Non-issuing of an Electronic Communications Services License to Infraco: briefing by Department of Communications

Meeting report

The Chairperson noted the apologies of Ms Rosey Sekese, Director-General of the Department of Communications and Ms N Michael (DA).

The Committee was concerned over the non-issuing of an Electronic Communications Services license to Broadband Infraco.  Infraco’s mandate was to provide broadband infrastructure and connectivity services, particularly in underserviced and remote, rural areas.  The entity’s ability to meet its mandate was compromised if the license was not issued.  The Committee wished to determine what the challenges were and what action had to be taken to resolve the matter.

Briefing by Department of Communications (DOC)
Mr Alf Wiltz, Director: Legal Services, DOC presented the briefing to the Committee (see attached document).

The briefing differed little from the briefing presented to Parliament in 2009.  An overview of the establishment of Broadband Infraco (Pty) Ltd (the State-owned national broadband infrastructure provider) in 2007 and the relevant provisions in the Broadband Infraco Act (BIA) and the Electronic Communications Act (ECA) was provided.

A policy direction was issued by the Minister of Communications to the Independent Communications Authority of South Africa (ICASA) on the licensing framework of Infraco on 6 February 2009.  The policy direction was issued in accordance with section 4(1) of the Broadband Infraco Act and directed ICASA as the licensing authority to consider applications for Electronic Communications Network Service (ECNS) and ECS licenses.  The ECA did not prescribe the type of license that the Minister had to proclaim in a policy direction.  The BIA specified the type of services that should be rendered by Infraco but this did not automatically entitle the entity to the corresponding license.

The definitions of ‘Electronic Communications Network Service’, ‘Electronic Communications Service’, ‘Wholesale’ and ‘Retail’ were provided.  The Departments of Public Enterprises and Communications obtained legal opinion from different two firms of attorneys in August 2009.  Essentially, both opinions concluded that Infraco required only an ECNS license.  The DOC felt that the original intention of Government for establishing Infraco should be the overriding factor.  The intention was to provide international connectivity on a wholesale basis to other licensees, thereby reducing the cost of access to the national broadband infrastructure and ultimately the cost of communications.  The intention was not to create another competitor in the communications sector.

ICASA issued only the ECNS license to Infraco on 17 November 2009.  Reasons for the decision not to issue the ECS license were provided on 7 April 2010.  The license was issued in accordance with the amended policy direction issued by the Minister of Communications on 17 May 2010.

The DOC was currently conducting a review of the ICT policy landscape, which would culminate in a national ICT policy.  A colloquium was held in April 2012, a Green Paper would be issued later in the year and a White Paper would be issued in 2013.  The issue of State-owned enterprises (SOE’s) operating in the electronic communications sector was subject to further debate.

Discussion
Ms C September (ANC) observed that the briefing covered the history and background but the Committee needed more information on what the current scenario was with regard to the provision of broadband services.  She asked what progress had been made in meeting the government objective of providing access to broadband services and where the bottlenecks were.  She asked what coordinating role was played by the DOC.  She pointed out that a Presidential Review Committee was established to deal with the matter concerning the State-owned entities (SOE’s).

Mr C Gololo (ANC) asked for clarity on what type of license was required for the provision of broadband services and why the Electronic Communications Network Services (ECNS) license issued to Infraco was not adequate for the entity to meet its mandate.

Mr M Sonto (ANC) asked if the DOC was responsible for issuing the ECS license to Infraco and how long the licensing process was.

Mr E Marais (DA) asked who could assist local government authorities to prepare a budget for the provision of broadband services.

Dr G Koornhof (ANC) recalled that the Minister of Public Enterprises had informed the Committee during 2011 that a study had been undertaken by Infraco and that a new business plan for the entity was being developed.  He asked if this had been done and if Infraco was convinced that an ECS license was essential.  He understood that Neotel had an ECS license and sold broadband services on behalf of Infraco.  This practice could result in accusations of unfair competitive behavior from other players in the industry and he asked for clarity on the issue.  He asked if the cost of broadband services would be reduced if an ECS license was issued and if the decision to refuse the license application was based on policy.

Ms G Borman (ANC) noted that the Cabinet had approved the mandate of Infraco to reduce the cost of broadband and to extend access to remote areas.  She observed that little had changed since 2009 and wanted to know what progress had been made over the previous three years.

Mr A Mokoena (ANC) asked what progress had been made in connecting the northern and southern hemispheres.  He asked if there were comparative scenarios in other countries.  Government was committed to an anti-trust policy and there should not be a single player in the sector.  He asked if the failure to issue an ECS license was promoting this objective.

Mr Wiltz was not able to respond to all the questions asked by Members.  Certain questions asked by Members were beyond the scope of his responsibilities and had to be deferred to the appropriate authority.  The DOC had established a committee to develop a plan for the implementation of the broadband policy.  The integrated ICT policy required 100% broadband penetration by a specific date.  The role of the committee was to determine how this target would be achieved.  In addition, targets had been set for the roll-out of broadband services.  The ICT policy review determined that policies needed to be updated and incorporated into a single policy.  The colloquium was held to identify the issues and to find solutions.  The role of the SOE’s in the ICT sector was under discussion and the debate had to include consideration of the broader ICT policy issues.

Mr Wiltz said that the DOC position in 2009 had been that Infraco only required an ECNS license in order to meet its mandate.  At the time, the Minister had clearly communicated the intention of government and the policy.  He was not able to state whether this position was still applicable.  Licenses were issued by ICASA and not by the DOC.  The independence of ICASA had to be respected and the Minister could not interfere.  The question concerning the timeframe for issuing a license had to be referred to ICASA.  Other stakeholders in the industry were better positioned to comment on whether or not the cost of access to broadband services had been reduced.  He understood that progress had been made in the provision of broadband services in South Africa.

Dr Koornhof suggested that the Committee invited ICASA to present a briefing on the issue.  He asked if the decision not to issue the ECS license was based on regulatory or policy grounds.

Mr Mokoena was disappointed that the DOC was not able to provide responses to Members’ questions.  He repeated his earlier questions, which were not responded to.  He said that the Committee had an oversight responsibility and Members needed to have the information at hand to respond to questions from their constituents.  He observed that Infraco and Sentech operated in the same sector but the entities reported to different Ministries.

Ms September observed that the Committee would not be able to make progress.  The Rules of Parliament required presentations to be in accordance to what the Committee had requested.  If the delegation from the DOC was unable to respond to questions from the Committee, there was a problem.  She suggested that the Committee adjourned and requested the advice of the Parliamentary Legal Adviser on how it should proceed.  The Committee was not unsympathetic and wanted to ensure that Infraco was able to deliver on its mandate.  The Committee conducted oversight to ensure that the applicable legislation was implemented.

Mr Sonto called on all present to work together to ensure that government policy was implemented.  If any bottlenecks and challenges were identified, solutions to resolve the matter had to be found.  The Committee would hold the responsible authorities accountable.  He understood that the view that Infraco only required an ECNS license was derived from the applicable policy principles.  The non-issuing of an ECS license was considered by Infraco to be a hindrance.  He suggested that the Committee asked ICASA for clarity on why the license had not been issued.

Mr Gololo said that it was futile for the Committee to proceed with the briefing if the responsible authority was not available to provide responses to Members’ questions.  He suggested that the Committee considered an alternative to proceeding with the briefing.

Dr Koornhof assumed that ICASA had made a regulatory decision that was based on the Ministerial policy directive in 2010.  He agreed that the Committee was not able to proceed with the matter.  He pointed out that the Committee was entitled to request the Ministers of Communications and of Public Enterprises to appear before it.  The matter had been long-outstanding and it was necessary for the Committee set a deadline to have it resolved.

Mr Rendani Musetha, Director: Broadband, Department of Public Enterprises (DPE) agreed that it was necessary to consider the current scenario, establish what Infraco was required to deliver and whether or not an ECS license was necessary for this.  The original intention had been that Infraco would provide competition to Telkom.  As a result, the wholesale price for broadband infrastructure access had been reduced by 75%.  In this respect, Infraco was meeting its mandate to reduce the cost of broadband access.  A similar cost-reduction on the retail side did not occur as Infraco did not have an ECS license.  Infraco was required to provide broadband infrastructure in remote, under-serviced areas.  There was no business case that would encourage other players to enter this market.  Infraco provided the infrastructure but no other service provider was interested in taking the services from the site to the end user.  As a result, Infraco was unable to fully deliver on its mandate to make broadband services available to the under-serviced sector.  The policy directive issued by the Minister in 2010 was not aligned with the ECA.  Infraco needed the ECS license in order to provide a bundle of services and to meet both aspects of its mandate.

Mr Klaas Motlhabane, Legal Counsel, ICASA supported the DPE position.  There was a need for intervention to connect the remote regions to broadband services.  Besides Infraco, other players were entering the sector.  The undersea cables to South Africa did not address the issue of providing access in underserviced areas.  The ECA required Infraco to provide services to consumers in remote, rural areas.  Infraco required both ECNS and ECS licenses to achieve this objective.  Without the ECS license, Infraco was forced to engage with other licensed service providers in order to fully meet its mandate.  If the local government authority did not have an ECS license, broadband access to end-users could not be provided and the municipality would not be able to meet its own connectivity targets.

Mr Fungai Sibanda, Councillor, ICASA explained that applications for an ECNS and an ECS license were received by the Authority in 2009.  In accordance with procedure, invitations to submit comment were issued and public hearings were held.  The applications were in the process of being evaluated when ICASA received a letter from the previous Minister of Communications (Mr Siphiwe Nyanda) informing the Authority of his intention to withdraw and re-issue the policy directive.  ICASA had obtained legal advice before proceeding with the issuing of the ECNS license.  He agreed that the process needed to be concluded as soon as possible.  The applications submitted by Infraco had met all the criteria and ICASA was presently evaluating if the licensing conditions had been met.  Infraco had not met the affordability criteria for the ECNS license.  He was of the opinion that the business plan to target large companies and government entities would reduce prices.  A roll-out plan had not been provided for the ECS license and ICASA was not convinced that Infraco would meet the universal access criteria.  ICASA only considered the legal and regulatory provisions and the licensing criteria in the issuing of licenses.  During the public hearings, concerns were raised over Infraco providing retail services.  A comparative scenario existed in Australia and New Zealand where SOE’s were involved in the provision of broadband infrastructure and services.  ICASA would only be able to issue and ECS license after the Minister had issued a policy directive.

Ms Borman supported Dr Koornhof’s proposal.  A policy directive from the responsible Minister was required.  The Committee had to establish a timeframe for resolving the matter.

Ms September asked if ICASA had requested Infraco to amend the license application so that it complied with the legal requirements.

Mr Sibanda advised that ICASA was required to provide reasons for refusing the license.  ICASA generally did not enter into engagements with license applicants.

Mr Motlhabane explained the process followed by the Council committee.  The Council committee had recommended that the ECS license was issued but this was withdrawn after the Minister had informed ICASA that the amended policy directive would be issued.

Mr Wiltz agreed that the ECS license was not issued because it would have been contrary to policy.  If Infraco’s mandate had changed, this should be agreed and then the normal process for applying for the license could be followed.

The Chairperson thanked the delegates for the information provided.  The Committee would meet to decide on how the matter should be proceeded with.

The meeting was adjourned.