Telecommunications Amendment Bill: hearings

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
25 September 2001
INDEPENDENT COMMUNICATIONS AUTHORITY OF SA, TELKOM, TRANSNET, ESKOM, Sentech, CAPE TELECOMMUNICATIONS USERS’ FORUM (CTUF) AND THE NATIONAL INDEPENDENT TELECOMMUNICATIONS ORGANISATION OF SOUTH AFRICA (NITOSA): PUBLIC HEARINGS ON TELECOMMUNICATIONS AMENDMENT BILL

Relevant Documents:
 

Telecommunications Amendment [Bill 65 - 2001]
Sentech Submission
CTUF’S Submission
Eskom Submission
Icasa Submission
Transtel Submission
Transtel Powerpoint presentation
Telkom submission

Chairperson: Mr. N Kekana (ANC)

MINUTES
Introductory Remarks by the Chair
The Chair referred to an article in the Financial Times which dealt with the way in which different media performed on 11 September 2001 (i.e. when the 'terrorist' attacks on the United States had occurred). The limitations of the Internet had become evident, as it became clear that the television and radio were still the most efficient media for transmitting up to the minute information.

In the SA context there is a challenge to use technology for the benefit of society. This would be the focus of these hearings. It would be important to balance the interests of the stakeholders with those of members' constituencies.

The Chair expressed his gratitude that the submissions sent in included proposed amendments by legal advisors.

Independent Communications Authority of SA submission
Mr Mandla Langa, the Chairperson of the Independent Communications Authority of SA said that ICASA welcomed the introduction of managed liberalisation for the telecommunications sector, as well as the introduction of a Second National Operator (SNO). The following are among the difficulties that ICASA has experienced with the Bill:
-Despite the fact that the independence of the regulator from commercial, government and party political interference was asserted by Parliament, there are provisions in the Bill which interfere with this independence. The policy of managed liberalisation requires that the regulator's autonomy should be strengthened and not limited.
-The appointment procedure for Councillors should not be changed as set out in the Bill, as the current process ensures transparency, independence and accountability of ICASA.
-The Bill provides that Parliament should no longer play a key role in the removal of councillors. Instead this role is given to the Minister. This could be seen as undermining the independence of the regulator.
-ICASA is unclear as to the reason for the creation of a Telecommunications Mediation and Arbitration Committee. It is unclear what current defect it is aimed at correcting. They proposed the deletion of S53 A. It could be replaced with clauses similar to those establishing the Competition Tribunal or Competition Appeal Court.
-ICASA proposed that the Act should stipulate that Small/Micro/ Medium Enterprises (SMME) licenses should be granted to women (especially to black women).
-The proposed amendments could result in women being marginalised, as they are excluded from the definition of 'historically disadvantaged groups'.
-In order to ensure maximum benefits from carrier selection and carrier pre-selection, their implementation dates have to be moved forward. Carrier selection should be phased in from May 2002 and carrier pre-selection from May 2005.
-The Legislature should set guidelines on how ICASA should allocate the 1800MHz spectrum, rather than determine who should be awarded this spectrum.
-They rejected the proposed definition of multimedia service and the scheme to grant such license to Sentech by way of statute. Sentech should apply for a broadcasting or telecommunications license in terms of existing legislation.
-Clauses relating to the funding of ICASA and their reporting to Parliament should be retained. A debate on the financing of ICASA should be conducted during the process of developing a communications law.

Discussion
Ms S Vos (IFP) referred to Sentech and the issue of multimedia. She asked if the fact that Sentech is now a broadcaster has constitutional implications.

Mr Langa replied that a broadcasting license cannot be granted except in terms of the IBA Act. Such license can therefore not be granted to Sentech in terms of this Bill.

Ms Vos asked why ICASA suggested that carrier selection should be introduced in 2002 and carrier pre-selection in 2003. She asked why it could not be the other way around.

It was explained that carrier selection means that the local exchange makes the choice as to which operator the consumer will use for a particular call. In terms of carrier pre-selection the consumer can choose which operator to use, e.g. S/he could decide to use Telkom for its local calls and the SNO for its international calls. Carrier selection benefits Telkom, since a consumer would have to type in a code if s/he wishes to use the SNO, i.e. the calls would otherwise be directed via Telkom. Thus carrier selection is not really beneficial to the consumer.

Ms Vos agreed, saying that carrier selection would benefit Telkom and would be a disadvantage to their competitors. She asked what the purpose then was of having carrier selection at all.

The response was that it would merely be an interim measure until they put mechanisms in place for the introduction of carrier pre-selection.

Ms N Mtsweni (ANC) asked how much carrier pre-selection would cost and where the money would come from.

The response was that the operator and not ICASA would fund it.

The Chair asked if ICASA has done any thinking on the final cost of the whole process.

The presenter answered that they were currently looking at how implementation has taken place in other jurisdictions. Once the first phase has been completed they will do the costing.

Mr R Pieterse (ANC) said that many people argue that the attacks on the US (on 11 September 2001) could have been prevented had there been some measure of state ownership in the telecommunications industry. He asked how one could ensure that the foreign companies who are entering the industry would ensure SA's maximum safety.

The Chair said that many policies had been adopted before 11 September 2001. Many policies may have to be reconsidered. This is however government's domain. This question could be dealt with again at a later stage.

Mr E Magashule (ANC) stated that removing the requirement for public hearings would give ICASA too much power. ICASA needs to obtain public opinion.

Mr Langa replied that ICASA wants the discretion as to whether to hold public hearings or not. He agreed that public input does enrich the regulatory framework.

Mr Magashule asked how the Bill undermined the independence of ICASA.

Mr Langa replied that this has been the topic of much debate. ICASA has to operate in a way that would not make it seem as if they are being influenced by either government or the stakeholders.

Mr Magashule said that ICASA should suggest a definition of 'multimedia services' since they rejected the definition in the Bill.

Mr Langa said that one should distinguish between broadcasting services and telecommunications services. Only the IBA could grant a broadcasting license. This Bill is however attempting to do so statutorily. ICASA therefore asks for greater clarity on the issue.

The Chair asked if ICASA is suggesting that government should not let Sentech carry international traffic.

Mr Langa said that the ICASA's problem was one of procedure. According to the IBA Act, only the IBA can grant a broadcasting license. They also had a problem with Sentech being granted exclusivity. Only Telkom had been granted such a privilege and this was only because of the roll out they would make. There was however no such responsibility on Sentech.

Ms M Smuts (DP) argued that anyone should be able to get an electronic communications licensing to deliver broadcasting or telecommunications services. The licensee would however have to comply with certain conditions. If this is not done there will be a continued problem unless it is dealt with in a separate Convergence Act.

Mr Langa replied that Sentech could be required to apply for a license under the existing law. Although this is a solution it is unsatisfactory. One can also look at how convergence services are being dealt with elsewhere. It is not possible to start drafting new categories of licenses. The Minister should definitely not be able to grant licenses. Whether it could be done in legislation is questionable, especially if it is granted to only one player.

Mr S Abram (UDM) asked what ICASA's problem was with the proposed amendments to the provisions dealing with the appointment procedure for Councillors.

Mr Langa replied said that ICASA's argument could be summed up by the saying 'if it ain't broke, why fix it?' They believed that by giving Parliament's power to the Minister, one is undermining the independence of the regulator. In addition, the Bill is introducing a cumbersome process, which would take approximately one year to complete.

An opposition member suggested that guidelines should be provided as to how the 1800MHz spectrum should be awarded, instead of the Bill specifying who should get it.

Mr Langa agreed, saying that the spectra are a national resource and all South Africans are therefore entitled to it. This however does not mean that ICASA should have the right to give blanket licensing. There has to be strict guidelines. If one meets the criteria one should get the license. This would be preferable to granting it to a specific person/organisation.

Mr V Gore (DP) asked for examples of international best practice where Voice Over IP has been restricted to certain parties only.

The Director General said that this has been done in Australia and Egypt.

Mr Gore asked how Voice Over IP would be policed.

Mr Langa replied that ICASA has raised this with the Department. This will require further discussion. The Minister will then have to come up with policies on the issue.

Ms Vos referred to the issue of facility sharing. She asked if it is realistic to expect them to build a parallel network in two years. She suggested that they build a network, which would compliment the existing infrastructure.

Mr Langa agreed that there are possibly more innovative ways of sharing infrastructure. The provision as it stands is mandatory and does not take into account commercial issues. ICASA cannot comment as to whether the provision is realistic or not.

Telkom submission
Dr Celli stated that in the process of codifying policy, one has to ensure that the Act is constitutional in order to enhance democracy. This is done by establishing clear roles. Secondly, the Act has to contain clear and concise definitions. Thirdly, the Act should designate clear rights, prohibitions and deterrents so that everyone knows their roles.

Telkom supports the principles of managed liberalisation, facilities-based competition, set aside for historically disadvantaged and SMMEs. They raised the following as the main concern areas:
- Definitions: Concise definitions are important so that everyone knows their roles and obligations.
- Licence rights: The scope of the different licenses is vague and unclear in the Bill.
- Contradictory provisions: Many provisions are inconsistent with other provisions/definitions in the Bill.
- Support for investment in infrastructure: Some provisions will undermine the expansion of networks.

Managed liberalisation
Some efforts at liberalisation are counterproductive and it appears as if it may also be premature. With regard to Sentech, they have a problem with the way in which the license is provided. He referred to the fact that service-based competition will be introduced after 2005 and stated that some provisions would be problematic in this area. It appears as if service-based competition is being introduced ahead of time.

Facility sharing
This will be done on a resale basis. The Bill seems to confuse the terms 'resale' and 'facilities leasing'. 'Resale' means that the person buys in bulk and then sells. Telkom therefore does not have a problem with the use of the term 'resale' but just wants it to be defined. The resale of services makes sense and not the resale of facilities.

Voice Over Internet Protocol
The term 'Internet Protocol' (IP) is a communication protocol, i.e. it is the basis for communicating over the Internet. It is used in many networks but is not a part of the Internet. A protocol has recently been developed to transmit voice by means of the Internet. Telkom argued that PSTS licensees and SMME's who are licensed to carry voice should be able to do so without the technology that will be used being prescribed to them. Thus, it should not be stated that an SMME can carry voice over the 'IP' as the IP refers to a particular type of technology.

Virtual Private Networks vs Private Networks
A new definition for 'Virtual Private Networks' (VPNs) is needed. This would have to distinguish (VPN's) from other telecommunication networks.

Carrier pre-selection
A customer of a particular operator can use a different operator for a different class of calls, e.g. long distance calls. Carrier selection is done by dialling a code. Carrier pre-selection is even easier and highly desirable for the SNO. Telkom argued against carrier pre-selection being introduced before 2005 as this would be a disincentive to the SNO to rollout its own facilities.

The oral submission also addressed concerns in the following areas:
- Fixed mobile service
- Mediation and Arbitration Committee
- Regulatory processes
[Refer to the presentation document for details]

Discussion
Ms Vos asked if the Mediation and Arbitration Committee was quasi permanent. She asked whether Telkom’s wish to have an Appeal’s Tribunal would end disputes back in court.

The presenter replied that the Committee should be ad hoc. No dispute between the regulator and the regulated should remain unresolved. If the regulated party feels that s/he was not treated fairly, the matter can be referred to the tribunal. There would be little else left for the courts to do. The problem with the Mediation and Arbitration Committee is that it requires the support of both parties to the dispute.

Ms Mtsweni asked how SMMEs would be financed.

The presenter said that the universal service fund was an option. However enterprises should be profitable and not just rely on subsidies.

The Chair cautioned that ICASA and the Mediation and Arbitration Committee should not create the situation where the regulator later becomes unable to resolve disputes.

The Chair asked Telkom to comment on their position on carrier pre-selection.

The presenter stated that carrier pre selection served as a disincentive for the SNO to roll out. The SNO may feel that it is not necessary to roll out as they have the benefit of carrier pre-selection. If the SNO were to roll out first, Telkom would have no objections to carrier pre selection.

The Chair asked what the introduction of the SNO would mean to the ordinary consumer on 7 May 2002.

The presenter responded that even though competition would have been introduced the SNO would have no facilities to establish its own network. It is important that they introduce their own facilities in order to increase competition.

Transtel submission
Mr P Nkhereanye read the presentation document and emphasised the following issues in particular:
-fixed mobile does not refer to a cellular license- This was captured in their definition of fixed mobile.
-the confusion around Third Generation licenses.
-their belief that servitudes have to be captured in statute. It is important to specify the wording, as third parties will be involved.
-leasing facilities to the SNO
-Their response to Telkom’s statement that the SNO will be discouraged from rolling out if carrier pre-selection were to be introduced. Transnet argued that the SNO would have rolling out targets.

Discussion
Mr Pietersen referred to the fact that there will be no number portability or carrier pre-selection in the first two years. He asked how the consumers would benefit if there was no competition.

Mr Magashule asked why any consumer would choose the SNO if there were to be no carrier pre-selection or number portability.

Mr Nkhereanye said that consumers would be able to move away from a service provider, which may not meet their needs. In order for this to become possible there has to be enablers, e.g. number portability.

The Chair said that fixed mobile had been debated internationally for three years already, yet many South Africans were surprised by it. He said that more time and money had to be made available for research and development.

Mr Nkhereanye admitted that they had been unaware of fixed mobile. However since they were made aware of it they had researched it thoroughly and included this research in their definition, which is in line with international best practice.

The Chair asked what the introduction of the SNO would mean to the ordinary consumer on 7 May 2002.

Mr Nkhereanye admitted that there would be no meaningful competition at that stage. It is important to move the power from the operator to the consumer. This can only be done if number portability and carrier pre-selection were to be introduced. In addition penetration into certain areas was poor at this stage. If two operators were attempting to penetrate into these areas these people could be reached more quickly. With regard to those persons who already have phones it is important to ensure that there is no duplication of infrastructure, as this would be costly to the consumer. The operators should enable consumers to switch from one to the other without incurring additional costs. Thus, carrier pre-selection and number portability are vital.

Mr Magashule asked if there was any conflict of interest in the fact that the Minister of Public Enterprises was a shareholder in the SNO.

Mr Nkhereanye denied that there was any conflict of interests. As Transtel is part of Transnet the Minister of Public Enterprises is their reporting Ministry. The role of the Minister of Communications is important, as her concurrence is needed.

Mr Magashule asked what Transnet’s opinion was on Sentech.

Mr Nkhereanye said that Transtel was not averse to the entitlement given to Sentech. However, if interactive audio comes in, one should be careful not to introduce additional Public Switched Telecommunications Networks.

Eskom submission
The presenter read the presentation document. He added the following background information on Eskom:
-Eskom is a major player in the area of electricity and telecommunications.
-Their network is the largest in the world.
-They already exist as a private network in most of the country, and will therefore have no infrastructural problems when Esi-tel becomes the second SNO partner.
-They are at an advantage as members of the SNO since they are able to provide a cost effective focus on the duality between electricity and telecommunications.

Discussion
Mr Gore enquired as to the way in which the stakeholders’ shares in Esi-tel would be determined.

The presenter stated that any stakeholder coming in would have to do a due diligence search in order to determine Esi-tel’s stake in the SNO.

Ms Mtsweni pointed out that Eskom has dealt with many communities and is aware of the problems encountered. She asked what changes they have managed to introduce in these areas.

The presenter said that Eskom has changed the lives of 3m people since 1995. Eskom is number one in the world in terms of cost efficiency. They are number three in the world in terms of technical ability and the ability to run electricity efficiently. They have the technical advantage that enables them to deliver services cheaply.

Mr Abrams asked if current servitudes provide for overhead use or land use.

Mr Nkhereanye stated that if they were to use cable on the ground they would compensate the affected party. If they were to use overhead cable they would pay no such compensation.

Ms Vos asked if a person would be billed as either a Telkom customer or a customer of the SNO.

The presenter stated that the customer should be able to switch easily, hence the importance of number portability. The customer would then be able to change without changing either his/her phone number or account number.

The Chair asked if Eskom agreed with the wording of S32A (2). He asked if they accepted the words ‘on a resale basis’.

The presenter said that they had no wording to offer at that time.

Ms Smuts asked if Esitel and Transtel would only get what was left over after foreign companies purchase their shares.

The presenter responded that the amount, which they can ‘honourably defend’ in terms of assets, is 35%. The Minister’s Invitation to Apply must be informed by the assets which Esi-tel, Transtel and the Black Empowerment group have.

Ms Smuts stated that Telkom’s infrastructure was already in existence. They should allow as many operators to piggyback on their infrastructure as possible (on a negotiated basis). Each operator will then be able to offer the consumer its own package of services.

Sentech submission
Mr. Maruma presented the submission on behalf of Sentech.

As an introduction he said that Sentech supports the Bill but have a few comments to make. To do away with the Telkom monopoly Sentech must be allowed to deliver international services directly. The telecommunications industry must be liberalised to facilitate the introduction of competition in the market. The benefits will be seen in price, service and technology. More importantly consumers will have the right to choose.

The areas of concern are the following:
a) Carrier of Carriers
The presenter said that the definition in the bill of ‘Carrier’s Carrier’ specifically excludes end users and is silent on other service providers viz. VANS, SMME’s and ISP’s. Sentech submits that these service providers must be specifically referred to in the Bill if the license is to have immediate value.

Sentech is further concerned with part (b) of the definition that could restrict Sentech’s services to licensed international carriers in other countries. It was suggested that surely it was the intention to restrict Sentech’s services in the Republic not outside. Since Sentech has been awarded a license the legislature is urged to make it a full license to benefit not only Sentech but also the industry as a whole. A full license will also utilise the infrastructure to its potential. Also VANS, ISPs and SMMEs must be allowed to obtain telecommunication facilities from Sentech for their international services.

SENETCH provides an amendment to the definition. (Annexure A)

The lawmakers were asked to reconsider he position of not allowing Sentech to provide provide international carriage to end-users. If this remains Sentech’s resources will be under utilised and as state assets it is in the national interest to use the assets to its full potential.

(b) Multimedia

The definition of multimedia is unclear because it does not define to what extent Sentech will be able to provide the return path in the interactive broadcasting environment. An amendment is proposed that will clarify this.

Mr. Maruma confirmed that Sentech’s infrastructure is ready to provide multimedia services.

(c) Infrastructure

It was submitted that the Bill must expressly recognise the right to establish, construct and maintain infrastructure. The Bill is silent on this. Certainty in this regard is important because it encourages investment in infrastructure and gives content to the license.

(d) Interconnection

The Bill provides the possibility to renegotiate the interconnection agreements for a period of five years but is silent on some key requirements establishing the interconnection rate. Sentech suggests an additional clause to deal with this. (Annexure A)

(e) Emergency Centres

It was submitted that Sentech was overlooked as a role player in the provision of emergency centres. Sentech has the infrastructure and is ideally placed to offer these services. It was suggested that the necessary amendments be done to Chapter X to remedy this.

Legal Counsel for Sentech returned to the definition of ‘Multimedia Services’ and said that there is a misnomer because a reference is made to ‘Digital Broadcasting Services’. Sentech provides converged telecommunication services and therefore the reference to ‘Digital broadcasting Services’ must be replaced with ‘Converged Telecommunication Services’. Broadcasters in a converged environment can therefore offer telecommunication services.

Discussion
Mr. Magashule (ANC) asked if Sentech will be able to provide services in the rural areas faster than Telkom.

Mr. Maruma said that if Sentech turned off its switches there would be no radio and television. Sentech was responsible for providing 98% of these signals. The answer to the question was therefore yes.

Mr. Maruma commented that SENETCH was a holder of a Signal Distributor License and in terms of the license must provide a signal for those who ask for one.

Mr. Maserumule was worried about the constitutionality of awarding the license to Sentech because the constitution states that all people must share in the economic activity of the country. But at the same time we understand that Sentech is a National Asset and can contribute a lot.

Mr. Maruma said that if the State does not use a parastatal like Sentech to deliver multimedia service who are they going to use. Private companies are only interested in profit but Sentech must provide the service to everyone. Sentech goes into the rural areas and areas where private companies wont go. It will be an obligation of Sentech to do this.

Ms Vos (IFP) stated that community radio stations say that they cannot afford SETECH’s prices. Her question was directed at the Director General and inquired whether ICASA and the competition commission had any insight into executive thinking.

The Director General said that they had a meeting with the competition commission and that ICASA was part of the process from the beginning. The DG will provide an in depth comment on this when the time comes

The chair asked why the operators have a problem with giving Sentech a multimedia license.

Transtel responded by saying that at the moment Sentech has a Signal Distributor License and have no comment on the existing rights of ENTECH. As far as the multimedia license is concerned, the definition of multimedia services might get into the ambit of PSTS services. Clarity is needed on exactly what the impact of the definition is because Sentech could provide PSTS services under the heading of multimedia services.
In relation to the Carrier of Carriers License to provide International Gateway Services, Transtel has no problem with awarding this license to Sentech.

Mr. Maruma responded by saying that the definition does not say that Sentech will provide PSTS services.

Cape Telecommunications Users Forum (CTUF) submission
The Submission was presented Ms Pam Sykes. The CTUF is providing a user perspective on the Telecommunications Bill. The forum would like to see the widest possible of variety of telecommunications services at the lowest prices.

The forums major concerns were the following:

Technology neutrality
The bill distinguishes between different kinds of services on the basis of technology. The operators should not be restricted in the aim of achieving the affordable provision of telecommunication services.

Multimedia
It was submitted that the definition of multimedia service creates uncertainty because it could allow Sentech to claim that all forms of Multimedia fall under its license.

Value Added Network Services (VANS)
The Forum is concerned that the definition of VANS will include all providers of e-commerce websites and e-mail services in South Africa.

The Forum submits that licensing should be kept to a minimum. Just enough to ensure the orderly regulation of the industry. If there is a proliferation of license requirements then there is a disincentive to small business to invest.

The ban on voice over internet protocol (VOIP) should be lifted. The forum submits that this ban is unworkable, unsustainable and harmful. There are considerable social and economic benefits where VOIP has been allowed.

The Bill creates the scope for unnecessary legal action and the uncertainty and scope for litigation should be reduced as far as possible.

Before questions were allowed the chair asked the National Independent Telecommunications Organisation of South Africa (NITOSA) to present their submissions because they represent the end users as well.

National Independent Telecommunications Organisation of South Africa (NITOSA)
The representative of NITOSA said that the organisation was started by Vodacom Community Franchisees. There are 1300 members throughout South Africa. NITOSA’s main concerns lie with the VOIP, Section 67A and the Mediation and Arbitration Tribunal. The tribunal is set up to resolve disputes between the larger role players. NITOSA wants to know about the problems of the smaller people. NITOSA is also interested to see what could be available for membership in the SNO.

NITOSA seeks to work with all the stakeholders because the organisation is in all areas of South Africa were there are very little services or where there were no services in the past. NITOSA can help and reach these areas.

Ms Vos (IFP) pointed out the amendment to Section 44 and said that this must be a great concern to CTUF and NITOSA because the section tariffs for third party operators are fixed.

Mr. Thomson (CTUF) said that he cannot fully comment on this but it could create a problem with competition. If tariffs cannot be negotiated growth will be stifled.

NITOSA said that at the moment the tariff is regulated. The tariff is approved by ICASA and thus far there has been no problems.

Mr. Maserumule (ANC) asked what was the CTUF jurisdiction.

Ms Sykes says that it consists of a broad range that differs. As an example there are academia and small IT companies that are members. Membership is voluntary. The focus is the Western Cape but the forum is looking at expanding.

The Chair thanked NITOSA and CTUF for their contribution and adjourned the meeting.