
Ms Ndabeni and Mr Zondi asked for further details about the lead-time of nine months. They noted that DOC had set April as a launch date but that Altech needed a 9 month period after the SABS formalised the specification to begin manufacturing.

Mr Balchin, noted that there was about a six months lead time for the components on these Set Top Boxes (STBs). The components were typically manufactured in China, where specialist companies produced hundreds of millions of components annually. The question was whether companies wanted to buy ahead of demand and take the risk, but even if the specifications were published in December, it would not be possible to get the component in to start in April. If millions of units were to be produced, then an order should already have been placed in August to meet a date of April. He pointed out that buying ahead would expose the company to risks should the specifications not be what might have been anticipated. However, in any event capacity around the world was already locked up, for millions of units, for six to nine months.

Ms Ndabeni asked if Altech wanted to introduce STBs that would speak to the South African market, and if there was not a possibility of losing out to or being in competition with other countries on the African Continent.

Mr Balchin said that it was unlikely that other Southern African Development Community (SADC) states would use STB control. Economies of scale however could be found across the SADC countries, and it would be possible to scale up operations.

The Chairperson asked for clarity on the comment that it was possible to take software out.

Mr Balchin responded that the encryption or STB control could be separated from the STB itself. However, everything in the box was based on software. This was a technology development issue.

Ms Ndabeni noted the comment that there seemed to be mostly white people employed at the factory, and asked why, if Altech understood the need for transformation, it was waiting for the DTT launch, and why black people were not already being groomed into positions.

Mr Balchin noted that in fact 98% of employees at the Mount Edgecombe plant were actually Indian or black. In engineering operations, over 90% of staff were black or Indian. Altech had been a level 3 contributor for some time. Altech had an accelerated development programme for young managers, and also sent the best of its engineers abroad to give them exposure and training. The Altech Academy went up to PhD level, although most were busy with Masters degrees at the moment. On the production level, technicians were constantly being trained, because they arrived with insufficient capabilities from the technical colleges.

Mr Khathu Netshisaulu clarified that his comment might have been misinterpreted earlier; he had been speaking of “rare skills”, and that was why he had suggested the Innovation Fund. From the following year, the intake from the Altech Academy would be 50% black. He also stressed that Altech employed a number of women, generally because they were better at paying finer attention to detail.

Ms Ndabeni noted that Altech had made the point that there were other possible manufacturers, and said that it was important to check who was responsible for qualifying criteria. She also asked what possibilities there were for new areas of development, and asked that Altech should partner with Small, Medium and Micro Enterprises (SMMEs) in the delivery field.

Ms J Killian (COPE) asked how Altech would see the transfer of skills taking place, and asked if this was part of the model.

Ms Kilian pointed out that M-Net had suggested earlier that a complex STB should not be used, but rather an affordable one that emerging manufacturers could tap into.

Mr Balchin noted that Altech had complex mass market devices. He illustrated, however, that even an Apple device was generally designed in America, but actually manufactured in China, where most of the factories were. South Africa was competing against the best Chinese factories. Altech could do manufacturing locally, up to a point, and could also train and transfer skills, as had been indicated to the Department of Communications (DOC) already. Assembly, packaging, labelling and so forth could be taken over by others. The value chain was complex. There were multi-million dollar silicone manufacturers in Durban, who could produce the economy of scale that was needed. The cost would depend on the functionalities needed. The STBs were a pseudo-computer, and had the ability to produce a lot of media. It was a matter of policy as to what level of functionality had to be implemented. Although Altech could undertake the entire DTT programme, it did not intend to do so, and had already committed itself to sharing the work. It already used a number of SMMEs in the supply chain. It would continue to do so in the distribution of this product, as well as the servicing. Support would be very important in South Africa for this new project. It was mentioned that perhaps STBs were too complex. Altech could empower and train others.

Ms Ndabeni asked about the ownership of the company.

Mr Balchin noted that 75% was owned by Altech, the JSE listed company, and 25% was owned by a black economic empowerment company. More information could be provided if needed.

Mr Zondi asked a general question as to what Altech suggested would be an ideal situation for a switch-over to digital migration. He thought that there were still many grey areas.

Mr Balchin said that the industry had been working with government for some years, and there had been active dialogue with many people. The engagement seemed to have been satisfactory. South Africa would be the only country in the world to impose a STB control requirement on DTT. Subsidies were provided in many countries, but STB control was not the solution to keeping a STB in the country. Altech had significantly increased the complexity of the programme.

The Chairperson asked the presenters to focus on the direct question.

Mr Balchin said that Altech felt that the ideal would be to have no STB control, which would result in a situation that was far simpler. However, the reality was that Altech would work with whatever government wanted. This, however, would add to the complexity and time required.

Ms Kilian asked how many months could be gained if there was no STB control.

Mr Balchin said that if the basic capabilities had been trialled in 2008, it would have been possible to be in operation this year.

X-Factor/Karabo IT Integrated Systems presentation
Mr Hosea Motjulo, Chief Technical Officer, X Factor/Karabo noted that this company was an integration of several South African systems and entrepreneurs. He noted that although there was a perception that the STB was new technology, in fact it was a simple electronic device that allowed those receiving analogue signals to have them converted to digital signals.

Karabo IT was a black-owned enterprise that, in 2009, had started digital operations with local partners. It manufactured electronic components. Partnerships had moved and changed over the years, and X Factor had entered the digital space in November 2010 with new ideas and expertise. In 2011, X Factor and Karabo launched into migration.

He noted that the digital migration (DM) experience to date must be understood. South Africa was imposing first world standards on itself, and people were being asked to come up with a solution. “862” was a standard for T1. If South Africa had gone with T1 some years ago, things would have progressed to the point where, today, companies could have been debating penetration of the market. There were still dual challenges in sending and getting back messages, and that added to the cost. The other impediment to penetration into South Africa was the overly-high cost of broadband. He cautioned the need for care when setting standards and benchmarking. The investment community was awaiting movement on the DM plan. Component and technical purchases, and the need for retraining would create bottlenecks in the production process. Other factors would be access to control software, and here he said that there were some misperceptions about what was conditional access control, and control software.

Mr Motjulo alluded to previous comment and said that Sentech had the software in-house that it acquired in 2009. He asked why, in this case, it should be necessary for SABC and others to attempt to get the same software. Probably 60% of the software could be upgraded for general use, and that would take away most of the problems.

Insofar as manufacturing capacity was concerned, he noted that Karabo already manufactured components for the military that were more complex than what was anticipated for the STB. In 2007/08, trials had been done on the DT1 platform, and the STB was working then. However, it had then had to move to the more expensive standards, R2, although this did have advantages of more channels, and more spacing, and used less energy. He still felt that there was a need to “go back to the drawing board”. He did not think it necessary to refine 862, and said that instead there should be concentration on DT2. It was possible to extract from this what was needed, and to select something that would be affordable. He thought it was necessary to get a simple STB that could do the job.

In regard to the finalisation of project plans, Mr Motjulo noted that these were subject to the DOC allocation, including distribution approach and timelines. It was difficult for this company to go ahead and acquire more, when it was waiting again for finalisation on the STB specifications.

He noted that the DVB T2 had been designed and the component suppliers had been sourced. There would be a two to three month lead time for this. Local assembly for a monthly production of 12 000 STBs was ready, and here about a two month lead time was needed. He stressed that funding had to be given up front. Karabo and X Factor had a distribution plan, and this was likely to take a 3-month lead time. The X-factor STB was designed for plug and play, and a network of installation companies to address extra service requirements had been identified, but required activation. There was likely to be a 3-month lead time for this. The X Factor customer relations contract centre had been designed. The set up and testing was scheduled within the project plan. This was likely to take about 4 months.

There were about 42 people employed in the company at the moment, but it could get more people if it was sure that it could get more work. It was possible to spread to other areas outside Pretoria as well. At the moment the customer centres dealt with current customers only.

Mr Motjulo tabled and explained a schedule of readiness (see attached presentation). He said that at the moment, there was no government institution in South Africa who could test a STB, although there were one or two private companies with this capability, whom he would not mention by name. He noted that distribution negotiations could be finalised by month 3. However, this would then require installation network agreements. Everything was dependent on what government decided to do.

X Factor and Karabo had goals of functionality, accessibility and affordability, and X Factor wanted to enter the market as a full player, not a sub-contractor. Its approach was simpler, namely to access the best international expertise and build South African capacity. Unfortunately, South Africa had lost a window of opportunity last year, when it was debating the standards. Other countries, who had not had such delays, such as Namibia and Botswana, had now overtaken South Africa. It was necessary to develop technical expertise, and to decide on the qualifications and accreditation. Manufacturing capability needed to be expanded. It was necessary to guard against grey products. He said that even if the STB had control software, there could be some systems that made their way to the market that should not have done so.

The market measures were clear: it was necessary to have a product deign that met the lifestyle aspirations of the target market, to demonstrate the sustainable product value, and to establish a competitive market presence. 

Discussion
The Chairperson noted that there were a number of different views expressed in the presentations.

Mr Zondi asked what the first-world standards were that were being imposed – whether it was the control standards or the STBs themselves.

Mr Motjulo responded that if the country had stayed with T1, to get penetration in South Africa, then it could have followed a certain route, although he did concede that there had been arguments for another approach.

Mr Zondi asked how X Factor and Karabo were mentioning shorter lead times than other companies. He asked whether, if the specifications came out in December, this company could meet the April deadline.

Mr Motjulo noted that the lead times were 3 to 6 months, if there was not consideration of manufacturing 500 STBs in one month.

Mr Zondi asked for comment on the reality that DVB-T2 was the standard adopted, and he asked if it would have been possible to have dealt with a different standard.

Ms Kilian asked for clarity on the concern that there was nowhere for the STB to be tested. The SABS had said that it had a facility and asked if any use had been made of that in the past, and whether any use could be made of it in the future.

Mr Motjulo said that if SABS did have such a facility, he would happy to test his product there.

A representative of the Department of Trade and Industry (dti) said that there as an electronic facility, and it would be faster to upgrade this than to start from scratch in setting up a completely new facility. She said that the DOC policy should show conformity. Government entities should work together to try to move matters along with shorter lead times. She had not been aware of the X Factor and Karabo plant and would like the opportunity to visit it.

Ms Kilian noted that X Factor wanted to be seen as a full contractor and asked how it intended to roll out countrywide, and whether it would be in a position to expand its operations in time to meet a tight deadline and the four-month lead period.

Mr Motjulo said that the Universal Service and Access Standards Agency (USASSA) needed to come out with a guideline or plan, and then companies would need to look at distribution. There was no point in moving before they were aware of what they would face.

Ms Ndabeni wondered why, if there were international links, players there were not shaping the decisions in the ITU, if they had the interests of South Africa at heart.

DiViTech briefing
Ms Salukazi Dekile-Hongwane, Chairperson, DiViTech, noted that DiViTech was a consortium that included a majority of black empowerment womens’ organisations. Having listened to debate and pronouncements on the migration process, it realised that this was a direction of movement in South Africa, and decided to take the lead and develop matters itself, rather than sitting back and waiting to be asked to participate. For this reason, the group had decided to investigate and find technical partners. Most of the shareholders were national rural women’s organisations. It came across the technical company Reunert, and decided to buy in its manufacturing expertise. Reunert had already tested through SABC. However, ReuTech was offered, and accepted, a 5% of the shareholding of DiViTech. Since then, DiViTech had been approached for assistance by various other organisations, both internally and the rest of Africa.

Mr Ramba Rammopo, Chief Executive, DiViTech, noted that DiViTech was ready for digital migration. He noted that it led a consortium consisting of intellectuals and various partners, and said that Reunert owned 5%, and 95% was owned by the Nozala Consortium. Its focus was Africa, but it was hoping to use South Africa as a springboard. Its products included STB technology, digital migration advice, localised electronic manufacturing solutions in Africa, and e-Government capability through the STB.

Nozala had been in existence since 1996 and it had made investments into various other companies across the spectrum. Reunert was a listed JSE company, operating through several divisions, including Reutech, CBI Electric and Nashua.

DiViTech had local design capability, drawn from Reutech, who employed about 1 000 people and had been involved in this industry since 2006. It had manufacturing capability through RC&C. It had distribution and product infrastructure knowledge, and its relationship with Nashua and Panasonic offered consumer electronics experience.

He provided an overview of the history of the STB manufacturing history. It had provided about 2 500 units for testing, and had won the first tender to supply the STBs to SATV. The manufacturing facility was based in Cape Town, and Reutech was a local company, committed to South African manufacturing. To date, there had been six designs. DiViTech would ensure that there was local content in its STBs, and would also ensure that these would be affordable, reliable and available to the mass market. Its design used low power, and had the ability to incorporate e-government software and internet capability.

He noted that it would take about 6 to 11 months for the design and development phases. DiViTech was busy with the T2 development. From manufacture to installation, notwithstanding government’s intentions to set a deadline of April 2012, he believed that four to six months would be needed. Free to Air STB would take 6 to 9 months and Pay TV STBs would take 9 to 12 months. Although there was local manufacturing capability there was still a need to procure the materials. He noted that to set up a manufacturing plant with 100 000 units per month output, about R100 million working capital would be needed. DiViTech had already spent this money on setting up plants, which was the reason that he had said that it was ready to run with the project.

Mr Rammopo tabled a slide showing the value chain (see attached presentation) from development to reaching the consumer. He noted that DiViTech had access to these services because of its relationship with Reunert.

He then outlined some of the limitations affecting the STB process. He stressed that government must take the lead to promote local manufacture and true economic value, linked to local design. That could facilitate export of the technology to other markets. Other stakeholders were also involved. The standard had been determined but there were still specifications that had to be finalised. It was critical that for government and broadcasters on the model that had to be adopted for “go to market”. This would have an impact on the consumer price.

He reiterated that the DiViTech factory was capable of manufacturing up to one million boxes per year. However, the industry could work also with other manufacturers, should the need arise. DiViTech was also happy to share its knowledge with SMMEs and other manufacturers, to transfer skills. He noted that one of the questions asked earlier was whether there was likely to be a bottleneck in manufacturing. He noted that if not enough lead-time was given to manufacturers, there could be such a bottleneck, and this could have significant impact on timelines. Components could take three months to arrive in South Africa, so production would happen only in month 4, and distribution only in month 5. The product was unique to South Africa. The STB control meant that the product could not be bought off the shelf anywhere else in the world. Once the specifications were agreed upon, and the limitations were understood, DiViTech could go to market.

Mr Rammopo highlighted that the industry had been in decline for the last 15 years, with many factories having closed in the last 10 years. Employment had declined rapidly. The Industrial Policy Action Plan (IPAP) specifically focused on uplifting this sector. The Digital Migration Policy document aimed to develop a world class industry. This, however, was a new market with no track record. No one knew the tastes of the market. The STBs would be a customised product, not saleable outside South Africa. It was important to have them available at the right time. The business was likely to have low margins, and so the distribution model was very important. He believed that if the correct model was chosen, a number of challenges would be appropriately addressed, including timelines. It would be necessary for government to choose the right model, as well as then promote local manufacture and technology. The product warranty, help and support would be critical. Government had to be the catalyst in a successful migration process. He stressed again that the industry needed clarity on a number of issues still.

Mr Rammopo said that DiViTech had already invested significant funds in developing a truly local STB, with DVBT1 and T2 having been developed. If investment started in November or December 2011, it was possible – although very tight – to reach market by April, provided that the distribution strategy was correct.  He noted that South Africa needed to move very quickly if it wanted to build an industry. Local Research and Development (R&D) was key to economic growth. The local industry was indeed capable to developing a STB, and South Africa had excess manufacturing capacity. However, he reiterated that it could take between 9 and 12 months from order before STBs started flowing into the market. . An incentive was required to start the STB market. He also said that a sustainable STB market could only be achieved through exports. An efficient and effective distribution model would accelerate take-up. Job creation could be achieved through the multiplier effect.

Discussion
Ms W Newhoudt-Druchen asked what the likely end-product cost was likely to be for consumers.

Mr Zondi asked for an indication of the most affordable unit

Mr Rammopo said that it was estimated that each unit may cost between R600 and R700.

Ms Newhoudt-Druchen noted that she had not heard from any manufacturers whether the STBs would be accessible for those with disabilities.

Mr Rammopo indicated that they would.

Ms Dakile-Hlongwane stressed that DiViTEch represented over half a million women and was fully committed to input specifically for the disabled. She noted that many women suffered from a number of disabilities.

Mr Zondi questioned the comment on the working capital needed, asking for an explanation on the two figures mentioned, of R30 million and R100 million. He also asked what would have to be invested to reach the numbers of units.

Mr Rammopo responded that if a new factory had to be established, it would cost about R100 million. However, DiViTech already had that infrastructure in place, and therefore would not have to make that output again. It would, however, need working capital of about R30 million.

Mr Zondi noted the comment that a sustainable STB market would be achieved only through exports, and questioned how STB encryption would affect that. He also asked what type of incentives were needed.

Mr Rammopo answered that DiViTech wanted guidance from the government and broadcasters. It did not want to be prescriptive about encryption, although it was conceded that to a certain extent this would protect the market and provide some certainty.

Mr Bertus Bressler, Chief Technical Officer, DiViTech added that a technology company could design whatever was required. The market in South Africa consisted of broadcasters and government, and if it was decided that encryption was needed, then the STBs would be designed in that way. If there was no encryption requirement, this would shorten the lead time. The company had already waited six years to hear what was needed, and it would be glad just to get to market.

Mr Zondi said that he was asking this question because of an earlier assertion that encryption was mooted as one way to keep the STB in the South African market. However, this would not make sense if in fact the market could only be sustained by exporting. He wondered if a tailoring to South African conditions would affect the sustainability, in the long run.

Mr Bressler said that about the market in South Africa would be about 8 million STBs, and this was not enough to sustain a business for more than three years. However, there were probably more than 100 million TV households in Africa. If a company could start producing volumes, it could move on. It was not desirable for South Africa to lag behind other countries in Africa and if it did so, it would find itself without an export market.

Ms Kilian noted that a date of April 2012 would probably not be achievable, unless “things were done differently”. She asked for more details on this.

Ms Kilian said that it was a pity that the USASSA presentation was not given that day. Its document had set out some models for subsidy disbursement. Given that the industry had been in decline, and that a major outcome should be to generate a South African process, she asked if the retail model selected by the DOC was appropriate to promote the manufacturing sector and position it for the export market. Other alternative options had been presented of manufacturing or retail subsidies.

Ms Ndabeni noted that all the manufacturers had spoken of delay, and leadership difficulties, but M-Net had said something different. She asked which option DiViTech thought would actually address the needs of the people and make the greatest impact in economic empowerment

Mr Rammopo said that it was not so much about incentives as creating an environment that would allow DiViTech (or others ) to manufacture efficiently and effectively, and reach the market at the most affordable price. One of the things that would assist would be certainty on a model. He did not want to sound arrogant, but would like government to assist with the process. The model had been debated in a number of forums. He did not believe that the retail subsidy model would work. A combination of institutional and retail model would be more likely to work. The institutional model would be mostly tied to the subsidised market. He noted that manufacturers would have to be given the chance to plan properly, and this planning would hinge on the kind of model adopted. He noted that about 5 million households would need to have access to STBs. If an order was placed to the manufacturers by one government entity, the retail model, which used “layers in between” could be too expensive, as everyone in that value chain would need to make their margins.

Ms Lehotlo Ramokgopa, Director, DiViTech, said that DiViTech was not aiming for short term solutions and was very aware of the need for jobs to be created.

Mr Rammopo again emphasised DiViTech’s state of readiness, and said that although the timelines were tight, the company looked forward to engaging with them.

National Association of Manufacturers in Electronic Components (Namec): Briefing
Mr Keith Thabo, Chairperson, Namec, gave a brief background to this matter in South Africa. No establishment anywhere in the world could actually transform itself without benefiting emerging entrepreneurs. It seemed that the Department of Communications was not prepared to transform ICT, although there was a real need to transform the sector for the benefit of all South Africans. NAMEC wanted to appeal to the Committee and Parliament that black people would be given the allocations.

He noted that the Namec Consortium was truly broad based, and briefly outlined its programmes and milestones (see attached document).

He noted that DTT was an entirely new sector, and everyone had to learn along with everyone else, so there was no reason for a black person to say that he was merely a BEE partner. A multi-dimensional approach was needed. He illustrated the partners of Namec and noted that Namec had been given some concessions in certain provinces, such as electricity rates.

Mr Thabo then outlined Namec’s state of readiness. He said that the hardware designs were ready, and licensing was finalised. There was compliance on software. Personnel were in place, and the job categories had been identified. There were nine manufacturing plants. Namec had plans to engage with consumer awareness and outreach programmes. It knew of the likely source of bottlenecks,

Ms Norna Thukani, Head: Technical Committee, Namec, explained some of the design details to the Committee.  She said that work had been started to meet the rights and needs of migration from analogue to digital. The strength of the signal, as well as the coverage, would be important. The process was likely to take up to six months. The leading periods and components, as well as hardware and software, had all been checked. Namec was keen to develop the skills.

Dr Ntsibane Ntlatlapa, Council for Scientific and Industrial Research, noted that Namec had partnered with the Council (CSIR) in respect of digital migration. He stressed that CSIR was not a member of the Namec Group but had entered into a partnership with it. He said that it was very difficult to talk with any certainty about readiness when there were no specifications, so people had to make assumptions. He explained that CSIR was but one of the research organisations in the country, but it was the only one that was multi-disciplinary. Research in ICT was based at the Meraka Institute, which was established in 2005, and this now employed the largest concentration of ICT researches in South Africa. Its strategic priorities included transferring technology and skilled human capital.

He noted that in the past, CSIR had been accused of doing research that did not directly benefit the country. It was particularly interested in research in this field because of its immediate relevance. CSIR had community wireless mesh networking research, funded by the Department of Science and Technology, and it was also running a project on internet low rate adaptive streaming of live video. It believed that DTT might offer a good opportunity to conduct further relevant research, and particularly whether it could integrate other technologies into a final solution. If South Africa developed something that could be exported, that would also bring royalty revenue to the country.

He illustrated how far the two projects mentioned had gone so far, and noted that in the past month, a pilot project had been launched with YFM, and it might be possible to combine technology for a uniquely South African STB.

He believed that South Africa should leverage on the digital migration process to dramatically increase broadband penetration, through an integrated and innovative design of DTT networks to deliver both digital TV and broadband services. These services could be sent through a single distributor, such as Sentech. He illustrated how this might work, and noted that if Sentech’s coverage were expanded, access could be improved.

He gave an overview of the STB specification, but said again that where there was no known specification, other assumptions had to be made. Hardware was not a speciality of CSIR. He set out details of connectivity hardware (see attached presentation) and said that with an Ethernet or USB port, it was necessary to have the ability to connect. However, if WiFi ad hoc mode support was added, this would allow for further development, enabling mesh networking.

He gave some details of the open-source Linux operating system, and said that not only did this reduce costs, but it allowed for innovation. Many research groups were using this, and were turning WiFi into mesh devices, and more mobile devices were now running on a Linux-based system. He noted that there were many skills in the country to take advantage of Linux, or to customise it. For instance, Meraka digital doorway and wireless mesh laboratories used customised firmware, as were other companies.

He suggested that, although this might not be appropriate for today’s presentation, it would be useful at some other time to consider what might be made possible in the future by support to local research and innovation.

Discussion
Ms Ndabeni asked whether high consumption of electricity at STB level was likely to lead to Eskom black-outs. She asked what could be done to ensure that the country would not suffer negative effects, either to consumers or manufacturers.

Mr Thabo said that in its experiences around the globe, the Namec group had noted that signal termination was another challenge. It would be necessary for the DOC to look at local expertise, and he stressed that this was available, and there was no need to source it from outside. Namec could advise on the DTT programme, having studied all applicable standards elsewhere. It was necessary to be specific about the times of switch-off and to recognise that not everything could be done simultaneously. 

Dr Ntlatlapa responded that most of those people involved in manufacturing would agree that the STBs would contribute very little to electricity consumption when they were running. However, at the manufacturing level, the factories were likely to pull more from the grid. Perhaps the supply of energy needed to be supplemented with solar or other types of energy sources at manufacturing level. He was not involved in this, but he did want to mention that CSIR did get involved in the generation of energy, and was working closely with Eskom to ensure that it assisted.

Ms Ndabeni asked about the pace of connection, if WiFi were to be used.

Dr Ntlatlapa noted that some STBs in a village might be outside the coverage, and it was necessary to ensure that all could be linked, and this was the context in which he had mentioned this. CSIR knew that the connectivity through WiFi would not be that good, but at least there would be connectivity. At the moment, the pilots with YFM had shown that it was possible to go lower than 64Kb per second connectivity, and still see the videos. There would be automatic adaptation to the strength of the network signal, as the picture would become of better or poorer quality.

Ms W Newhoudt-Druchen (ANC) wanted to make a general comment. It was incredibly expensive for the disabled to get the devices that they needed in order to live independently in South Africa, and she cited examples of visual aids for those with hearing disabilities, from doorbell, to noise recognition signals, to phones. Only very few people made these kinds of devices, and since most had to be sourced from overseas, they were outside the financial means of many people. Electronic wheelchairs were extremely expensive. Hearing aids cost about R20 000 each. She asked what innovations were being made in this field, in South Africa. When Parliamentarians were elected, they often found that there were no computers with voice-activation software, for those who were visually-disabled. Currently, DeafSA had to purchase commodities overseas for resale in South Africa. She urged that CSIR, who probably had the capabilities, should try to work on these kinds of devices and make them affordable for South Africans. Equally, she urged that any device for digital migration should be accessible for South Africans with disabilities.

Dr Ntlatlapa said that most of the Meraka Institute’s research was directed to inclusive access. The National Accessibility Portal was one way to address access by those with disabilities. An STB could certainly include features to enable disability-access, in keeping with the philosophy of the research institutes.

Ms Kilian wished to comment on the opening remarks by the Chairperson of Namec, and indicated that she, and not only ANC Members, had been elected by a largely-black electorate and she stressed that it was her duty also to serve all people of South Africa.

Ms Kilian said that the ITU was driving this process on an international level and South Africans had to find each other in terms of the broad objectives. She asked whether Namec would concur that this process had more than one objective, and that it was necessary not only to ensure that South Africans did not lose their signal in the progression to DTT, and that they were not disadvantaged, whilst local industry should also be developed, especially historically disadvantaged people.

Ms Kilian asked if there had been a costing of all the additional facilities. She asked what the time lines were likely to be if all the functions were incorporated. She also asked for comment on the time lines and pressure, and asked if the launch could be achieved by April 2012.

Dr Ntlatlapa responded to the question of the time lines, saying that if there were specifications given timeously, and the platform was available, then there could be some functionality of the STB by April 2012. He suggested that an optional system should be used, because this would allow for innovation. He suggested that it could extend the life of the STB, if several other useful applications were to be built in. If the device was not merely a STB that provided for TV access, it could also be extended, say, to make material available to schools who may not have books, or for students to access the information at home. The software that would enable the initial running in 2012 could be available within about 6 months.

Mr Shalin Govender, Technical Committee, Namec, spoke to the costing. Namec was a group of manufacturing companies whose philosophy was to incorporate all of these industries and create value. It would look to various other R&D houses to enhance its own value. He emphasised that what had been outlined was not so much a change in standard, by having a STB that must incorporate mesh networking, but a STB that was capable of incorporating it, should the public say that this was the kind of value-add that it wanted. In respect of manufacturing, all the parties had laboured the fact that their lead times would be associated with access to components, ramp-up facilities, and their labour force. The CSIR WiFi and mesh initiatives could be viewed as “add-ons” that could be actually installed at a later date. A parallel process could be to develop this technology and form accurate pricing. It would be necessary to look at the cost. The dynamic would have to look further than just manufacturing, and also embody all other enterprises related to this process. Namec was more than ready on the manufacturing side. The costing was likely to be around $10 incremental to the STB price for the optional choices, and he emphasised that this would not have to be purchased, but could be a value-add.

The Chairperson noted that on the previous day it was stated that manufacturers could still engage with the Department.

The Chairperson asked how sustainable the jobs created were likely to be.

Mr Thabo said that this was a new sector, and the jobs would be sustainable, particularly if government positioned itself to stress applications such as e-government and e-commerce, both of which were extensively used in South America. The ability to broadcast interactively would exist “for ever”. The innovation phase was only the first phase, but the ultimate aim would be interactive services.

The Chairperson took the point, but said that this did not answer his question. There would still have to be a distinction between what the STB could do on its own.

Dr Ntlatlapa responded that jobs tended to evolve in this sector – for instance, there had been a flush of “dot.com” jobs when this was popular, but they had evolved into other jobs some years later. If a platform was opened that allowed for innovation, the industry would constantly create new jobs, perhaps in content, or perhaps in other issues. TVs would come with tuners, and there could be a move to manufacturing TVs. CSIR, for this reason, trained all its staff in basic skills, and these would be added to with specifics.

Mr Thabo stressed that all members of the Namec Consortium were currently-operating enterprises, who utilised their resources, and were willing to increase their capacity to take DTT migration even further.

Arion Technology: Briefing
Mr Phatang Nkhereanye, Chief Executive Officer, Arion Technology, said that Arion Technology South Africa (Arion) was in partnership with Arion Korea, and had been established to create a real opportunity for supply of STBs in the South African and African markets. Arion’s board and Executive comprised black South Africans. Arion had registered its own intellectual property. It was committed to skills transfer.

Arion intended to assemble STBs, using imported components from its partner company, but over time it could increase its capacity to manufacture its own STBs. The assembling would be sub-contracted to local facilities. It had the ability to manufacture about 250 000 STBs per month and increase that gradually. It believed that this number would be saleable, but the greater the allocation, then the more it could create and the more skills it could transfer.

Arion had a detailed skills transfer and job creation programme, including the training and employment of 320 South Africans over the next three years. They would be trained in software and hardware design, converging development, quality control, R&D and management skills. The skills training would take place locally and regionally, through regional depots, and training of partners in Korea.

In regard to distribution, Arion would work through government-stipulated channels and through established private partnerships. It intended to work with SMMEs in urban and rural areas, to get the STBs to as many South Africans as possible. It would develop installation partners as part of its skills transfer programme and this would also include support.

Mr Nkhereanye noted that the technical partner, Arion Korea, was established in 1999 and provided systems and technical consulting in digital broadcasting. It had 376 employees worldwide, and about 67% of them were engineers. It had branch offices and factories throughout Korea and China. Arion Korea had been accredited by a major bank as a leading STB manufacturer, and had patented multiple technologies. It was ISO certified, and was recognised for its product designs. His presentation (see attached document) contained a list of references, and partners elsewhere in the world, as well as information on the chipset manufacturer, conditional access and middleware, and license situation. The benefits of the relationship with Arion were also outlined and it was hoped that Arion SA would eventually have its own R&D capacity.

He specifically stated that Arion could manufacture to any standards. It was committed to transfer of skills and would do so, in relation to R&D and management, and would be a leading manufacturer strengthening ties with the rest of South Africa.

Discussion
Ms Ndabeni asked about the presenter’s references to “they”, and asked who Arion SA was representing, and why it would still rely on Arion Korea for manufacturing.

Mr Nkhereanye noted that Arion Korea was a shareholder in Arion SA, as well as in its plant. In addition to this, Arion Technologies Korea was a partner of Arion SA in this project.

Ms Kilian noted that the presentation cited a Korean internet address.

Mr Nkhereanye noted that the South African website was still under construction. The reason for citing this address was that the Committee could refer to this website to get some idea of the types of boxes that could be produced. He confirmed that Arion SA was in existence, and was a registered company.

The Chairperson asked where the plant was.

Ms Ndabeni asked if Arion would be manufacturing itself.

Mr Zondi noted that Arion SA claimed to have the ability to produce 250 000 units per month, and asked if this would be done in local factories, and, if so, asked where the factories were, and what skills and profile they had.

Ms Kilian asked how many people were currently employed at that plant, noting that there was an intention to develop 320 people over the next three years.

Mr Nkhereanye answered that Arion did manufacture, but in relation to the STBs it had taken a business decision that it would take too long to set up a manufacturing plant itself, and for this reason had decided to sub-contract, and partner with another local manufacturer in the short term. It was not intending, in the short term, to include manufacturing in its business plan. The factory to whom it had subcontracted was in Boksburg. This factory was already an existing electronics manufacturer. Arion would import the components from Korea. They would be assembled in Boksburg. Arion SA would then distribute according to its allocation in the subsidised and paying markets. He noted that there were already 800 people employed at the factory, but another 320 jobs would be created specifically to cater for the STBs in South Africa.

Mr Zondi asked what the lead times would be to manufacture the STBs.

Mr Nkhereanye said that he could send through a spreadsheet to the Committee. Basically, this set out a 32-week timeline. It would not be possible to meet an April deadline, but if the specifications were released by 2 October, then the STB could be put into the market in early June.

Department of Communications comment
Mr Norman Munzhelele, Acting Deputy Director-General, Department of Communications, thanked the Committee for holding the session, said that the discussions had been insightful and had given the DOC some idea of what needed to be investigated. Government remained committed to having a successful DTT programme in South Africa. It would try to ensure successful migration. The technical parameters would be set, and DOC would ensure that the consumer would benefit, and all consumers, whether in the free-to-air or paid channels, must be able to receive high-definition picture quality. He noted that the dti and the Department of Science and Technology had incentives available.

Independent Communications Authority of South Africa (ICASA) comment
Dr Stephen Mncube, Chairperson, ICASA, said that the regulators would try to be flexible and creative, and would attempt to accommodate the spirit of the discussions over the last two days. He hoped that a win-win situation could be achieved.

Parties’ comments
Mr Zondi said that the IFP hoped to find a process that would avoid the pitfalls and that resulted in all consumers – particularly those in the rural areas – being brought into the loop.

Ms Kilian said that COPE agreed. The role of this sector was vital, particularly since it could give broader access to information, education and entertainment. It would be critical to agree on the right mix for South Africa. She hoped that there would not be too much rigidity and that all options would be considered. This was a critical moment and the process could not be allowed to fail.

Mr N van den Berg (DA) noted that in the past the DOC had been hampered by in-fighting and he would have liked to have seen this sorted out many years ago. Many good ideas had been put forward, and if they were properly considered, then success could be achieved. He pleaded that all the knowledge and experience should be harnessed not for personal gain, but for the benefit of all people in South Africa.

Ms Ndabeni said the ANC believed this had been a fruitful exercise, and said that if ICASA and the DOC had held hearings like this themselves, they would already have known the answers. Both entities, if they truly represented the interests of the people, should have called on experts to appear, as had this Committee. She thought that the DOC was still displaying an arrogant attitude, and although it might be firmly wedded to its position, it was still important for it to respect other viewpoints and attempts to help people in South Africa and to achieve what Parliament wanted, and she stressed that if the Committee did not believe that DOC had the correct approach, it could compel it to change that policy, although it would prefer to negotiate.

Ms Ndabeni noted that this was the first time that the Committee had actually been informed of the type of technology that M-Net and CSIR could develop, and she stressed that it was critical for institutions appearing before Parliament to disclose all options available, and then motivate for one or the other, and not only to present the one option that was preferred. Money must be spent productively and progressively for the benefit of young people. Public officials could be reprimanded if they failed to represent interests. 

The Chairperson read out a draft Report. This summarised that DOC had confirmed that its plan was still on track. The Ministry had published the amendment to the DM policy and intended to complete the policy. ICASA said it would publish an amendment before end September, and run this concurrently with a process to produce regulations by the end of the year. If all went well, the regulatory framework should be in place by January 2012. The broadcasters had indicated that if these assumptions were met, they were ready to launch. The Committee called upon the DOC, ICASA and dti to facilitate this process by complying with all targets.

Discussions had included whether there should be an encrypted STB, or a simple converter, or  a simple STB initially moving to a more integrated one, in the public interest. The need to ensure that historically disadvantaged individuals, and in particular blacks, would be primary beneficiaries, was noted, and this should include the areas of manufacturing, skills transfer, and the whole value chain. These discussions needed to be finalised speedily by the DOC, and guidance must be provided. Manufacturers expressed their commitment to ensuring that South Africa could win in this attempt. The Committee encouraged the DOC to continue to engage with other departments and entities so that work costs could be cut. He urged that it must engage with dti to ensure that there was no analogue dumping.

USASSA had not presented, and the process would be incomplete until this presentation was given, so it could respond to issues raised.

Finally, the Committee was mindful that not everyone had been invited to present, but the Committee was satisfied that the country was ready for digital migration. The public interest should be the main guide for DM, and this must encompass protection of local content, protection of the viability of the service, universal service and access benefiting rural and historically disadvantaged areas, and access for people with disability. The pillar of the system should be building of the nation and social cohesion, in line with Constitutional principles. The Committee also noted the indication by DOC that it may be willing to look again into the timelines so that more realistic time frames could be set.

Ms Kilian noted that this was mostly a very accurate summary, but would be unwilling to concur that South Africa was “ready” for DM, and it would be more accurate to say that “certain sections in the industry” were ready, but that the lack of a regulatory framework could affect this. 

Other Members agreed, and indicated that they would be willing to concur with the Report, amended in this way.

The meeting was adjourned.