COSATU and CWU submission on Telecommunications Amendment Bill

1. INTRODUCTION

2. CONTEXT OF TELECOMMUNICATIONS LIBERALISATION

3. COSATU/CWU'S VISION FOR TELECOMMUNICATIONS
3.1 UNIVERSAL SERVICE

3.2 AFFORDABILITY

3.3 STATE OWNERSHIP AND REGULATION

3.4 ECONOMIC DEVELOPMENT

3.5 JOB RETENTION AND CREATION

4. COMMENTS ON THE BILL
4.1 "MANAGED LIBERALISATION"

4.2 UNIVERSAL ACCESS AND UNIVERSAL SERVICE

3. INSTITUTIONAL ISSUES
   

1. Introduction

COSATU and CWU welcome this opportunity to present to the Communications Portfolio Committee around the Telecommunications Amendment Bill (hereafter "the Bill").

We oppose the primary component of the Bill, namely the "managed liberalisation" of the telecommunications sector, for reasons which will be set out in the course of this submission. It is unfortunate that government policy appears to be set in stone on this issue, as per government statements that no further change in policy on the principle issues is contemplated. This also undermines the integrity of the parliamentary process, which should give elected representatives the opportunity to genuinely engage with issues and to deliberate on the legislation with sovereignty. Nevertheless, COSATU felt that it would still be important to set out our views on the Bill and on the telecommunications policy debate more broadly.

COSATU’s inputs into this process are informed not only by the direct interests of our 1.9 million members, but more broadly by a concern around the provision of telecommunications services to all South Africans. Our approach to telecommunications policy rests on three central pillars:

• accessibility and affordability of telecommunications services to working people and the poor;
• the direct interests of our members employed in the telecommunications sector;
• the importance of this sector for South Africa’s economic growth and development.

We are disappointed that all of our inputs into the process thusfar seem to have been ignored. COSATU has attempted to put forward our views at various stages in the process, including amongst others the following:

• Participation of COSATU, CWU and NUMSA at the Telecommunications Colloquium in February. Unfortunately this forum was dominated by private sector interests with a vested interest in gaining a slice of the market, and more developmental views were marginalised. We do not regard the "outcome" of the colloquium as representative of all stakeholders.
• CWU has previously made an initial presentation to the Communications Portfolio Committee on the Intended Telecommunications Policy Directions.
• COSATU/CWU made a detailed written response to the Intended Telecommunications Policy Directions to the Department of Communications, in which we raised our objections and proposed alternatives.
• We responded publicly to the final Telecommunications Policy Directions.
• We have also engaged with ICASA on related issues, making two written and one verbal submission on the telecommunications rate regime in which we also raised our broader approach to the sector.

Despite these and other engagements, there is no indication of any of our views being accommodated. In fact, in some aspects the policy has worsened during its evolution. The marginalisation of labour is in stark contrast to the apparent bending over backwards to accommodate different sections business interests, domestic and foreign, at difference stages of the process. This is particularly unfortunate given the fact that, as has been widely noted during this process, COSATU is the only prominent voice speaking on behalf of consumers and those who are still waiting for telecommunications services.

COSATU is also concerned that the process which government itself stipulated in the Telecommunications Act has been flouted. As per the requirements of Section 5 of the Act, the public was invited to respond to the Draft Policy Directions by 2 May 2001, which comments the Minister should have taken into account in developing the actual Policy Directions and subsequently the Bill. There is reliable information that a version of the Bill was already in process over a year ago, and draft legislation dated 18 April 2001 was prepared for Cabinet, at a time when the public was still commenting on the Policy Directions. This flawed process goes against what was required in terms of the Act. It seriously undermines the value of the "consultation" that was supposedly followed, and may go some way to explaining why our comments seem to have had no effect on the Policy Directions.

In this submission we start by discussing the context in which this debate is located, around the restructuring of state assets. Thereafter we set out COSATU’s vision for the telecommunications sector in order to contextualise our comments on the issues raised in the Bill. The two central, and closely related, aspects of the Bill that we focus on in this submission are the proposed market structure, and issues around universal service. At this stage we reserve our comments in terms of various other issues. Given the fundamental nature of our objections to the overall direction of the Bill, we have concentrated in this document on the broad issues rather than on particular drafting. Should the Committee wish to pursue some of our proposals further, we would be available to elaborate these and to develop detailed legal drafting to give effect to them.

1. Context of telecommunications liberalisation

COSATU locates this issue within the broader debate around state asset restructuring. We believe in the central role of the state in the delivery of basic services. In this regard COSATU has made clear its objection to privatisation, which we conceptualise as not only the open sale of state assets but also other processes which turn over state functions to the private sector and the market.

These processes include:

1. The sale or partial sale of state-owned assets or enterprises.
2. The introduction of private competitors in sectors historically controlled by the state. Effectively, this approach privatises part of an industry or sector, even if the state does not itself sell any assets. It effectively subjects state interests to pressure to compete on the market, ultimately reducing their capacity to meet social needs.
3. Relinquishing the management of state functions to private interests. This can take the form of outsourcing services from the public service. It also takes the form of contracting management of municipal services to private companies. In these cases, the state does not necessarily sell assets, but they nonetheless fall under private control.
4. The requirement that state functions operate on a commercial basis, in some cases registered under the Companies Act. Commercialisation both often forms a first step toward privatisation and subjects state activities to the logic of the market. As with the privatisation of historically state-run industries, it makes state interests pursue commercial imperatives rather than broader social needs.

This objection to privatisation led to COSATU undertaking the highly successful two-day national general strike against privatisation. Privatisation in the telecommunications sector was one of the issues at stake in this. We raised objections the range of privatisation moves, as conceptualised above, which the telecommunications sector has been subjected to. Firstly, the outright sale of 30 percent of Telkom to U.S. and Malaysian investors, with a further 20 percent apparently slated for an IPO before the end of this financial year. Secondly, and related to the above, the problematic role played by private, foreign management in the running of Telkom. Thirdly, the increasing commercial bias of Telkom. Fourthly, the liberalisation of the telecommunications market, initially to private cellphone operators, and now with the proposed licensing of an additional fixed-line competitor.

The millions of COSATU members and sympathisers, as well as the range of civil society groups which actively participated in the strike, voiced their opposition to these and other forms of privatisation. We are awaiting political follow-up from this to attempt to address the substantive issues raised by COSATU. In this respect it is problematic that the Bill pre-empts these discussions by following a particular policy direction – the effective privatisation of the telecommunications sector – which undermines the political resolution of differences.

COSATU and CWU strongly believe that the state is best placed to provide basic services such as telecommunications. Telecommunications infrastructure is part of the environment that makes economic activity possible - it is an important determinant of the cost structures of firms and of their spatial location. The benefits from infrastructure for the economy as a whole are therefore much greater than what can be earned by charging for services. These benefits arise because there are economic effects from telecommunications services that have effects beyond the two groups involved in the sale of the services themselves (i.e. the service provider as the seller and the customer as the purchaser of the services). It is well recognised in mainstream economic theory that when such effects exist (termed "externalities", as they are external to the transaction in question) free-market transactions will not be economically efficient. Efficient outcomes in these situations require government intervention.

Private owners will only take into account the narrow financial gains to themselves in deciding how much to invest. The private sector will always under-invest in infrastructure such as telecommunications as investors do not take account of the wider economic effects. They are also risk averse, meaning that they base their decisions on existing demand, rather than the potential demand which may arise from the economic growth which is made possible by the infrastructure provision itself. This means less infrastructure and less jobs in operating that infrastructure. The location of infrastructure is also very important for addressing the effects of apartheid. A broad definition of Black economic empowerment includes the provision of infrastructure in historically disadvantaged areas. Private owners have limited interest in doing this.

Telecommunications also improve the provision of other essential services such as education and health. The private sector will not take into account the benefits in terms of wider and better provision of health and education that come from extending telecommunications. In addition, there are impacts from telecommunications services that affect development more broadly but which may be difficult to quantify. These include the importance of telecommunications for being able to participate in the political, economic and social activity in a country. It is impossible to work out the value of information and communication purely in Rand terms, yet it is clearly important.

More especially in a country such as South Africa with massive infrastructural and service backlogs and extreme inequalities, "pure" competition in a basic needs sector such as telecommunications is particularly inappropriate. This would be likely to result in "cherry-picking" of profitable market segments and neglect of the majority. It is relevant to note that even in developed countries which now have a competitive regime, it was through a state driven approach that telecommunications were rolled out in the first place. We return to these issues in the course of this submission.

The argument that globalisation requires a reduced role for government, with policies such as privatisation, is based on a false analysis. A country’s ability to participate in the international economy depends on its infrastructure, and particularly telecommunications. This requires government support and a longer-term development approach if South Africa is to take advantage of the opportunities available from globalisation. Industrial economies already have a mature infrastructure that provides the basis for global economic links.

In the context of a mixed economy continued government ownership provides a range of benefits:

• Government ownership is an important way of setting non-profit objectives. These may conflict with the objectives of the private shareholders (where they exist), meaning the government, as shareholder, must enforce its conditions.
• Ownership combined with regulation of the existing private sector is almost certainly better than relying solely on regulation. As an owner the government has access to much more information on the performance and decision-making of the firm than the regulator.
• Government can ensure that a longer-term perspective is adopted to grow the market rather than short-term, shareholder driven profit.
• Ownership ensures that a stream of returns from the business go to the state.

Ownership alone, however, is clearly not a guarantee of service orientation. Where there are private shareholders who prioritise profit maximisation, this will inevitably put pressure to scale down the meeting of universal service obligations, increase prices and so on. This underlines the need for tight ongoing regulation.

Moving from this broad approach, our comments on the issues of market structure raised in the Bill are reflected in section 4.1 of this submission.

1. Economic development

Telecommunications have been identified as particularly important for economic development because they directly impact on the nature and level of economic activity. They also increase the efficiency of institutions and make service delivery more effective and potentially cheaper. It has long been recognised that government has a primary role to play in facilitating the development and adoption of new technologies. This is the case with the recent developments in information and communication technology including the Internet. Many of the gains from these technologies extend beyond the institutions using them and rely on their widespread adoption. Government action is necessary to ensure linkages are achieved between enterprises, public institutions (in education, health, research etc.) and financial incentives for investment and innovation.

Such a conception is echoed in the RDP which noted that "telecommunications is an information infrastructure and must play a crucial role in South Africa’s health, education, agricultural, informal sector, policing and safety programmes. The telecommunications sector is an indispensable backbone for the development of all other socio-economic sectors. An effective telecommunications infrastructure which includes universal access is essential to enable the delivery of basic services and the reconstruction and development of deprived areas." [RDP section 2.8].

It is widely recognised that infrastructure investment is closely associated with economic growth and development. A recent study of employment and unemployment in South Africa found strong and significant correlations between provision of telecommunications services and the ability to find employment. There are important backwards and forwards linkages of telecommunications infrastructure with other sectors. For example, it is linked closely to manufacturing of electronic equipment used in setting-up and running the infrastructure. Increased service provision will have positive knock-on effects on production and employment in other industries and sectors.

Private firms, however, simply view employment as a cost to be minimised. Particularly in a situation of high unemployment, the ‘savings’ achieved by private firms in reducing employment are losses rather than savings, when viewed from the perspective of the economy as a whole.

Increased investment in telecommunications infrastructure also has a range of multiplier effects through the increased demand for equipment and materials, which stimulates growth in upstream sectors. The cost of direct government support for investment in infrastructure will therefore be partly recouped through the effects of this spending on growth and employment (and thereby on tax revenues). ICT as part of business services also provide the necessary conditions for higher productivity, business efficiency, and industrial development.

2. Job retention and creation

It is generally accepted that South Africa is currently facing an unemployment crisis, and that addressing this crisis is arguably the central policy challenge facing us. Any policy initiative needs to be guided by the imperative of protecting current jobs and creating new ones.

Telkom has shed a fifth of its workforce over the past year, with the number of employees falling from 61 237 staff members in 1999 to 49 128 in 2000. The possibility of future retrenchments would obviously further worsen the unemployment situation.

Job retention and creation in the telecommunications sector is not only compatible with universal service provision: the massive rollout of infrastructure and services required is actually dependent on a sufficient number of employees who are adequately trained and motivated. Productivity is not a function of employment levels: it may be increased by raising output rather than reducing employment. Telkom should be investing in training staff, rather than retrenchment. In this way it internalizes costs associated with human resource development, particularly where there are skill shortages. Technology to be adopted should take into account South Africa’s labour abundance, and should not be labour displacing. Given the need to expand basic telephony, especially in the rural areas, Telkom should actually see growing employment in the next few years.

1. Comments on the Bill
1. "Managed liberalisation"

The key issue in the Bill is the proposed "managed liberalisation" of the telecommunications sector, particularly in terms of the intended introduction of competition through a second national operator (SNO). Many of the other provisions of the Bill flow from this. It is this aspect which presents major concerns for COSATU and CWU, and for this reason it is the focus of our comments here.

The Bill proposes that a SNO be introduced from 2002, unlike in the Draft Policy Directions, there is no restriction on the extent of foreign ownership in the SNO. From 2005 an additional national operator is to be licensed (subject to a feasibility study) with at least one service-based competitor to Telkom and the SNO. Other aspects of the Bill which flow from the introduction of a SNO include the setting aside of up to 30% for historically disadvantaged groups, number portability and carrier pre-selection, the methods of deciding applications and awarding licenses, provision for facility sharing, and directory services in a "post-exclusivity environment". A further way in which the Bill proposes to extend the role of the market in the provision of telecommunications services is by handing over areas with low teledensity – those most in need of the provision of basic telephony – to the private sector through SMMEs. An Invitation to Apply (ITA) is to be issued for a SNO telecommunication license.

The Bill proposes service-based competition in which the SNO would be able to use Telkom’s facilities based on a commercial agreement, and facilities based competition thereafter (the SNO would have to develop its own facilities and infrastructure). The license conditions would (according to the Policy Directions) stipulate targets of infrastructure rollout, universal service obligations, universal access targets, and a system of penalties for failure to achieve the infrastructure rollout for the SNO. It is also specified that the SNO and any new major licenses will include a shareholding of up to 30% for historically disadvantaged groups, and will include the incorporation of ESI~TEL (a subsidiary of Eskom Enterprises) and Transtel (a division of Transnet).

COSATU is not convinced that the proposed market structure will foster a telecommunications industry which meets people’s basic needs. While we are not necessarily opposed to some regulated competition for the provision of high-level services to business, we are opposed to competition in the provision of basic telephony. Given the massive needs for extension of telephonic services, as discussed elsewhere in this submission, we believe that the optimum market structure would be for Telkom to have sole responsibility for the roll-out of basic telephony, with this responsibility being funded both from the fiscus and dedicated levies on operators providing other telecommunications services. We believe that any telecommunications providers, including Telkom, need tightly circumscribed license conditions and ongoing monitoring and regulation, to ensure that government objectives, particularly universal service, are indeed met.

Particularly in the light of the highly skewed income distribution in South Africa, competition is in our view highly unlikely to lead to universal service. Economic logic, backed up by relevant international experiences, indicates that competition leads to cherry-picking and an improvement in costs and service for the upper end of the market, side by side with poor or no service for the lower ends. The profit-maximising drive of private companies, or even commercially oriented public companies especially in a competitive environment, dictates cost minimisation and revenue maximisation.

This translates into a reluctance to service the lower ends of the market, poor quality and high tariffs for the poor, and a concentration of resources on the upper end of the market and value added services which tend to have higher profit margins. These dangers become even more apparent with foreign investors, who have no interest in South Africa’s development but only in extracting maximum profits as quickly as possible. The fact that the Bill has no restriction on foreign ownership of the SNO heightens our concerns in this regard.

In a nutshell, the telecommunications priority for COSATU is the extension of affordable telephone services to all South Africans; we do not believe that the market structure proposed in the Bill can achieve this.

To elaborate: there are two related concerns for us in terms of the telecommunications market structure, particularly as it relates to basic telephony. Firstly, the integrity, viability and orientation of the national public telecommunications provider, Telkom. COSATU believes that policy should maintain the public sector character and obligations of Telkom. As articulated in section 3.3 above, we believe that the state is best placed to deliver basic telecommunications services and therefore that public ownership and a public sector (non-commercial) orientation of Telkom will best dispose it to quality and equitable service delivery.

Secondly, the range of mechanisms and instruments – regulatory, legislative and otherwise – through which universal service is achieved. It is clear that whatever the market structure, both public and private providers need to be tightly circumscribed to ensure universal service. Regulations must be geared, not to the "public interest" in a vague sense, but to quantifiable targets for affordability and universal service. Without clearly specified targets, tight monitoring of the meeting of targets and appropriate penalties for failing to do so, the majority of South Africans are unlikely to have the benefit of access to even basic telecommunications services. As discussed in section 3 above, this access is vital for households’ full social participation, prospects of economic development and employment, skills development, and other benefits.

Proper regulation relies heavily on timely, detailed and accurate information, attribution of costs, assessment of externality and growth effects of services, and so on. A firm which is the subject of regulation often has no interest in providing such information. It is unfortunate that Telkom has not yet developed the capacity to provide information (such as cost breakdowns) required of it. Government as well as ICASA should play a firm role in ensuring that Telkom is in a position to provide such information in future, which will enable proper regulation.

Government should use its majority ownership of Telkom as well as its stake in any other telecommunications service providers to ensure that objectives are met. Our view of the Telkom experience of the past few years is that, as Telkom has become increasingly commercialised, management has been allowed to run it as more as a semi-autonomous business entity rather than operating within a clearly defined mandate for taking forward government objectives. Public ownership or stake should be used to set and achieve non-profit objectives, particularly rollout of affordable services.

Management incentives and disincentives can also be structured to promote such objectives, rather than narrow commercial financial goals which tend to be achieved at the expense of service delivery and employees security and conditions of employment. Monitoring and enforcement mechanisms clearly need to be strengthened, including the role of government as shareholder, the oversight role of parliament, ICASA, stakeholders and the public at large.

While we are not opposed to the consolidation of state enterprises, which can often be a strategic move, this should in no way be conflated with privatisation or the bringing in of market players.

Although the Bill does not comprehensively deal with the IPO, it is clearly envisaged in the Bill which in a sense lays the basis for the planned IPO. For example, the Memorandum of Objects on the Bill motivates the price regulatory provisions "in anticipation of the Telkom IPO". Repeated government statements have indicated government’s intention to list Telkom before the end of the fiscal year. COSATU is strongly opposed to this proposed privatisation of one of our key national assets. We believe that the more of this strategic enterprise are sold off to private interests, the less able it will be to provide basic services for all South Africans. It is also of concern to us that it has not gone through the National Framework Agreement on the Restructuring of State Assets (NFA) process as required. We call for political engagement on this issue before processes move ahead any further.

In fact, given the negative experience of the Telkom equity partners up to now, we propose that this arrangement should be reviewed in the coming period. We propose that Telkom moves back to full state ownership, which we believe will better enable it to fulfil government objectives particularly universal service.

It is difficult for us to form a view at this stage as to the conditionalities of the SNO and how it will contribute to universal service: no substance is provided in the Bill but instead universal service obligations, universal access targets, infrastructure roll-out targets, and penalties for failure to achieve the latter will apparently be specified in the ITA and formalised in the license conditions. Given that the Bill does not give any indication of what universal service and access obligations the SNO will face, nor what penalties and enforcement mechanisms are contemplated, it is difficult to access the possible impact of the proposed market liberalisation on access to telecommunications in South Africa.

In our submission on the Draft Policy Directions we called on government to explain how the proposed market structure would advance the objective of extending telecommunications access to all our people, but no convincing explanation has been forthcoming. If government insists on the route of market liberalisation proposed in the Bill, it will be imperative to have very tightly circumscribed license conditions for the SNO, with strict penalties not only for failure to achieve the infrastructure structure rollout but also for shortcomings in meeting universal service obligations.

Successful industrial development and a more productive economy are also dependent on a conducive business environment. For this reason COSATU recognises the importance of high-level ICT services for business, and accepts that more operators can be enabled to provide these services. They should pay a levy that will contribute to funding the extension of basic telephony. The levy should be made available to Telkom as a ring-fenced subsidy for this purpose.

Under-serviced areas

Under-serviced areas are now defined in the Bill as those with a current teledensity of less than 5%, as compared to 1% as previously proposed by government. The Bill proposes permitting SMMEs to provide telecommunications services as from 7 May 2002, using their own or leased infrastructure. The previous inclusion of co-operatives – which was at least a collective, community-based form of ownership - in this provision has now been excised in the Bill.

The fact that a situation of such low teledensity in certain areas still prevails is an indictment of Telkom’s record in service extension. It also highlights the limitations of the regulatory regime up until now. However, we do not believe that this failure is a motivation for effectively outsourcing this responsibility to SMMEs. A danger with such a proposal is that private operators who initially take on an obligation later fail to properly deliver services or that these are of a poor quality. SMMEs will be less accountable to consumers than would the national service provider, and it is difficult for people to raise complaints or to enforce their rights.

COSATU thus suggests an approach to underserviced areas in which delivery remains part of the universal service obligations in license conditions. Furthermore, these obligations need to be rigorously enforced, both through the direct ownership stake of the state and through the regulatory regime.

2. Universal Access and Universal Service

As outlined in section 3.1 above, COSATU and CWU regard the attainment of universal service as a priority. Given the inadequate progress made thus far in extending telecommunications services to the majority of South Africans, it is clear that a more decisive approach is needed. Unfortunately, the Bill as it stands does not clearly set out how progress towards universal access and universal service will be accelerated.

As the International Telecommunications Union states in their World Communications Development Report 1998, "Technology that theoretically provides telecommunication access from anyplace on the surface of the earth is already available. Universal access is now not so much an engineering or supply-side problem but rather a regulatory and policy challenge." The report also provides a useful conceptualisation of three dimensions of universal service:

• Availability: there should be nationwide coverage of telephone service, wherever and whenever required.
• Accessibility: users should be treated alike, there should be no discrimination in terms of service, quality etc based on location, race, etc.
• Affordability: telephone services should be priced so that users can afford them.

We believe that it is viable for government to set a target for universal service for all within five years – that is, every household that applies must be linked up to the telephone network. As discussed above, affordability is the flip-side of universal service. High rental costs and call charges have resulted in the phenomenon of churn over the past few years, which have undermined progress towards universal service.

COSATU proposes a price structure based on the system of lifeline services and progressive block tariffs developed for municipal services. This would have two important advantages: firstly, everyone would have access to some basic telephone services. While the package of lifeline services could be discussed further, it could at least include outgoing local and national calls up to a certain amount, incoming calls, and access to emergency services. Secondly, telephone charges would rise progressively at higher levels of usage. Based on the assumption that high-income households with higher ability to pay are likely to make greater use of telephones, this would build in cross-subsidisation to lower-income users.

Cross-subsidisation is an accepted principle of service delivery for governments around the world in the provision of water, electricity, telecommunications etc. These are basic services and it is regarded as unfair to expect the poor to pay the same amount per unit as the wealthy. More so in a country such as South Africa, with massive inequalities and service backlogs.

In fact it has also been used historically in South Africa, for example to extend services to farmers where the costs of rolling out infrastructure are relatively high. Moving towards cost-based pricing (as proposed, for example, in the ICASA tariff review) would mean that those who do not yet have access to telecommunications – predominantly poor and black – would be paying closer to the full cost, while services have been extended to whites over decades funded through public subsidies.

While COSATU certainly supports service extension and adaptation for differently abled persons, given South African socio-economic realities a broader approach is needed. We believe a two-pronged approach is needed: on the one hand, the overall price structure should favour low-income consumers as discussed above (including lifeline telephonic services followed by progressive block tariffs and ongoing subsidisation of local calls by long-distance and international calls). This general progressive price structuring should on the other hand be complemented by specific targeting of groups such as the disabled, unemployed, the elderly and so on.

We agree that there is a need to restructure the Universal Service Agency (USA) in order to better equip it to fulfil its mandate. Within the two-pronged approach to universal service outlined above, the USA should deal with both a general, comprehensive approach to service rollout and price structure, and targeted interventions aimed at specific disadvantaged sectors. The Department could also look into either merging the USA and ICASA, or better integrating the USA within the telecommunications regulatory regime, to ensure that universal service is mainstreamed rather than ghettoised within one agency.

In terms of contributions to the Universal Service Fund (USF), the Bill proposes that in order to increase the size of the fund all telecommunications licensees shall from April 2003 contribute a percentage of their turnover not exceeding 0.5% to the USF. According to the Policy Directions, the actual percentage is to be specified by ICASA.

It is generally recognised that the USA has until now been hamstrung by a lack of resources, and we thus welcome the intention to increase the size of the USF. A 0.5% levy would certainly increase the resources available to meet pressing needs, as compared to the current ceiling. It might be advisable for the Bill to specify not only a maximum ceiling but also a minimum floor for contributions, to avoid a situation where insufficient resources are available to meet the objectives.

The section of the Bill on the education rate (e-rate) (section 20(b)) proposes that all public schools will qualify for a 50% discount on telecommunication calls to an internet service provider an on connection fees to the internet. COSATU believes that access to Internet can be very important as a source of information and communication for schools. Closing the "digital divide" at the school level is part of laying the basis for reducing inequality in society as a whole; similarly, inequities in access to information and communication technology (ICT) at school level can only exacerbate existing inequalities.

In this context we support the apparent intention of the Bill in proposing a 50% discount on Internet access calls for public schools. However, our concern is that the costs of connecting to the Internet in the first place, and even the discounted call access rate, may prove prohibitive for the majority of our schools. We thus suggest that a more active approach is needed to ensuring that pupils, including those at black schools, do benefit from access to ICT. For example, the universal service obligations imposed on licensees could include the installation, maintenance, and subsidisation of Internet usage at public schools.

1. Institutional issues

A concern which we wish to raise is around the aspects of the Bill which seem to downgrade the role of the legislature in various decisions. COSATU has been consistent in pushing for a strong role for elected representatives in matters of public interest. We are concerned that the Bill seeks to change the process and responsibilities for appointment of ICASA Councillors. This would downscale the role of Parliament and instead empower the Minister to choose them. For the regulator to perform its functions effectively it is imperative that it is perceived to be appointed in an open and transparent fashion, and we believe that Parliament is the ideal institution for this role.

Finally we would like to flag a concern around the role and purpose of the Telecommunications Mediation and Arbitration Committee. It is not entirely clear to us what the responsibility of this proposed body would be vis-à-vis ICASA, and whether a danger would be opened up of "forum shopping". In the absence of an adequate motivation for this proposal, perhaps the consolidation and, where necessary, the further capacitating, of existing bodies would be a better route to follow.