Electronic Communications Amendment Bill: public hearings day 1

Meeting report

Chairperson’s introduction

The Chairperson opened the meeting by welcoming Members of the Committee, officials from the Department of Telecommunications and Postal Services (DTPS), the Independent Communications Authority of South Africa (ICASA), industry stakeholders and Members the public. He was happy that the Department of Communications (DoC) and DTPS were combined and hoped that the consolidated department would be able to assist in resolving the challenges faced in the past.

The Minister and the Director General of the DTPS had sent their apologies.

The Chairperson said that the Committee was dealing with the Electronic Communication Amendment Bill. There were concerns that the Bill had been with the DTPS for a very long time, while others were complaining that the process of completing the Bill was being rushed. The Bill was published for four weeks so that the public could give their inputs.

People who made submissions would be given time to supplement their submissions and submit them in writing. Most stakeholders waited for the last minute to make submissions, and this had put a lot of strain on the Committee. Because of late submissions of comments, Members could not get time to print copies.

The Committee had received more than 30 submissions. The Committee had anticipated spending ten days working on the Bill, but this would not be possible because the submissions had been submitted late.

The Electronic Communications Act (ECA) Bill was informed by the policy that was adopted in 2013, which seeks to foster innovation, competition and open access to infrastructure, ensuring accessibility to service and reducing costs of communication. Reducing the cost of communicating was the essence of the Bill.

The public hearings seek to determine if the Bill addresses the above concerns. The Committee and stakeholders would have to ascertain if they share the same view with the objectives of the policy and establishing the necessary legislative framework. The Committee would not rush to complete the Bill because of its complexity and importance. His view was that it may be necessary and important to have a workshop on certain parts of the Bill after the public hearings to discuss concerns like constitutionality of the Bill.

There were different views. Some were of the view that the Bill seeks to address concerns of the previously disadvantaged people to reduce the costs to communicate, while others were of the view that the Bill would increase the cost of communication. Because of the divergent views, Parliament must ensure that these differences are resolved without rushing and addressing the concerns of poor people.

The Chairperson said he had also invited the Portfolio Committee on Communications to be part of the public hearings. He hoped that the Members of that Committee would attend the hearing. The public hearings would be conducted until Friday 30 November.

The Postal Services Amendment Bill had been tabled and was now in Parliament, and that Bill would be dealt with by the next Committee.

The Chairperson requested Ms J Kilian (ANC) to deal with the motion of desirability.

Ms Kilian indicated that the motion was wrongly placed on the agenda. According to the Constitution of South Africa and the rules of Parliament, public comments must be invited and considered. After the public comments were considered, Parliament would determine if there was a need for enacting the Bill and adopt a motion of desirability.

She said that rule 28.6 (a) of Parliament was not followed. Rules 28 (6) (a) stipulates that in the process of inquiring into a Bill, the Committee must apply the following separate formal stages; informal discussions on the principles and subject of the Bill, including a briefing by the Department or a Member if it was a Member’s Bill. Rule 28 (6) (b) provides that consideration of public comments that have been received must take place.

She said that the Committee should not proceed with the adoption of the motion of desirability before the public hearing. When the rules were drafted, constitutional principles were considered and the principles of public participation had to be respected and followed. In the past, committees had had challenges for failing to follow the two separate processes. She suggested that the public hearing should be conducted first before moving on to the adoption of a motion of desirability. The motion must not be adopted until all the public submissions have been considered.

The Chairperson asked Advocate Frank Jenkins, Senior Parliamentary Legal Adviser, to give his legal opinion.

Adv Jenkins agreed with Ms Killian’s interpretation of the rule, and said the motion of desirability must be done after the public hearings, and deliberations would happen after the public hearings.

The Chairperson reiterated that the Committee was not discussing the Bill, but taking note of comments from the different stakeholders that had made written submissions. He added that Ms Kilian requested the Committee to invite a scholar who was knowledgeable on telecommunication policy, Professor Alison Gillwald.

Ms Kilian introduced Prof Gillwald, saying she had vast experience in telecommunications and broadcasting. She was the Executive Director of Research ICT Africa, and an adjunct professor at the University of Cape Town (UCT) Business School.

Briefing by Research ICT Africa

Prof Gillwald said South Africa’s digital economy was doing well, despite the uncertain regulatory and policy environment. She congratulated President Ramaphosa’s recent effort to urgently address obstacles in the sector, such as the licensing of high-demand spectrum by ICASA and the reintegration of the two Ministries.

She said institutional incapacity, policy uncertainty and regulatory inefficiency had, among other factors, shackled the potential of the sector to contribute to the digital economy. The Green and White Paper processes had slowed the process of rapid deployment, high demand spectrum release and institutional rationalisation. She urged the Committee and stakeholders to ensure that the process of finalising the Bill was not slowed down. However, the process required policy and implementation that cuts across the sector’s digital economy vision.

There was a need to ensure that quality data was collect for evidence-based research which could inform policy formulation. South Africa had been lacking in terms of reporting electronic communications data. There should be data on subscriber numbers, minutes, traffic, and who was able to access the internet. As such, she welcomed the provisions in the Bill indicating that ICASA must conduct research and establish indicators. It was important that the analysis was done in collaboration with the national statistics body and universities that had capacities and skills. Demand data was important in order to understand who was online, sim cardholders, how many people had access to the internet, the proportion by sex, income group, gender and why certain people do not have access mobile phone or to the internet.

There was a high gender gap for mobile phone ownership in Asia, but South Africa performed well as compared to India and Bangladesh. However, South Africa performed poorly on internet penetration as compared to some South American countries. Rwanda had the lowest internet penetration rate, despite the enormous loans, and its gender gap was also high. Most of the least developed countries were struggling to increase internet penetration and close the gender gap for mobile ownership. The major barrier to adoption of mobile phones in Africa was the lack of electricity. However, South Africa performed well compared to African countries.

The urban-rural divide gap was higher than the gender gap in most African countries. Nevertheless, South Africa was performing relatively well on the continent, but still lower than most South American countries. The low performance of South Africa in the urban-rural divide was attributed to poverty and the fact that there were many households headed by single women. Households with internet and a computer in South Africa were increasing, compared to many African countries.

Despite the lack of policy implementation and effective regulation, information communication technology (ICT) in South Africa was strong, but those who were offline faced the same affordability and skills challenges as those offline anywhere else on the continent. The time spend on the internet was also caused by levels of income and earning power.

In the last three years, internet access and social media penetration in South Africa had been increasing. The South African mobile market was dominated by two players, Vodacom and MTN. However, in 2015, when smaller players like Cell C and Telkom entered the market, competition increased even though they failed to gain a substantial market share. The reason why the small entrants had not increased their market share was because there had not been a lot of investments by the small entrants, as compared to Vodacom and MTN

The data costs in South Africa were very high, compared to most African countries. The cheapest cost of 1 gigabyte (GB) of data was used to compare prices in South Africa with other African countries. South Africa performs poorly, and comes 35th out of 49 African countries. The cheapest cost of 1 GB of data in South Africa was US $8.28, which was seven times higher than the cost of 1 GB in Egypt -- US $1.13 -- and nearly three times the cost of the same data in Ghana, Kenya and Nigeria. The cost drivers of data were the high rand-dollar exchange rate, increasing costs of key inputs, the absence of high-demand spectrum being released to operators for 4G, and regulatory issues. In a regulated data environment, there were several factors that should be considered in comparing prices. These factors include licensee obligations, quality of service, intensity use and penetration.

Even though there were significant investments in South African networks that had resulted in the extension of mobile and fibre networks across the country, the after access survey data illustrate how the socially and economically marginalised people were unable to harness the internet to enhance their social and economic wellbeing. Although lack of affordability of devices was the primary barrier to South Africans coming online, as well as lack of affordability of data, the major factors limiting intensity of use were education and income. There was a human development challenge in South Africa for people to use the internet productively. The development of relevant local content and applications in local languages, along with the enhancement of citizens’ digital literacy skills, were all important demand stimulants. If the fundamental inequalities were not addressed, the inequalities would be replicated and amplified online.

There was need for regulatory agility and insight to manage tensions between the certain policy objectives of competitive efficiency, innovation and consumer welfare. With prices of various services high by various benchmarks, more effective regulation of wholesale access in a market in which operators were dominant could also reduce the cost of broadband, not only for individual users but as a critical input into other sectors of the economy. The cost-based prices, which were based on existing business models, licensing frameworks and spectrum valuing and use, were not going to be affordable for half the population in South African that was currently offline. Interventions that would reduce prices, enhance quality, improve e-literacy and develop local content, would all bring online those who were currently marginalised from services, women being in the majority.

The implementation of SA Connect to drive investment into underserviced areas through public demand aggregation was important for the creation of incentives through anchor tenancies, focusing on schools. Further, there should be public Wi-Fi to all public buildings. It was essential to implement critical competition elements of the ECA, particularly the Chapter 10 market review, to enable more price sensitive users to use the internet. ICASA must regulate wholesale prices in markets where there is dominance, as this was critical to creating the fair and competitive environment required to produce lower prices, better quality and a range of services. The review of wholesale regulation in the data market of facilities and bandwidth would reduce input costs for service providers and private networks.

The cost of not releasing 4G spectrum for more than six years had been high. The requirement to reform spectrum and use suboptimal spectrum for 4G had contributed to operator costs. If policy had been effectively implemented, the requirements and intended outcomes of the Wireless Open Access Network (WOAN) could have been far more effectively achieved through assessment of market dominance and asymmetrical regulation. The WOAN had been considered only in markets with far more extreme dominance than South Africa, like Mexico, Russia and Rwanda.

There were tensions between the objectives of universal access, small and medium enterprises and economic empowerment on one hand, and competition pressures and investment on the other. While this would enable market entry and expansion of some existing smaller service providers, a disparate competitive pressure would not discipline market behaviour of the incumbents, and may weaken the position of late, smaller network operators through market fragmentation in the face of the global trend towards greater concentration. Therefore, high demand spectrum should be competitively assigned without creating artificial scarcity to drive up prices, with rules to avoid speculation. Spectrum trading to correct valuation errors should be permitted.

There were several institutional failures that had contributed to the cost to communicate being high. Many of the failures were attributable to institutional arrangements and incapacitated institutions, which therefore obstruct the national public policy to transform. The institutions and the individuals in them require the technocratic capability to implement the policy effectively. It may be necessary to shift competitive assessment functions from ICASA to the Competition Commission to enhance consumer welfare. More so, there was a need for more stringent appointment processes of Chapter 9 institutions that had higher technical expertise thresholds, and Parliament would need to play its oversight role. In addition, the implementing agencies should be equipped with skills necessary to advance national polices and public interest.

Discussion

Ms M Shinn (DA) said that Research ICT Africa had submitted comments on the draft Bill and wanted to know why the organisation had not submitted comments to the ECA Bill. She asked whether there would be competition if ICASA was properly empowered and resourced, and if the objectives of the ECA Bill would be achieved.

Mr C Mackenzie (DA) asked if a WOAN was necessary in the market, and if her proposed alternative on access strategy could address the objectives of the WOAN.

Ms Kilian asked why South Africa and Nigeria had a low performance low in the area of mobile money business. She asked if operators were competing for high products and for the business of people with money, and not looking at affordability and access by poor people.

The Chairperson asked why there was a divergence between internet intake and access to mobile phones.

Ms Kilian asked how the functions of ICASA could be separated with regard to the convergence telecommunications and broadcasting.

Research ICT Africa’s response

Prof Gillwald replied that ICASA needed not only financial resources, but also a clear institutional design, appointments, and skills transfer when consultancies were brought on board. She emphasised that financial resources should be coupled with oversight of Parliament for ICASA to function properly. It would be easy now, since the regulator would be accountable to one Minister.

Prices could be reduced, but there was a strong market, which favoured the top corporations in the digital economy. However, there was need to grow and expand to be part of the global economy. On the other hand, South Africa and many other countries could not afford the model.

She said there should be alternative strategies that include exclusive licences, and scrap the universal service fund. There was an intention to make the Universal Service and Access Agency of South Africa (USAASA) take on many critical functions, but its other powers were being withdrawn with regard to spectrum and fibre.

The alternative access strategies were about allowing existing fixed and mobile operators to evolve their business and grow the sector, because that was where investments come from. However, on the other hand, secondary networks and spectrum network users, community access networks and wireless internet service providers (WISPs), should be allowed to offer services in an environment which was not constrained because spectrum was owned by someone who was not using it. This would give the small players an opportunity to scale their businesses. The ICASA processes were laborious for most small players that did not have capacity.

Furthermore, WOAN should be part of a mixed spectrum use. There should greater demand side valuation of spectrum. At the moment, there was only commercial supply spectrum valuation to get big licence fees, or auctions for operators to make money on. She emphasised there was no traditional demand valuation of spectrum which speaks to the public good of spectrum. Public Wi-Fi was important because more traffic travels on public Wi-Fi across the globe than Global System for Mobile (GSM) networks. Public Wi-Fi was important for the reduction of traffic on traditional networks. Poor people who could not afford data would have to use public Wi-Fi to do basic things in a digital economy.

There were ways of giving operators spectrum and require them to cover under-serviced areas before they could operate in those areas. The way the WOAN was being reduced from being an exclusive network would make it manageable, but it should not be prioritised because it may not be viable for a long time.

In terms of financial inclusion, South Africa have relatively well banked, but a large number of people have only a savings account. There was an opportunity to enhance mobile banking in South Africa. In other countries, mobile banking had increased investment loans. There were cost effective measures that should be implemented in South Africa to reduce cost. She did not think that the reason why there not much of financial inclusion in South Africa was because of cyber security concerns, but the issue was about banking.

She said operators make most of their money from big contracts. There was an old statistic which indicated that contracts created 70% of revenue, while non-contract customers accounted for 30%. The figures might have fluctuated over time. However, as one reaches saturation of high end users, the market should be mopped. The poor were paying the premium on low cost value bundles.

She referred to the reduction in the second tier of income. In the national statistics, the income curve was attributed to social grants. This meant that the impact of social grants affected the affordability of service.

Prof Gillwald said that a policy and regulatory framework should be in place for the convergence of telecommunications and broadcasting. The ECA was old fashioned, and South Africa should be preparing for an integrated digital economy and society. The Bill should considered by all players, like trade and industry, health and education.

The Chairperson thanked Prof Gillwald, and said the Committee would continue to work with her to deal with the Bill.

Briefing by Independent Communications Authority of South Africa

Mr Willington Ngwepe, Chief Executive Officer: ICASA, commended the presentation by Prof Gillwald, and said that ICASA had carried out a study on the cost to communicate and would like to brief the Committee on the findings.

There had not been progress in the regulation of the wholesale market and a reduction of prices. ICASA concluded a review on wholesale call terminations, and a priority market study with a view to dealing with the cost to communicate. On 16 November, it published a notice for the commencement of an inquiry into mobile services, and to regulate data prices. He hoped that when the enquiry was completed, there would interventions.

ICASA had also done a study on data prices in southern African countries and BRICS (Brazil, Russia, China, India and South Africa), as well as countries where South African mobile operators had businesses. ICASA had published the amendment regulations on the user and subscribers’ services charter to deal with unfair business rules in data provisions. The two critical rules from those regulations were to prohibit the expiry of data bundles and deal with out of bundle rates. ICASA had informed operators not to automatically default people to out of bundle charges. This would bring transparency in pricing and force operators to close the inordinate gap between in-bundle prices and out of bundle prices.

The Chairperson requested reports on the studies done by ICASA so that the Committee could study the documents.

Mr Ngwepe said that ICASA would share the information. He said that ICASA’s independence was enshrined in terms of section 192 of the Constitution. Section 3(3) of the ICASA Act clearly stipulates that the Authority was independent and subject only to the Constitution and the law. The ECA and the ICASA Act imposed a duty on ICASA to consider policies and policy directions issued by the Minister in exercising its powers and performing its duties.

ICASA was concerned that the Bill purported to undermine ICASA’s independence by requiring ICASA to blindly implement policies or policy directions without objectively assessing them in line with its mandate to regulate in the public interest. The undermining of ICASA's independence would violate South Africa’s international commitments, particularly the World Trade Organization’s (WTO’s) General Agreement on Trade in Services. The independence of the sector regulator was of cardinal importance to ensure objectivity and to safeguard against potential conflicts of interest in regulation-making, particularly in the light of the government's role as a shareholder in ICT sector state-owned entities. More importantly, ICASA’s constitutionally guaranteed independence should extend to both broadcasting and telecommunications regulation.

Section 4(3) (k) of the ICASA Act empowered the Authority to make regulations to promote broad-based black economic empowerment. Conversely, the ECA required ICASA to promote participation by historically disadvantaged persons in the ICT sector. However, in terms of the Broad-Based Black Economic Empowerment Act 2003 (B-BBEE Act), the transformational measures seek to (a) increase the number of black people that manage, own and control enterprises/productive assets; (b) facilitating ownership and management of such assets by black people; and (c) human resource and skills development. ICASA submitted that the sector specific transformational measures, as set out in the ICASA Act and ECA, should be aligned with the generic economy-wide measures as set out in terms of the B-BBEE Act

The Bill proposes that ICASA’s functions should be limited to administering and managing spectrum assignment. The Bill also proposes that a National Radio Frequency Spectrum Planning (NRFSP) Committee be established to ensure fairness and equitable distribution of radio frequency spectrum. This provision dilutes ICASA’s powers to manage radio frequency spectrum, and the amendment was not in line with best practice and South Africa’s international commitments. The decoupling of the spectrum management mandate undermined regulatory certainty.

Mr Ngwepe submitted that ICASA should continue to manage spectrum, as an independent regulator.

The Bill proposes that unassigned high demand spectrum reserved for assignment to the WOAN must be assigned following a policy direction issued by the Minister. However, these amendments were unnecessary, given that on 27 September 2018, the Minister of Telecommunication and Postal Services had published the draft policy and policy directions to initiate the process for the release of spectrum to the WOAN and to other licensees. The closing date was 8 November 2018 and ICASA was extensively consulted on the policy direction by the Minister. As such, ICASA said the proposed amendment was superfluous.

ICASA said there should be a clear delineation of roles between the policy-maker and the regulator in respect of licensing matters. The Minister should set policy, but should not prescribe licence conditions. The regulator (ICASA) should prescribe licence terms and conditions, including universal service obligations. Licence conditions and obligations were by their very nature a matter of regulatory discretion and should not be prescribed in the law.

Regarding competition matters, section 67(13) of the Bill requires ICASA to perform the market definition and market review proceedings after consultation with the Competition Commission. ICASA indicated that this section was unnecessary since ICASA already asks for assistance and advice from the Competition Commission. Additionally, ICASA was of the view that this would further lengthen the market review consultation process. However, it supported the proposal in the Bill that the Authority and the Commission Competition expand on the agreement that governs the exercise of concurrent jurisdiction.

The Bill also proposes that the Minister of Telecommunications and Postal Services must establish a rapid deployment national coordinating centre for rapid deployment of electronic communications networks (ECNs) and coordination with local municipalities. The Bill further requires ICASA to prescribe regulations which provide for procedures and processes to resolve disputes between ECN licensees and landowners. However, the ICASA does not have powers to regulate non-licensees or landowners. It would therefore be ineffectual to require ICASA to develop and enforce dispute resolution regulations for landowners. Therefore, ICASA proposes that the function of resolving disputes should be carried out by the national coordinating centre.

Discussion

The Chairperson thanked ICASA for its submissions, and said that all the submissions received raised the same argument that the Bill encroached on the powers of ICASA. The issue of resolving disputes concerning landowners had also been raised by South African Local Government Association (SALGA) in its submissions. SALGA believed that it was their territory to resolve the disputes concerning landowners and had been performing that responsibility with its 257 members for a long time. SALGA was of the view that the Bill was getting into its space and are prepared to defend that space.

The role of the Competition Commission and ICASA was also raised by other stakeholders. The constitutionality of the Bill was another issue raised in many submissions. Some of the issues raised were queries, and the DTPS had to clarify.

Mr Mackenzie asked if ICASA believed that the Bill was unconstitutional, and wanted to know if ICASA had a legal opinion to support that conclusion. He asked if ICASA had made reference to the B-BBEE ICT Code in its submissions, and whether the Code referred to historically disadvantaged groups, or black people.

Ms Shinn said that section 31E of the Bill required a licensee/prospective bidder to invest huge sums of money without deriving any incentive for doing so. ICASA stated that the obligation may deter any licensee/prospective bidder from participating in the licensing process to be initiated by the Authority with regard to unassigned high demand spectrum not reserved for the WOAN. She asked why the amount of money paid by Mobile Network Operators (MNOs) for unassigned spectrum would be inhibited.

 

She asked how ICASA would fulfil its new onerous obligations in the Bill, and how it would impact on its operations and its budget. How much would the spectrum auction cost, and was it feasible to have it before the elections? What did they think should be done by the Committee to achieve the objectives of the Bill? Would resourcing ICASA ensure that the objectives of the Bill were achieved? The auction and rapid deployment programme had been outstanding for a long time.

A suggestion had been made to the Committee that a significant difference would be made to the cost to communicate if the MNOs split their operations into wholesale and retail. Telkom Mobile was often referred to as the best example of the how the strategy worked, and what could happen within the mobile network. She asked if ICASA had looked into that model and if it was financially sustainable.

Ms Kilian said ICASA had made substantive comments and raised concerns on definitions in the Bill. When would the Committee get detailed information from the Department about the definitions of concepts in the Bill? ICASA had made valuable comments on the deficiencies in the Bill, and the Department should elaborate. This would determine whether the Bill should be proceeded with or not, and whether it should revised and reintroduced in the new Parliament.

The Chairperson said that the DTPS should take note and reflect on the queries raised by the Members, and submit a detailed response when the Committee was dealing with the Bill.

Ms D Tsotetsi (ANC) said that no law was cast in stones and iron, therefore situations would dictate if there was need to change certain laws. She asked if the DTPS would not be able to implement the Historically Disadvantaged Individual (HDI) programme as effectively as ICASA

The Chairperson said ICASA was not bound by the policy, but was guided by the Constitution and the law. The Bill reduced ICASA’s roles and responsibilities to regulate and control, since this was now being transferred to the DTPS. This was a serious matter which other entities had also raised, and had provided decisions made by the Constitutional Court. The Department must consider the concerns raised. ICASA had raised the point that the provisions on spectrum may not be necessary. SALGA had also said that its powers were being diminished. These issues were crucial, and he hoped that the Department would assist in addressing them. The recent decision of the Constitutional Court on the rights land owners was important to consider. The Bill as proposed went against the decision of the court.

He also asked the Department to address the question of timeframes which ICASA had opposed, given the fact that the market reviews take long to complete.

Ms Cynthia Lesufi, Senior Manager: Telecommunication Policy, DTPS, said that the Department was not on the programme of the Committee’s agenda. She asked if it was expected of the Department by Friday to provide a comprehensive analysis of the comments received, and its presentation would deal with all issues raised by the stakeholders.

The Chairperson said that the Department should provide clarity on queries being raised as the Committee went through the public hearings. At the end of the public hearings, it should table a comprehensive report on its final position and the concerns raised.

He reminded officials from the DTPS that its letter to the Committee had indicated that the Bill should be prioritised. With the amount of inputs received, the Committee was not likely to finish the public hearings. When the Committee received inputs, it noted that there were different views, including the views of the Department. Because the Department had initiated the Bill, it should provide clarity on all the issues raised by end of business on Friday.

He said that when Members meet on Tuesday, the responses would have to be considered. The issues relating to WOAN, the constitutionality of the Bill, and that the Bill would not increase prices, should be addressed by the Department so that the Committee could make an informed decision.

Ms Kilian said that what was important for the Committee was to have confirmation that the Department had received all the written submissions, because fundamental constitutional issues had been raised. A Constitutional Court judgment had been referred to in written submissions, so the Department should respond on all the statements made and give their view. ICASA had quoted a particular case relating to the Minister of Telecommunication and Postal Services, where the Constitutional Court had made a specific finding that the Authority had a duty to take national policy into account, but the Minister’s policy directions did not bind the Authority. Therefore, the Committee should understand why there were different provisions, and the Department had to explain its position.

Mr Alf Wiltz, Chief Director: Telecommunication Policy, DTPS, said that the primary focus of section 192 of the Constitution was on broadcasting. The question asked to Prof Gillwald on convergence had been raised in light of section 192. ICASA was not specifically mentioned in the Constitution, unlike other Chapter 9 institutions. The other constitutional institutions were fully dealt with in Chapter 9. This was relevant, because the Constitution wanted other organisations to describe the nature of their independence.

He said that independence came in different forms, depending on who appointed the head of an institution, how it was funded, who could remove the head and how much they were paid. All these aspects were not included in the Constitution in respect of ICASA. The reason for this was because it was left to the legislature to define the nature of the regulator and independence. He was of the view that the Committee should determine the independence of the regulator in the legislation. Enabling legislation gave a mandate and power to ICASA. It may be that in the late 1900s, the regulator had to be more independent than today, or vice versa. Therefore, the Committee may be influenced and make changes to the legislation.

It would still be fine if ICASA operated separately, irrespective of government policy, and reported to Parliament. However, the regulator’s independence in the current form was of a hybrid nature, because the Minister plays a role in the appointment of council and funding, even though he was restricted from interfering in day-today operations, licensing and other matters.

Mr Wiltz said that the Department had been through court cases concerning the uncertainty of how independent ICASA was. The Department was of the view that it was an opportune time to reflect on what the ICASA Act and ECA say about independence.

Furthermore, spectrum was a policy matter and the responsibility of the executive. The case cited by ICASA in its submissions was about spectrum and policy considerations, wherein the court had pointed out that a simpler and more obvious interpretation was that ICASA must function within existing policy, and consider existing national policy and policy directives. In summary, therefore, ICASA’s duty was to cooperate with the Minister, and whatever the reach of the duty might be, it was confined to the existing policy.

The White Paper that started in 2013 created a new framework for spectrum management. The policy applies even today, and it created a new governance framework. The policy provides that the Minister would develop the national radio frequency plan. This was a fundamental shift in policy. He asked whether the deliberations should be opening the White Paper, or implementing some of the policy provisions. He reiterated that there was a new framework, since the Minister would now be allowed to develop a national radio frequency plan, together with a spectrum steering committee.

Mr Wiltz said the Minister was responsible for allocation. Allocation was a policy matter, and should be made by the Minister. In respect of the policy, ICASA was responsible for licensing and assignment, and the Minister could not play a role. The current legislation uses many terms, like ‘control and management of spectrum,’ which causes disputes. This did not mean that ICASA had overarching control on spectrum. He strongly argued that spectrum was a policy matter if government played a significant role.

The White Paper provisions clarify the role of the Minister. The policy is clear that there is a dedicated role for the Minister. The policy framework would not work if left to the current provisions of section 3(3), which say that ICASA must consider whichever policy directives of the Minister. If the Minister was responsible for the national radio frequency plan and policy, the management, control and steering the sector, ICASA must follow the policy. If ICASA could consider only the policy and do nothing else, the system would collapse.

ICASA had brought the issue of the B-BBEE Act in relation to previously disadvantaged people, but the regulator had draft regulations that sought to address the challenges. The B-BBEE policy was not addressed by the Bill. The Bill, however, made the B-BBEE policy stronger than before. In terms of the ICASA Act, the regulator had a right to make regulations on B-BBEE. However, ICASA had not made the regulations. The regulations were tools that would ensure the enforcement of the B-BBEE Act and the ICT B-BBEE Charter.  

The Chairperson asked Mr Wiltz to be brief in his responses

Mr Wiltz said that the current draft policy direction was not without legal concerns, and the policy dealt with high demand spectrum and not future high demand spectrum. There were other future spectrums, and the Bill was necessary to deal with the spectrum issue in future.

The White Paper also deals with the cooperation and engagement between ICASA and the Competition Commission, given that the Commission had expertise. The Bill prescribes that ICASA must inform the Commission, but ICASA does not have to wait for their approval. Both parties would benefit from their respective expertise.

He indicated that the Department disagrees with ICASA on the question of lack of authority to regulate landowners. The debate had been ongoing between the Department and ICASA, and the arguments would be shared with the Committee in writing.

Ownership and control over spectrum were difficult, but the Department was of the view that the provisions of the Bill required ICASA to make regulations on ownership and control. Those regulations, when made, would define the technical concepts.

Ms Kilian said that the ICASA Act lists objects of the Act, which include regulating broadcasting and electronic communications in the public interest. As such, it would be difficult to move on with ECA and changing ICASA’s role without going into detail about the Authority’s responsibilities in terms of section 192 of the Constitution. She asked if one should not start from the ICASA Act.

The Chairperson said that some of the questions would be dealt with by other presenters.

Ms Shinn said she wanted to know the position of the Department on the International Telecommunications Union (ITU) Council, which requires regulators to be independent

Mr Wiltz replied that there was international benchmarking, which indicated that different countries treated regulators differently. Some had independent regulators and other did not, and the nature of independence differed in different jurisdictions.

The primary focus was on the ECA and to the extent that the ECA amendments affect the ICASA Act, those amendments should be dealt with in the schedule of the Bill. Therefore one of the provisions of the Bill was amending the control and management which belongs to ICASA under the current legislation. If the amendment prevails, a consequential amendment also had to be made to the ICASA Act.

There was another debate which was linked to the new regulator which was anticipated by the White Paper. When the Bill was first drafted, it had provisions related to independent powers. The Department had taken out the things that it thought would affect the independence of ICASA. The Bill was crafted with ICASA in mind, and the things that infringed ICASA’s independence were taken out.

The Chairperson said that representatives from the Department must write down all their concerns and note queries raised by different stakeholders so that the Committee could consider them when working on the Bill.

Mr Ngwepe replied to Ms Shinn’s question as to whether it was feasible and financially sustainable to split the MNOs into wholesale and retail. In terms of the current ECA, one of the remedies that could be imposed to address competition measures included functional separation. However, this should be imposed after a detailed market review.

There were a lot of provisions in the Bill that were good and needed to be effected. For instance, the provisions on rapid deployment of infrastructure guidelines and measures introduced in the Bill were critical to address bureaucratic challenges that had hampered the deployment of infrastructure. Other provisions on spectrum trading, single trenching, spectrum re-farming, international roaming regulations, open access and quality service, were welcome and should be progressed.

With regards to whether the spectrum auction could be done before the elections, he said it would be impossible to answer without being accused on disregarding policy. The process was under way, and timelines would be dictated by how the process unfolded.

He added that ICASA was currently constrained, so the additional obligations would also require more resources. When the additional duties were imposed, additional resources should also be made available.

ICASA may submit written responses if required by the Committee to address the question on the constitutionality of the Bill.

The Chairperson said that ICASA was free to make further submissions on any matter in the Bill.

Briefing by Broad Bandband Infraco

Mr Phatang Nkhereanye, Senior Manager: Legal and Regulatory Affairs, Broadband Infraco (BBI) said BBI believes that the draft policy direction would provide the much needed regulatory certainty regarding International Mobile Telecommunications (IMT)-2000 frequency bands that have been identified for 4G wireless deployment. It was of the view that the primary protagonists for licensing high-demand spectrum would also welcome the draft policy direction and its ambitions. The country’s increasing demand for less expensive data prices should be helped by the licensing of unassigned high demand spectrum.

BBI welcomes the establishment of WOAN as the state’s primary means of actively attempting to intervene in the access market to reduce the cost to communicate. It requested clarity on the ownership and governance of WOAN, how the WOAN would be funded and how the government would meet the WOAN’s ongoing capex and opex requirements to ensure the entity’s sustainability. The legislation was not the best instrument to provide the clarity, but the Memorandum of Incorporation should clarify shareholders’ concerns.

Notwithstanding that the WOAN would be a juristic entity with a quasi-public mandate, given the possibility of it being a public private partnership, BBI believes that the WOAN should have a clear and unequivocal statutory remit. The main objective of the WOAN must be to expand the availability and affordability of access to wireless broadband electronic communications, including but not limited to underdeveloped and under-serviced areas, in accordance with the ECA and commensurate with international best practice and pricing.

Furthermore, BBI was of the view that WOAN must be allocated high-demand spectrum. The current version of the ECA Amendment Bill envisages the WOAN being allocated over 70 MHz of high-demand spectrum bandwidth. The fairness of universal service obligations (USO) imposed on the WOAN would need to be viewed in the context of USOs being regulations of general application; notwithstanding the business purpose of the licensee.

To enable the WOAN to effectively, efficiently and economically achieve its statutory mandate, the ECA Bill should ensure that the WOAN was not restricted from whom it could procure its backhaul services. BBI supported the non-prescriptive position of the Bill on this critical issue. BBI was of the view that the WOAN’s management should be at liberty to procure support services for its operations from service providers who offer the soundest commercial solutions with the most value for the WOAN.

Discussion

Ms Shinn asked if BBI was of the view that the WOAN would be a state-owned company. The previous Minister had said that the government would not be an owner of the WOAN, but that it would be a private consortium. Does BBI think that the WOAN would be competition in rolling-out internet to the disadvantaged areas, and if it would a threat to BBI’s business?

The Chairperson said that it was an assumption that the WOAN would be a public entity, and BBI had been the only entity that raised the assumption. He asked ICASA officials to reflect on the issues raised, and assist the Committee in clarifying those concerns.

Mr Wiltz replied that WOAN was not intended to be a public entity but a private commercial entity or consortium of entities that come together to voluntarily participate in the process, and apply for a licence in accordance with ICASA processes. The Bill deals with USOs in clause 19A, which provides that the Authority must determine the USOs for the WOAN.

The Chairperson asked Mr Wiltz to elaborate on USOs, as there were different interpretations of the same thing.

Mr Wiltz said there was a need for clarity from a regulatory perspective to determine the approach to be followed and the nature of obligations on operators in USOs. There was also a role to be played by the Minister and ICASA. The two parties had different responsibilities and the Minister’s included defining USOs, determining what constitutes underserviced areas, the linking of licensing processes, prescription standard terms on USOs, and the imposition of USOs by ICASA. However, this had not been consistently applied over time. In the past, operators had received similar rights but had not had similar obligations. The majority of operators did not have similar obligations. He indicated that there were discrepancies which had to be addressed in a proper approach. The USOs should be left to ICASA to determine the obligations to be carried by the WOAN and enforced by ICASA.

The Bill did not propose that the WOAN must use the backhaul of a specific entity. There was, however, a link between what the WOAN should be able to access, being existing infrastructure facilities and networks of existing operators and the spectrum. The operators that receive high-demand spectrum would have commensurate obligations to open their networks to WOAN.

Mr Nkhereanye said that BBI did not view WOAN as a competitor, but as a prospective customer, because BBI provides backhaul services to other operators. Its focus was on long distance fibre while the WOAN was on the access side. As such, BBI would be able to provide backhaul links between the base stations and the access points of the WOAN.

The meeting adjourned for lunch

When the meeting resumed after lunch, the Chairperson said that there were certain things that the Bill expected the South African Local Government Association (SALGA) to do. However, SALGA was arguing to the contrary -- that the Bill should not take away powers of municipalities. The Chairperson said that SALGA may provide additional submissions after consulting all its 257 members. He reiterated that there would be a workshop on matters where different stakeholders hold divergent views.

Briefing by South Africa Local Government Association (SALGA)

Ms Xanthea Limberg, Cape Town City Councillor, and Chairperson: ICT Municipal Innovation Portfolio Committee, SALGA, said that its submissions on the Bill were formulated through the inputs made by different telecommunications directors, ICT managers and municipalities during a workshop hosted by SALGA in 2018. However, SALGA intended to do further engagements on the amendment of the Bill.

SALGA’s interest in the Bill was primarily on how the amendments would be implemented in relation to land ownership and the holders of electronic communications network service (ECNS) licences. SALSA therefore hoped that all municipalities would be enabled and empowered through frameworks which promoted the self-provision of broadband and related services for their own internal use, and access to spectrum and other inputs to allow them to support efficient service delivery and to allow broadband to function as a socio-economic enabler within their local communities and economies. SALGA and municipalities had experience and practical knowledge to impart, aside from controlling and operating their own electronic communications networks and facilities.

Municipalities were not holders of ECNS or Electronic Communications Service (ECS) licences, although certain municipalities do hold private electronic communications network (PECN) licence exemptions. A PECN licence exemption allows the holder to provide ECNS for its own internal purposes, as well as authorising it to sell additional capacity on that network to third parties. SALGA hoped that the Committee would consider the extent to which the Bill purports to ICASA’s jurisdiction over municipalities, and whether it was permissible in law.

SALGA was of the view that access to dedicated spectrum was essential in allowing municipalities to achieve their mandate and constitutional objectives to enhance service delivery, socio-economic development and the movement towards smart cities, and the fourth industrial revolution. SALGA argues that it was an oversight that the Bill does not recognise the role of local government in delivering broadband services. Dedicated access spectrum could greatly expand this role by allowing municipalities to leverage fibre networks to provide public Wi-Fi and other services over a far greater area. It would allow greater control over quality of service, and improve network redundancy. Hence, SALGA proposes that part of the unassigned high demand spectrum intended to be made available to the WOAN licensee be dedicated for local government, and even the other state entities.

Furthermore, municipalities make up a significant percentage of affected landowners and are distinguishable from most other landowners in terms of the constitutional mandate and obligations which they were required to discharge. SALGA welcomed the attempt made to clarify the law applicable to the interaction between landowners and entities holding ECNS licences issued under Chapter 3 of the Principal Act. Therefore, SALGA requests the Committee to consider whether the proposed subsection 20D (5) (b), which stipulates that a by-law which regulates the manner in which a licensee exercises its powers ‘may not require the municipality’s consent’. Further, the Committee should consider whether the proposed section 20B (2) should not also be made explicitly subject to 20(B) (5).

SALGA supports the proposed section 20 D regarding single trenching. The implementation of this provision would fall to ICASA, and the practicalities of enforcing a single trench policy would be set out in the proposed rapid deployment regulations. There were, however, difficulties with holding a position that municipalities would be subject to these rapid deployment regulations, which would impose obligations on licensees. As such, SALGA would engage with ICASA as it had done before regarding proposed rapid deployment guidelines or regulations, on the need to align municipal processes and procedures with the obligations to be imposed on ECNS licensees.

Regarding the text of the proposed section 20F and taking into account the autonomy of local government in respect of land planning, SALGA submits that reference to ICASA having the power to decide which geographic locations had single trenching obligations, must be deleted. This was properly a power to be exercised by municipalities. In addition, decisions regarding the desirability or technical feasibility of single trenching were surely best left to the municipal authority responsible for the land in question.

The proposed section 20E seeks to facilitate access to high sites, which includes buildings used for public purposes that were suitable for the deployment of radio equipment, with the objective of promoting broadband. In this regard, SALGA was of the view that access to high sites owned by municipalities should be handled in the same manner as access to land. Access to municipal high sites by ECNS licensees should be subject to compliance with the steps proposed in sub-sections 20 D(5) (b) specifying that such access was subject to applicable by-laws which regulate how such access could be exercised.

SALGA also submitted that section 20K of the Bill should be clarified to ascertain if administrative costs, damage deposits, and monthly rental charges were covered by reference to access fees in the Bill. In conclusion, it submitted that rapid deployment may be difficult to implement, given the lack of capacity in municipalities.

Discussion

The Chairperson thanked SALGA officials and asked Members to comment.

Ms Shinn asked Ms Limberg to clarify how municipalities intended to operate the fifth utility -- broadband infrastructure and service. She was concerned about municipalities using internet connectivity as a means of generating revenue. She asked how the National Deployment Coordinating centre oversight of infrastructure roll-out in municipalities could ease the rapid roll-out of ICT infrastructure, given the complicated processes within municipalities.

Mr Mackenzie asked if the Bill in its current form was unconstitutional, and if passed in its current form, whether SALGA would challenge it.

The Chairperson said that there was an argument on the tagging of the Bill -- whether it was a section 75 or 76. Some stakeholders were of the view that the Bill should be tagged as a section 76 while others were of the view that the Bill was a section 75. He wanted to know SALGA’s opinion.

He said there were categories of people who had not been consulted, like heritage bodies in different municipalities. These were independent entities, even though they fell under municipalities. He was of the view that spectrum should be allocated to certain players in the Department. He asked why municipalities charged people for accessing certain roads, and for the name of the roads.

The Chairperson said SALGA must restate its position on the infringement of municipal by-laws.

Mr Wiltz said that it was not the intention of the Bill to promote the role of municipalities in broadband. There had been a meeting at which SALGA had raised the issue of spectrum, but it had been clarified by the Department. The process of high demand spectrum was not intended to determine what spectrum goes to municipalities. It was open to municipalities to go to ICASA and apply for spectrum. However, the Bill made provision for a disaster relief type of spectrum.

The current ECA already provided for ICASA’s jurisdiction to resolve disputes between ECNs and landowners. If the submissions were right, this meant that the current ECA as it stands was unlawful.

Section 20 D (6) stipulates that a landowner may object to the Authority in a prescribed manner. This means that the landowner had an option because the provision was not prescriptive. If a landowner does not want to follow the process, then they could approach the courts. The Department was of the view that a proper dispute resolution process created by ICASA would help all parties to ensure clarity on what was allowed and the procedure to be followed.

Mr Wiltz said he thought the ‘fifth utility’ was a policy discussion going on at municipal level. It was not a national policy which stated that ICT was now a fifth utility. The issue was a potential policy debate that should be developed to ascertain if municipalities could provide services for themselves and the communities they served.

The Department thought it was making progress in ensuring certainty in the White Paper and the Bill through crafting provisions aligned with court judgments. The provisions were worse before the current Bill. The provisions in the ECA were unclear, and ECN operators were crossing land and sometimes paying rent and sometimes not. As such, parties had started taking each other to court. However, the courts had not declared the provisions of the ECA to be unconstitutional. Some of the judgments were incorporated in the Bill in provisions, such as section 20D.

He agreed with SALGA that municipalities were critical stakeholders in the issue of single trenching, and that the engagement of ICASA would be required on the obligations of licensees. The Bill also makes provision for obligations for existing and new ECNS licensees in the context of rapid deployment of infrastructure.

Mr Wiltz said that the White Paper deals with the single trenching comprehensively. The model of implementation did not favour everyone. However, there was a key policy objective that multiple trenching was not in the best interest of anyone or the environment in the context of the duplication of infrastructure. The Department was of the view that ICASA must make the rules on single trenching. A provision could be inserted indicating that when a decision had to be made relating to municipal areas, consultation should be done with the respective municipality.

He added that the former Minister insisted on provision on fees, and that way leaves were the biggest challenge to rapid deployment. He had attended a SALGA meeting where a presenter had stated that SALGA and the municipalities must look at themselves and their contribution to reduce the cost to communicate. There were provisions that provided for municipalities to process way leave applications in 30 days, and charge fees based on cost. Those provisions had been taken out and did not appear in the current Bill. The fees charged in the process must be reasonable to avoid increasing the cost to communicate.

He indicated that he was surprised by the comments made by SALGA, considering the time he spent at SALGA. The Department had proposed that SALGA must develop a model of rates that could be charged by municipalities. The rates should be administrative and cost-based, and there should be uniformity across all municipalities. The Department had recognised SALGA’s concern at the time, that they did not have the authority to impose anything, and had requested SALGA to propose uniform rates to its members.

It was important not to maintain the status quo. Everyone had been calling for rapid deployment provisions, but it was not happening. The Bill gave an opportunity to ensure that rapid deployment took place. All parties should play an important role and realise that it was in the interest of the economy for networks to be built faster.

The initial draft of the Bill had placed a lot of obligations on government, but the onerous state obligations had been taken out. For instance, there had been a provision which stated that municipalities must make provisions for ICT infrastructure so that operators did not have to dig trenches. In the end, those provisions had been taken out because it was the competency of municipalities to make those decisions, and because of the financial implication involved. The obligations would be dealt with in the Memorandum of Understanding between various stakeholders.

The Chairperson said Mr Wiltz must clarify two issues. In the earlier argument by SALGA, they stated digging is not their mandate. SALGA was of the view that their mandate was licensing. The Department had not countered the argument made by SALGA. Ever since the enactment of the ECA in 2005, ICASA had not carried out the responsibility.

The Chairperson said the he did not understand Mr Wiltz’s argument on access to land. The Constitutional Court, in Maledu and others v Itireleng Bakgatla Mineral Resources (Pty) Limited and another, restated the right to land which had been violated by the Department of Mineral Resources, traditional leaders and the mining company. He wanted to know if SALGA’s concern on the right to land was in line with the decision made by the court. There was precedent as pronounced by the courts. South Africa was a constitutional country and constitutional dictates should be respected. He also asked the state law advisers to make comments on the issue of land.

Mr Wiltz responded that single trenching required operators to operate in a certain way. This was where ICASA had to play a role to regulate licensees and make the rules on what was permitted.

In addition, the current position in section 21 was that the regulations must provide procedures and processes for resolving disputes that may arise between ECNs and landowners in order to satisfy the public interest in the rapid roll-out of electronic communication networks. This had always been the law, and the regulations had not been made. ICASA was dependent on the Minister’s policy, because the policy had not been made until the White Paper introduced the rapid deployment policy. ICASA had the authority to make the regulations. The authority was obtained from legislation to resolve disputes over landowners.

Mr Wiltz said that in City of Tshwane Metropolitan Municipality v Link Africa, the constitutional court had been asked to determine whether section 22 of ECA was unconstitutional because it gives licensees the right to enter properties and construct networks. He said that it was not unconstitutional, as pronounced by the court. In the context of municipalities, the court had said an operator could not cross a busy intersection. The municipality must have a right to determine how the right to trench would be exercised in terms of municipal by-laws. There should be a balancing of interests. The limitations of rights applied if there was national law and if the limitation was justified in an open and democratic society. The limitation and rationality test were both applied in the Link Africa matter.

He was not sure whether the Maledu case affected the issue of single trenching. The case had been similarly decided and found that South African law created the necessary safeguards and checks and balances to ensure that there was no infringement.

Ms Yolande van Aswegen, Principal State Law Adviser, said she had not read the submissions made by SALGA. However, the court case had assisted with putting measures in place for access to land. The constitutional court did not find the provisions to be unconstitutional.

As far as the independence of ICASA was concerned, the Bill was not unconstitutional where it alluded to overtaking the powers and functions of ICASA. The court cases cited by ICASA had been considered. The functions and roles of ICASA were stipulated in the ICASA Act and the ECA Act. There had not been a constitutional case which found ICASA to have the independence as provided in section 192, although many cases pointed out that ICASA was the institution referred to in section 192.

There was still a debate as to whether ICASA should get the same independence afforded to chapter 9 institutions. If the independence of ICASA was to be determined, such an issue could be addressed in the ICASA Act or ECA. There were arguments for both sides, if the matter was to be taken to the constitutional court. However, at this stage, the Bill was not unconstitutional although there might be conflicts between the different Acts of Parliament.

The Chairperson asked if Ms Van Aswegen had read submissions made by other stakeholders.

Ms Van Aswegen replied that she had read most of the submissions. However, most court cases alluded to the fact that the Minister may make policy, and ICASA must act within the scope of the policy or at least consider it. In the recent case between the Minister and ICASA, it was decided that ICASA must cooperate. Therefore, there was never a case which stipulated that ICASA had the constitutional independence with regard to electronic communications, although it had independence in broadcasting. She reiterated that the Bill was not unconstitutional.

Ms Limberg said even though the fifth utility issue was still a policy discussion and an aspiration for municipalities, it was important to recognise that municipalities oversee certain functions in respect to the deployment of telecommunication infrastructure, such as the administration of way leaves, and granting access to electric poles. Municipalities play a dominant role in the oversight and administration of how deployment takes place. Therefore, telecommunication infrastructure should be recognised as a fifth utility.

Municipalities did not operate on a revenue basis, but rendered services to cover costs of services. It would therefore not be the intention to drive the policy concept of a fifth utility on the basis of generating revenue, but would rather be a mechanism for ensuring that municipalities play their role and ensure that it covers the maintenance and repairs of infrastructure accessed by licence holders.

It was difficult to ascertain whether the National Deployment Coordinating Centre would ease the deployment of infrastructure without clear roles and responsibilities for the centre. Often the introduction of another body adds another level of bureaucracy. SALGA hoped that the centre would provide a standardised and streamlined process for how deployment will place across the country. It was impossible to tell at the moment whether the centre would enhance the deployment of telecommunications infrastructure.

Ms Limberg also mentioned that there were conflicting rights that needed to be considered as part of finalising the amendment to the Bill. For instance, section 20F grants ICASA the right to decide on the geographical location of where single trenching should take place. Municipalities were landowners or custodians, so their views should be considered.

If ICASA was given the right to determine the location of single trenching, this would impede the rights of licence holders to argue for the right to equitable licence conditions and requirements. This would also impede license holders from deploying their infrastructure and ensuring that they had equitable access. SALGA would guard against how conflicting rights were exercised.

SALGA believed that it had a role to play in the Bill, and had actively participated. It had also outlined its role and how it should be considered in the application of the Bill. Other new legislation, such as Spatial Planning and Land Use Management Act 16 of 2013 (SPLUMA), should be considered in the context of land ownership. SPLUMA had assigned planning rights to municipalities, and should be considered in that context.

There would be value in ensuring that heritage bodies were consulted to ensure an inclusive process. Nonetheless, in the existing planning approval processes of municipalities, there was provision for heritage bodies to provide their comments. Within municipalities there was an embedded process which ensured that there was wide consultation. There were also appeal mechanisms established according to the requirements set out in SPLUMA.

In response to the statement by Mr Wiltz that municipalities should obtain spectrum from ICASA, she said that municipalities and SALGA had had direct interactions with ICASA on the need to allocate high demand spectrum for critical services, like emergency and disaster relief services. Those engagement had not necessarily reached the point of ensuring the municipalities were assessed differently. She emphasised that municipalities were not operating in the space for competitive purposes, and should therefore be looked at differently.

Ms Limberg said the reason why SALGA listed spectrum in its submission was because the Bill seeks to provide new approaches on scarce resources such as spectrum, including the assignment of high demand spectrum on open access principles. It was proper for SALGA to make a submission on spectrum, given the long engagements it had with ICASA in respect of access to high demand spectrum.

She replied to the Chairperson’ on whether it was correct to charge access to roads, and said that processes within municipalities had development contributions. For instance, if a person had an early childhood development (ECD) centre and was expanding the centre on their private property, the person should make a development contribution towards the increased access or utilisation of infrastructure, like sewers, roads or water reticulation. The contribution was not termed ‘charges’ or ‘levies,’ because municipalities were already charging a form of levy in respect to the impact any activities had on their infrastructure.

In the matter of Link Africa, the City of Tshwane had entered into a formal process through the municipal asset transfer regulation process, granting Link Africa access to the sewer network. A way leave was a once-off fee. In many instances, telecommunication providers were making permanent use of the infrastructure. The municipalities had a responsibility to oversee the maintenance and upkeep of the infrastructure. There should therefore, be a charge or levy to ensure that the city maintained the integrity of the infrastructure while telecommunications providers were accessing it and not contributing to its maintenance or repairs. Hence, SALGA’s submission in relation to fees and levies were related to the access to infrastructure and the cost of maintaining it. Both parties would benefit if the infrastructure was maintained at a suitable quality level.

Ms Limberg said there should be consideration that municipalities, in terms of the Constitution, had the right to institute by-laws within their boundaries. Therefore, there should be a complementary approach in how the Bill was implemented in the light of existing by-laws. The by-laws were drafted to align with the Constitution. She reiterated that there should be consideration of the by-laws in relation to how the rights in the Bill would be exercised.

Mr Moses Msizi, Municipal Broadband Director: SALGA, said that traditional leaders had not been consulted, but the process was still going on.

Mr Norman Gidi, General Manager: Licensing, ICASA, referred to the responsibility and jurisdiction of the Authority in relation to licensees. The reason why ICASA’s jurisdiction was limited to licensees was because it was the licensees that the Authority had powers and control over. This meant that the Authority was able to license the licensee or summon licensees to appear before it. The Authority may also impose fines and revoke licenses already issued.

ICASA was not in a position to do the same in relation to landowners. Therefore, while ICASA accepted that the provisions for dispute settlement relating to landowners had been in existence, it was not going to be possible for ICASA to enforce the regulations. He emphasised that it was not about the legality of the provisions, but whether ICASA would be able to enforce the regulations. He stressed that regulations should be developed so that they could be enforced.

He stated that the judgment of court in the case of Minister of Telecommunication and Postal Services v Acting Chairperson of ICASA involved the issuance of the invitation to apply for IMT spectrum in relation to telecommunication. The judgment had been in relation to telecommunication, and not broadcasting. ICASA was of the view that it should remain independent. In relation to dispute resolution, ICASA was not the best institution to discharge those functions. ICASA proposed that the National Coordinating Committee would be well vested to discharge the mandate.

Briefing by Open Access WOAM Forum

Mr Enver Fraser, Secretariat: Open Access WOAM Forum, said that the Forum believes that the decision by government to establish the WOAN, through the licensing of the WOAN and assignment of the IMT spectrum, marked a watershed period in transforming the ICT sector to meet the economic and social needs of South Africa. The WOAN Forum therefore supported government in its strides to change the ICT sector landscape.

Mr Joe Mjwara: WOAM Forum, said that the Bill was making a mistake by treating a new entrant into the market as if they were a dominant player. Those restrictions and obligations placed on the WOAN should be reconsidered, since the WOAN was a new entrant without any dominant power. The Bill obliges the Regulator to impose cost-based pricing on the WOAN. This approach may fall foul of the competition regulation as due processes have yet to be undertaken to analyse the impact of the WOAN on competition. Secondly, the WOAN was entering the market as the smallest of the operators with no market share and no dominant position to warrant pro-competitive measures that should be reserved for dominant operators. The decision to undertake the amendment of the underlying statutes while going ahead with the licensing of the WOAN raises fundamental issues that need to be considered before the finalisation of the policy and policy direction to ICASA on the licensing of the unassigned high demand spectrum to the WOAN and to other operators.

This decision, to licence the WOAN prior to the finalisation of the amendments, means that the WOAN would be licensed under the repealed policy and current regulations that had not been updated to be in line with the new integrated national integrated ICT policy. All the measures that were outlined in the policy to deal with market dominance, would not be available to help protect the WOAN and other new entrants from the current dominant market behaviour. Therefore, the WOAN Forum submitted that the finalisation of the Bill must take place prior to ICASA embarking on a major licensing initiative that is dependent on many measures that are not yet part of the law or regulations.

The Forum was of the view that ICASA must be directed to ensure the creation of an open access environment. The environment envisaged in the White Paper must be the basis of the operations of the mobile market and be part of the conditions of licensing the unassigned high demand spectrum. The conditions and terms under which the WOAN would interface with the existing infrastructure providers was paramount to the success of the WOAN as a late entrant. These conditions and terms would have a direct bearing on the cost and extent of investment.

As such, the Forum proposes that WOAN must enjoy mandated open access to existing MNOs infrastructure at incremental cost-based prices, as well as cost-based interconnect, termination and roaming prices. Further, ICASA must develop regulations that allow for open access principles of fairness, transparency and non-discrimination and effective access. The MNOs should have obligations which would be put into law. The playing field should be level because a few operators were the ones responsible for increasing the cost to communicate. The Forum does not support an auction of spectrum. There were no guidelines as to how the auction would be managed. The operators without access to revenue would be excluded from competing in an auction for spectrum.

It was important that ICASA be required to regulate for the accounting separation of vertically integrated entities. It should be a requirement that all existing access providers should observe account separation, and for ICASA to determine within five years if such measures had succeeded in order to consider if structural separation would be required. Additionally, the ICASA must be required to issue regulations pertaining to open access principles relevant to deemed entities.

Discussion

Ms Kilian said what are the expectations of the WOAM Forum were? Did the Forum expect government to invest in the roll-out of the WOAM? What was currently making it impossible for a consortium to apply for a licence and start operating? Were there any inhibiting factors in the current ECA Act? Would the WOAM be a public entity or public-private partnership (PPP)? If the WOAN was a PPP, how would the government give an upfront commitment and ignore section 217 of the Constitution?

Mr Mackenzie said his impression of the WOAM from the White Paper was that it was not a competitor to existing entities, but an enabler to help reduce the cost, bring transparency, and encourage new entrants into the market operators. The presentation of the Forum seemed to shift from basic services and away from the value-added services component of the intention of the WOAN. The WOAN would provide a new wholesale service to the new entrants, and competition would be increased. The object of the WOAN to transform the sector was to ensure the provision of services on an existing network. He asked officials from the Forum to clarify if they shared the same view of the WOAN.

He asked for clarity on whether their submissions were about the entire ICT market or the telecommunications mobile sector. Would splitting wholesale and retail amongst the network achieve the same objectives as the WOAN?

He asked Mr Fraser why he thought spectrum was an infrastructure. His view was that spectrum was a commodity. He disagreed with the Forum that the current arrangement by a few players was stifling the South African economy as a whole. He felt that the opposite was true, and that the work done by telecommunication operators was the reason why South Africa was one of the most evolved telecommunications sectors on the continent. The failure to allocate spectrum to players was what had stifled the ICT sector and the economy.

Mr Mackenzie said that he was also concerned about the argument that the WOAN would be supported by the state. The WOAN was meant to be a cooperative of private sector players and new entrants. He repeated that WOAN was not meant to depend on government funding or government contracts.

Ms Shinn asked how the WOAN would be structured, and if there would be multiple licensee holders or a legal entity with a Board. Furthermore, she wanted to know how the people forming part of the WOAN would have access to money. If they wanted to compete for infrastructure against major players, they should have access to a lot of money.

She also asked who the target customers for WOAN were. In 2014, the Department had commissioned a survey and the results indicated that a WOAN should not be launched. The Department’s own research warmed them against the WOAN. Mr Mjwara had pushed hard for the WOAN to be included in the Bill, and wanted to know why the former Director General was now involved in WOAN.

Ms Tsotetsi said they had been struggling for a long time to convince the mobile operators to lower to costs of communications. Sometimes the costs were not equal to the quality of the service. What were the factors that would allow WOAN to lower the cost without tampering with the profits?

The Chairperson said that there was no existing example of a WOAN anywhere in the world. He asked the Forum to advise whether there was any other example of a WOAN.

He asked the Forum officials to respond to the issues of forced sharing of the infrastructure, and the imposition of a relationship, as this would be defeating the competition which the Bill seeks to achieve. How many WOANs would be allowed to exist and for how many years? Some stakeholders were challenging the feasibility of a WOAN.

He also asked the officials to go through all submissions made by other industry players. Because of the divergent views of the submissions received, it was important to narrow the views and find common ground. There a lot of queries raised which must be responded to in writing.

WOAN Forum’s response

Mr Fraser responded that the WOAN Forum was not a consortium bidding for the WOAN, but was a group of entities that were a looking at how to ensure that policy formulation and process was in the best interest of the country and met the requirement of policy direction and legislation. The underlying principle was that the WOAN should be privately funded. What was required was to create an environment which allowed for investment into an entity like the WOAN. The WOAN would be a wholesale provider of infrastructure to services providers, and not a competitor. The new entrant would not have to put up capital for investment and expect a return, but could compete on a shared infrastructure model and focus on how to acquire customers and maintain the customers.

The reason for creating a WOAN was that there were vertically integrated players, which made it difficult for service-based competition to take place because, it was an unfair advantage to those with infrastructure and services to compete in the same space. Therefore, it was important to look at how to open the market by providing a common infrastructure provider that offered cost-based, transparent pricing to any service provider who was available, and competed to provide the best to the consumers.

Mr Mjwara said the WOAN Forum was not a company, and was still far from being a company. There were serious impediments for the WOAN to enter the market. As policy makers, the Committee understands what is happening and must assist with the policies and regulatory environment that would allow for the WOAN to come into play.

The policy was explicitly that the WOAN was not a government entity, but a private sector entity. The private sector would invest only if there was certainty. The Forum was raising the issue that the WOAN would be coming into a market which was dominated by others. As such, something must be done to lower the dominance of the existing operators in order for the new ones to come into the market. Cell-C had also experienced the impediments when it entered the market. When Cell-C lowered the cost to communicate, the dominant players did not respond.

He repeated that there was need for a conducive environment for the WOAN to come into being. The conditions now were stifling the South African economy. The input costs of telecommunications were high for many companies to start operations. In costing and pricing, South Africa was way above other countries. Some were arguing for targets to be set for how much telecommunications costs should be in South Africa, and that prices should be benchmarked against other countries.

It was not a sweeping statement made by the Forum but everyone had been worried about the cost to communicate in South Africa for a number of years, and nothing had been done. The reason why the cost to communicate was still high was because of the dominance of the existing players. Those players were market setters, and did not have to respond to anyone. There was no space for new operators unless the existing players were effectively regulated,

Mr Mjwara said they envisaged the government using the services of the WOAN because it needed a wholesaler to deal with in order for it to deliver services. The Forum was of the view that if the WOAN was set up and offered prices comparable or cheaper to others, government would not have a reason not to utilise the services of the WOAN. However, the Forum expected government to contribute to the resolution of the problems in the sector. The government had treated certain companies in a different way in the past. As a result, government ought to intervene to change the current situation.

He said that when Vodacom and MTN started operations, they had preferential termination rates. Telkom had calculated benefit from the preferential rates, and it amounted to R50 billion. As such, the conditions ought to be conducive and government should utilise the services of the WOAN. The two operators had been given a leg-up for them to enter the market. This should not happen only to the two operators, but the new entrant (WOAN) should also be afforded favourable conditions in order to succeed.

He responded to Ms Shinn’s question as to why he, as the previous DG, had been involved in the WOAN, and said that he was a South African citizen and had a right to make a presentation to the Committee. His rights were not affected by his past roles. He would participate in the WOAN if he wanted to participate. He had nothing which showed an intention of setting up operations -- he was interested only in policy and the policy environment, which needed to be done.

After the policy was enacted, consultations took place between government and the sector. The people in the sector who offered to do the uptake were now perceiving it to be a forced marriage. Those people were the ones who had approached that the government and said they would commit 30 percent to the capacity of the WOAN if they were given spectrum. Government had not forced them. The players had added that the WOAN would be done in conjunction with their access to their financial resources.

There were other constitutional issues that would have to be discussed with the Committee at a later stage. The setting up of a WOAN would ensure that all South Africans had the ability to utilise spectrum. This would broaden the rights from a few who exclusively controlled the spectrum, to the many others had the rights in terms of the constitution to use the spectrum. He argued strongly that the model of handing over spectrum to a few companies was not the essence of the democratic dispensation which was envisaged in the constitution. Everyone should get a chance to utilise the spectrum to realise the constitutional provisions.

He said there were 400 licences who had never had spectrum in the past. If those licence holders went to ICASA, they would not be given spectrum. ICASA would say it was waiting for directions from the Minister. The Minister was, however, not supposed to be involved in allocating spectrum. There should a policy environment which allowed everyone to share equitably in the utilisation of the spectrum. Instead, there were only six companies that had spectrum against 400 licence holders who were already established but did not have the right to participate.

There had been many studies done by the Department. One of the studies did not address the access of the WOAN by all of South Africa. There were some members of the Forum who had applied to ICASA and were considering taking ICASA to court to start the process. However, this had not happened because they had been persuaded by the Minister to wait for the process of national consultation to come up with a framework to divide the scarce resources.

The auction was a simpler way of allocating the spectrum, but would lock out everyone and leave the dominant players. This would not solve the fundamental problem of how South Africans would utilise access to a common scarce national resource.

Mr Fraser replied to the Chairperson’s question as to whether there was an existing example of the WOAN anywhere else in the world, and said one should not be blinded by the fact that nothing had happened in the past and think that it could not happen in future. They had invested in a sub-marine cable called C-Com, which was a privately funded cable which serviced the east coast of Africa. At the time when the proposal was put on the table, the market said there was no precedent for a privately-funded submarine cable. The model was a club where one bought capacity. Thus it was important to be mindful when one spoke of no current examples, because one may be closing oneself off to innovation in the sector.

Mr Mjwara said that regulations in the ICT sector evolve with time. If someone had not done it, it did not mean that it could not be done. Mexico had experienced similar problems to South Africa because of dominance in the market, and they had introduced the WOAN at a constitutional level.

Mozambique had also started the process four years ago, and was in the building phase of the network. It had shared its experiences at the ITU on what needed to happen. Rwanda also had an open access network like a WOAN. The Forum would share some studies with respect to the evolution of the ICT market towards open access, and show that nothing was cast in stone.

There were changes to the ways in which the spectrum was allocated. Before, it used to be government departments that were allocated spectrum, and no one in the private sector. Thereafter liberalisation had happened, and few companies had got the spectrum. However, because of the shared economy and shared use of infrastructure, the most appropriate way going into the future was considering open access network. He said that there were papers that the Forum would share with the Committee.

The policy provided for services based competition and that the infrastructure should not be duplicated, but allow the use common infrastructure. The WOAN would be competing with other operators because there was nothing which prevented the existing operators from offering services like the WOAN. Immediately a WOAN is established and shows that it is viable, the operators would start competing with the WOAN.

The WOAN was an infrastructure which would be co-existing with other infrastructures around it. As such, they would be in the same market. However the difference was that the WOAN would be the smallest, since the exiting players were the biggest. One could not treat them as if they were not a potential competitor. That was why the Forum was calling for a levelling of the playing field to ensure that all the infrastructure was regulated and treated the same way.

There should be functional separation so that they could operate at both the infrastructure and servicing level. In 2005, the two licences were created, but the terms of conditions were not put in place to do an account separation between services and infrastructure. What they were suggesting was not something that was totally new. The ECA says there should two licences which were distinct. The reporting for infrastructure and services should be separated so that conditions could be imposed.

It had been difficult to get other players into the market because the existing players had vertical integration, which helps them to subsidise certain areas within their network and allow their service to benefit more than others.

He said that when he was still in government, there had been a discussion as to why the regulator would discriminate in favour of a fixed network which it imposed many obligations. There was no reason which could be advanced to support why the mobile sector was not required to open up and offer open access to their infrastructure. Some had argued that there was a technical inability, but the current technology allowed for the shared infrastructure in terms of the mobile communication.

He said one could not understand why there were open access principles in one sector of the market, and not in the other. The mobile sector could be separated in terms of functional separation and regulated, and the open access applicable to it. He stressed he could prove that it could be done. Hence, open access was fundamental to the creation of a WOAN. A WOAN could not be created in an environment where others were vertically integrated, because the WOAN itself would have to rely on the interconnectivity with others.

The Forum was of the view that there should be competition in terms of the WOAN, because everyone with a licence would be enabled to get into the site. Instead of four or five companies, 100 companies would be able to participate in the market. Therefore, the Forum was of the view that the WOAN would get to the services level, because there were already enough people with licences who were eager to get into the market and provide services.

There were some who were talking about communal licences, and SALGA had indicated that local government was also interested, including the 400 entities who were already licensed. As such, there was vast interest in the WOAN. However, the drawback would be if the conditions in law and regulations perpetuated the dominance which was present at the moment. Something had to be done, and the policy was clear that the problem was about control of the national resources. The only way to solve the problem was to ensure that there was common infrastructure which utilised the scarce resource which all parties could use to enter the market.

The Chairperson asked Mr Wiltz to comment.

Mr Wiltz said although the WOAM must be treated as a new entity, it would on the other hand get certain benefits that were exceptional. The WOAN had a combination of incentives and at the same time was being treated as a deemed entity in the Bill. The framework for open access leads to a process where large operators with significant market power were classified as deemed entities, and carried the full obligations of open access.

The WOAN would have similar obligations, even though it was being given special treatment. The success of the WOAN would be for the benefit of society to share the resources and spectrum, and enabling the 400 licensees to provide services on top of the network. However, competition matters had to be considered, because the benefits may potentially grow quickly and create another monopoly. It took a very long time to regulate a company which had a monopoly, and it was often unsuccessful. Hence, there was a need to build regulatory remedies upfront to ensure that the company could be regulated at the appropriate time. These suggestions came from the competition authorities.

He said that the open access framework was about creating different types of classification of entities and following due process to determine the vertically integrated operators and those that were called deemed entities. If a company fell under vertically integrated entities, then there were certain obligations to open access, such as functional separation and accounting separation that would be imposed on those operators. However, that could not be done upfront because due process must be followed and ICASA must prescribe the relevant open access regulations. There were processes that should then be followed and may lead to certain operators being classified accordingly. The classification could not be done through legislation, because the Bill would be unconstitutional.

The 30% commitment could be monitored in the future by ICASA determining the terms and conditions during the licensing process. These terms and conditions may include buying capacity, and if spectrum was granted subject to the imposed conditions, non-compliance would be a ground for withdrawal of the licence.

In terms of regulating wholesale rates, the WOAN would be seen as a deemed entity in the long run, so its rates must be regulated, so it should be stated upfront that its rates would be regulated. However, at the same time, the Bill allows ICASA not to regulate the rates for a certain period. When the WOAN has grown, ICASA would decide whether to regulate its rates to avoid anti-competitive effects.

Regarding the auctions, the current ECA had similar provisions in section 31 of the Bill, that ICASA had the right to determine the licensing process for high-demand spectrum. The matters were within ICASA’s jurisdiction. Although the type of spectrum may lean towards one technology now (4 G or 5G), the Bill was only an enabler and would treat any spectrum. One should not be technology specific in the Bill.

The Chairperson asked the Forum to submit additional submissions and suggestion on how to craft the Bill on crucial areas.

Mr Mackenzie asked for a list of members of the Forum.

Briefing by Business Unity South Africa (BUSA)

Mr Olivier Serrao, Director: Economic and Trade Policy, BUSA, said BUSA had finalised consultations with the telecommunications industry and other stakeholders to ensure that the allocation of spectrum reduced barriers to entry, promoted competition and reduced costs to consumers. It cautioned that the ECA Bill in its current form threatened these noble objectives that had been set out by the President.

BUSA proposed that there should be a retention of the exclusive assignment of spectrum principle, which was applied in almost all markets. High Demand Spectrum (HDS) should not be subject to open access, and non-exclusive rights to HDS should not be mandated through legislation. The amount of spectrum to be assigned to the WOAN should enable it to compete both on a technical and economic basis without distorting the market. The spectrum assigned to the WOAN should be equal to other licensees.

Further, BUSA was of the view that the existing ECA provided an appropriate balance between the Minister setting policy objectives and ICASA complying with its operational responsibilities. It was consistent with international best practice and should not be changed. The existing ECA and supplementary regulations set out clear provisions on the terms and negotiation of access agreements, and enable the regulation of access to facilities and network services, including if required, the resolution of disputes

BUSA submits that licensees should be allowed to utilise spectrum in a technology and geographically agnostic way. Rural and underserviced area deployment should not compromise the deployment in other areas. There should be support for the deployment of broadband services in rural and underserviced areas, and licensees being obliged to deploy networks in these areas in return for getting access to high demand spectrum. The WOAN should be enabled to compete (both on technical and economic basis) on an equivalent and fair basis with other licensees in providing competitive wholesale services.

BUSA supports the Government’s objectives, which aim to increase broadband coverage, promote affordable broadband and innovate and transform the sector. To achieve this new investment, innovation by existing and new entrants is required. BUSA was of the view the Bill substantially increases the uncertainty and regulatory risk for telecoms operators. This would reduce investment and innovation at exactly the time when significant new investment was needed in the telecoms sector to deliver the services and reach that South Africans require at affordable prices.

Further, BUSA submits that the Bill should be suspended because of its far-reaching implications for the sector and the consumer. The implications of the Bill, together with the increasing importance of electronic communications to the wider economy, require caution. The Bill should be subjected to a socio-economic impact assessment, and consideration be given to tabling the Bill at the National Economic Development and Labour Council (Nedlac) to allow for maximum input and consultation. Therefore, the Bill should be reviewed, and the telecoms sector governed though existing legislation, which includes the licensing of high demand spectrum.

Discussion

Ms Kilian asked how one bridged the digital divide between urban and rural? What incentives besides spectrum should be given to operators for them to roll-out services in rural areas? Despite the interventions by ICASA, the major players were still receiving the bulk of the populations’ subscriptions. How did one change that in practice? Did the answer lie in the current ECA, or was ICASA not deploying sufficiently?

Ms Shinn said that if one assumed that the WOAN was going to be a company of merged entities, it would take some time to formulate the entity and get it legally registered. It took Mexico four years to get it started with the WOAN. The WOAN in South Africa would also require three years to win themselves off the infrastructure. It may be seven years before the MNOs who got the spectrum that was not assigned to WOAN, could deploy their HDS, which may be worthless at the time. She asked for the views of BUSA on the difficulties of rolling out the WOAN and if the spectrum was worth having, assuming that the WOAN would take eight years to become established.

Mr Mackenzie said that the two dominant players (Vodacom and MTN) were painted as having an advantage and had developed their network, and that they should be stopped. The players were good because they were excellent, and because they had got the markets, logistics and product development. He urged against penalising the players for excelling in business.

If BUSA saw the WOAN as a distortion to the market, what would they propose as a means of disrupting the market to make it easier for new entrants to enter the market and be successful?

The Chairperson asked what does rural and underserviced areas mean. He also asked how the existing system would achieve a reduction in the cost to communicate. The presentation made by Prof Gillwald showed that there were areas in which there was only one service provider. The people in those areas had had to switch from their preferred service provider to another service provider to access certain things. He asked how many businesses were represented by BUSA.

BUSA’s response

Mr Serrao said it was incorrect to suggest that BUSA did not represent small, medium and micro enterprises (SMMEs). BUSA represented both big and small businesses. BUSA was at the apex and consisted of associations that included multi-sectorial associations that include small and big organisations, retail associations and various chambers of commerce. BUSA also represented businesses in agriculture, mining and retail. A lot of these businesses depend on the functioning of an ICT sector. As such, costs and reliability were major concerns for them. Therefore, when BUSA pointed to the risks involved in particular legislation, the organisation would be presenting the interests of both big and small businesses that require a functioning ICT sector. Hence, the concerns of BUSA were not only for big businesses, but applied to the economy as a whole. It operated on the basis of a mandate, and he would present a list of BUSA’s direct members to the Committee if required.

He agreed with Mr Mackenzie that the two dominant players were now multinationals and competed successful across the continent. If it was not because of the regulatory regime, they would not be able to compete as they do.

Ms Rossana Gell, Senior Manager: Market & Competition Regulation, MTN, said the only way to bridge the digital divide was to have investment. The mobile or fixed telecommunications were characterised by heavy fixed investment costs upfront, and continued capital investment for ongoing technology upgrades. This was why in the last 15 years there had been close to R90 billion being put into the industry. As such, economies of scale would lower the average cost. She indicated that this was why there were three players in the telecommunications sector across the globe.

She said the 700 and 800 MHz spectrums were perfect to bridge the gap to get into rural areas. The engine to growth in South Africa was capital investment. The mobile operators had done a decent job in 2G, 3G and Long-Term Evolution (LTE) coverage. However, they were now stuck because they did not have the spectrum. Different spectrum bands would have an impact on the average cost.

The difficulties of a start-up were significant, but the industry supported that idea of a WOAN because they want it to be sustainable. For an operator to become sustainable, it should be able to cover its high cost investments. The market for the WOAN was essentially the LTE network. The industry supports the idea of a WOAN because it is seen as the bridge for broad-based black economic empowerment for SMMEs.

Mr Kefilwe Madingoane, Executive Head: Public Policy & Engagement, Vodacom, indicated that was a Universal Service and Access Agency of South Africa (USAASA) which had been in place for many years, and was assisted by the universal services fund. However, there were questions as to whether it had been able to deliver on its mandate. There was an opportunity to rethink the mandate and the modality of delivery of universal service access.

BUSA did not disagree with the concept of universal service obligations, but it was of the view that the way in which the Bill was configured was not correct. There were capacity constraints in rural and urban areas. As such, both efforts should be allowed to be in play so that operators could balance the return and the need to service obligations.

Furthermore, the operators had gained experience and were experts in infrastructure roll-out. Not enough was being done to exploit the expertise of the operators and the approach of incentives to go into rural areas. In the USA, operators were incentivised to be in all areas and still allow each other to play in the same space.

The expertise of existing operators built up over the years should be considered, because the operators could work with SMMEs. Today’s environment required that an entity was agile, smaller and used partners and smaller players across the value chain. The space within which operators were working should be understood, and how to bring them in to assist.

He supported the point made by Ms Gell, that the digital divide could be bridged if spectrum was allocated. Spectrum had a direct impact on prices and the cost to communicate. An efficient operator would have spectrum in three bands: firstly, spectrum below 1gig to get coverage; a range between 1gig and 6gig for coverage and capacity; and above 6gig for in-depth capacity in cities and to explore technologies like 5G. There was an impression that those who had spectrum did not need additional spectrum.

He also mentioned that there was a certain spectrum which was ideal for certain technologies to evolve. South Africa wanted to be country which was competitive and that was digitally enabled according to the Constitution and the national development plan, so it should move with the moment.

There should be recognition that the membership of BUSA included people who had shown commitment to the country and investment in the networks. On an annual basis, the investment was R25 billion. Therefore, the industry had shown commitment and would like to project that commitment going forward.

The recent policy direction on spectrum indicated that there was a tool which worked but had to be revised. A policy directive had been issued within the existing framework and used to allocate spectrum. The existing framework functioned better than what the Bill was proposing. Therefore, BUSA was of the view that the solution should address the problem being faced.

Ms Gell said that to disrupt the market, the licensing of spectrum should not be held back until the WOAN was established, and that they should work in parallel. It was important that operators were given an opportunity that would allow technological advancement and South Africa’s ability to play in the global economy. She also said that an Invitation to Apply (ITA) should be issued to generate revenue for government and allow operators access to sufficient spectrum. The operators who were allocated spectrum should also have coverage obligations which they must fulfil and roll-out in certain areas. She reiterated that the spectrum should not be held back.

The Chairperson said the BUSA officials had not assisted the Committee in answering questions properly. He said his questions had not been answered. The Bill came from the executive and the Committee would like to mould the Bill in the best interests of South Africa. His question on what constituted rural and underserviced areas had not been answered.

There was a serious call for “data must fall.” There was an outcry that the whole communications landscape did not favour those who wanted to participate. Prof Gillwald had said that in certain rural areas, one could access services from only one provider, and it came at a huge cost. The majority of customers were the people who should be alleviated out of their situation.

He asked BUSA to analyse the presentation of Prof Gillwald and see how each income band was unable to move from one band to the next to enhance their internet usage. There was a responsibility to bring services of all kinds in the ICT sector to the people. He was disappointed that the BUSA officials could not respond to simple questions.

Mr Wiltz said there was concern over the removal of the reasonability test contained in the current facility leasing and interconnection regime, that approval would be required in adequately serviced areas for operators to build their networks, and the fact that rates would be regulated for certain large incumbents and would hamper investments. The reasonability test had not been abandoned completely and there were still some elements that could not be abused. Under the current facility leasing framework, there were submissions which indicated that it was not functioning and was ineffective.

The large incumbents used the reasonability test to refuse access. One of the elements of the reasonability test was technical and economic feasibility. Based on special economic feasibility, which was open to interpretation, the large incumbents may use the test and block access. He recalled one access seeker who said he did not bother filing for facility leasing agreements anymore. This was why they had suggested an alternative approach and come up with an open access framework. Under the new open access framework, the technical ability would still be left.

In terms of the cost oriented rates, they had moved from the use of the word “cost-based.” This was because some interpreted the word to mean that it was at a cost only, and there was no mark-up. After benchmarking, the Department came up with ‘cost oriented’. However, this did not mean that there were insufficient margins. It may be based on cost, but there would always be a reasonable return on investment which was allowed, but the costing exercise and prescribing would be done by ICASA.

Regarding adequately serviced areas, it was found in the policy investigations that in many areas such as shopping malls and gated communities, there was a monopoly. Whoever builds a network in those areas refuses access. If access was granted, it would be on the terms of the access provider and not the access seeker. Therefore, this was linked to the principle of duplication of infrastructure.

The basic premise under the policy was that if there was an existing network in an area, and the network met the speed and capacity requirements under SA Connect, then there was no need to duplicate. ICASA would classify the place as an adequately served area or place. If that happened, some rules would apply and the access provider had to open the network to any other person who wanted to provide services in that area. He indicated that operators move into a certain area quickly and monopolise the areas and block access to others. The incumbents claim to provide open access, but in practice they do not.

There was now a requirement in the Bill that if an operator gets high demand spectrum, then one of the obligations was to build and deploy the spectrum in rural areas. This was one of the remaining tools that could be used to ensure proper coverage and services. If operators were serious about serving the policy needs and connecting the poor, there was no reason why they could not prepare for the roll-out because it would take time for the Bill to be passed. There was enough time to do preparatory work.

There was a discretion for ICASA to determine an achievable number of underserviced areas that must be covered first, before the spectrum was used anywhere else. The underserviced area was the appropriate term that was used by ICASA, and was linked to the definition of universal services and access. There were more underserviced areas in urban than in rural locations, according to what he had been told.

The Chairperson said that he lived in an underserviced area. At some point the area had been sufficiently connected, but because of an increase in population, the network strength had lessened.

Mr Madingoane said he was concerned that his point on how to reduce costs had been missed. For many years, operators had to be creative on how to use the spectrum they had, considering the number of users that were on the network. Making the spectrum available would bring down the cost. The operators were saying they must be allocated spectrum to bring down cost. He said that the availability of high demand spectrum was key to reducing cost and expanding the networks for operators

The Chairperson said Mr Madingoane was not answering his question, because he wanted a practical answer.

The meeting was adjourned.