ICASA would have liked to have interacted and engaged with the Minister and the DoC prior to making this input to the Portfolio Committee, but unfortunately, the opportunity did not come up.

On 14 March 2001, the Minister of Communications informed ICASA that the consultation between the Minister and ICASA in terms of Section 5 of the Telecommunications Act on the telecommunications policy directions would commence.

The Minister indicated that ICASA would receive the draft policy directions on 20 March 2001 and she requested written comments by 26 March 2001.

The Authority began a process of preparing written comments and informed the Minister on 26 March 2001 that the short period (7 days including a weekend and a public holiday) for providing written comments was insufficient to make any meaningful written comments and that the Authority would like more time to study the policy directions closely. Accordingly, ICASA indicated that it would provide some preliminary comments on 26 March 2001 and submit more detailed comments in the course of the next thirty days.

In making this presentation to the Portfolio Committee on Communications, ICASA wishes to highlight three areas of concern:

• The legal status of the policy directions;
• The timeframes for making regulations based on the policy directions;
• The finances required to implement the policy directions.

1. Section 5(4)(a) of the Telecommunications Act (103 of 1996) ("the Act") states that the Minister may from time to time by notice in the Gazette issue to the Authority policy directions consistent with the objects mentioned in section 2 of the Act. Section 5(4)(b) requires the Minister to consult with the Authority before the said policy direction is issued.
2. It is our understanding that a policy direction therefore would contain in broad terms the policies of the Government in relation to a particular aspect of the telecommunications sector, in order to achieve the objects of the Act, which the regulator must implement through the powers allocated to it in the Act and in the ICASA Act.
3. At the outset let it be clear that the Authority does not question the right of the government as represented by the Minister to issue policy directions to the Authority. The Authority however is required, in terms of its mandate under the ICASA and Telecommunications Acts, to comment on these directions. The Authority also has the responsibility to ensure that it contributes towards the successful implementation of the direction and to the achievement of the objects of the ICASA and Telecommunications Acts.
4. The Authority’s concern here is to strive to protect the policy direction from being susceptible to legal challenge and thereby causing unnecessary delays. The Authority sees its comments as a contribution towards ensuring proper process and achieving the objects of the liberalisation process.
5. The comments that follow have come about as a consultation process within the Authority.
6. While the Authority is committed to the intention of the Minister and Cabinet regarding the development of a framework for the liberalisation process, the Authority is concerned that the scope of the directions is such that it may render the directions ultra vires and susceptible to legal challenge by existing and prospective licensees. Our understanding is that the issue of ultra vires would revolve around matters that are not within the scope of a policy direction. For example:

1. The directions contain details or wording in such a manner to suggest that such statements belong more appropriately in some other government publication rather than in a policy direction to the Authority. Some statements for example may be more appropriately placed in a Cabinet statement, others in proposed amendments to legislation (which should also be Gazetted) and still others in an Invitation to Apply. This can be remedied by simply placing such statements in other more appropriate instruments. For example Clause 3 (SNO) belongs more appropriately in a Cabinet statement of its decision and in an ITA rather than in a policy direction to the Authority.
2. Some statements seemingly amount to "granting licenses" to operators. Licenses cannot be granted to operators unless they apply for these and in compliance with the provisions of the Telecommunications Act. The Authority is concerned that the policy directions attempt to grant licenses to operators, in violation of the provisions of the Telecommunications Act and the principles of transparency, just administrative action and the values of the Constitution. See clauses 4 (Telkom), 5 (Sentech), 10.1 (1800 allocation), clause 11.1 (third generation). The directions as they are worded presently suggest that the Authority must simply issue these licenses through a policy direction, whether the operators apply for such licenses or not, and without due regard to the procedures and provisions of the Telecommunications Act. These above clauses could also be interpreted as an attempt to amend the law and undermine the independence of the Authority. In this regard we understand independence to mean a non-interference in the Authority’s processes and functioning, not independence from government policies and laws. We know that the Minister and Cabinet would not want to create any such impression. It may be possible to remedy this by a re-phrasing.
3. A further concern that arises here is that the "granting" of these licenses will require legislative amendments. With due respect to the Minister, the Authority would simply like to flag that such "granting" would be contrary to the letter and spirit of the Telecommunications Act and the government’s commitment to transparency, public participation in the economy and liberalisation of the Telecommunications sector. A granting of licences in this manner is contrary to the international trend and undermining of the government’s own rationale for the establishment of the regulator.
4. An issue about the 1800 MHz spectrum is that parts of it are currently being used by a number of government agencies. Is it envisaged that these government agencies shall migrate out of the 1800MHz spectrum? If so, when and who shall bear the cost of such migration?
5. A concern around the granting of third generation licenses is the recent experience of other countries. The Authority is concerned that it would be premature to grant such licenses at this stage of the liberalisation process.
6. Another example is the definition of "fixed-mobile". If this is a new service it will have to be properly prescribed in terms of the relevant section of the Telecommunications Act, and in accordance with due process prescribed under that section. But see below for more concerns about "fixed-mobile".
7. Some statements attempt to impose penalties on licensees, for example clause 9.4. This is clearly a regulatory function, which Parliament has allocated to the Authority in terms of the Telecommunications Act.
8. Clause 10.3 of the directions states that licensees shall pay an appropriate fee to be determined by the Minister. While the Authority appreciates the guidance that the policy directions provide in respect of the calculation of spectrum fees, which guidance the Authority is more than willing to abide by, the current regulatory framework allocates the responsibility of calculating spectrum fees to the Authority. The Authority would do this by way of regulation which in any event will require the Minister’s approval (under the Telecommunications Act). The Authority is concerned about the blurring of roles and functions, and that statements such as these could render the direction susceptible to legal challenge. This could possibly be remedied by a re-phrasing.

7. Some statements are vague and therefore require further elucidation or clarification so that the Authority is able to implement the directions speedily and with certainty. For example, the meaning of "fixed-mobile" needs further clarification. Does it mean that the licensee will be able to provide both fixed and mobile (mobile to the extent that the current cellular operators provide)? If so what are the implications for the current cellular operators and the third cell? Does this mean that Telkom will be required to dispose of its interests in Vodacom? Or does it simply mean that the fixed licensee will be able to use wireless technology?
8. Similarly, how is it envisaged that the Authority’s resources must be directed towards the monitoring of violations of VoIP when technologically it is almost if not entirely impossible to distinguish between voice and data conveyed over packet switched networks? This raises the question of possibility of implementation of the policy direction (and an inefficient allocation of huge resources).
9. These are but some aspects of the policy direction that the Authority has concerns about. Once again the Authority would like to emphasise that these concerns are raised in order to ensure that the policy directions are protected against legal challenge, that the policy directions are clear enough and possible to implement so that the Authority can implement them without undue delay.

The date for issuing the Invitation to Apply (ITA), July 2001, for the Second National Operator (SNO) will not provide enough time for ICASA to produce the requisite regulations following the public comment procedures of the Act before July 2001. Assuming the final policy directions are gazetted by the end of May, ICASA will need a month, at least, to finalise the regulations prior to gazetting them for public comment for 90 days. Thereafter, at least a month will be needed for oral representations before finalising the regulations. We assume the Minister will then need at least a month to check the regulations with the state law adviser before approving and publishing them. This adds-up to the final regulations by the end of November 2001.

The following table illustrates the broad timeframe required for making regulations in terms of the Telecommunications Act.

In a letter to the Director-General dated 14 February 2001, (and copied to the Minister's office) ICASA expressed concern regarding the question of time-lines for the policy process. We stated then that "….our view is that the regulation-making process needs to be rationalised and made less cumbersome. This may require an amendment to the Act. For example, the 90-day period is too long and could be shortened to 30 or 45 days".

Although we have not yet had a response from the Department or the Ministry, ICASA hereby proposes the following amendment to section 96(4) of the Act:

This amendment will assist both government and the regulator in expediting the policy process.

Reducing the public comment period to one month will have the following effect on the time scales.

This would result in the earliest period for regulations being produced as 30 September 2001.

One of the implications of these timescales is to cast doubt on whether an ITA for the SNO can be issued by July 2001. Potential applicants would need to know the full scope of the regulatory framework prior to the ITA being issued. The ITA would itself need to refer to the regulatory framework. Accordingly, ICASA proposes that the date for the ITA to be issued be shifted to 30 September 2001 and that S96 of the Telecoms Act be amended to change the time period prescribed for the making of regulations as soon as possible.

ICASA is pleased to note that the Cabinet decision of 14 March 2001 required that:

ICASA understands this decision to mean that additional supplementary finance will be made available to the Regulator primarily in order to:

• complete the restructuring process required to give effect to the merger of the IBA and SATRA and thereby strengthen the institutional and human resources capacity of ICASA;
• enable ICASA to undertake its role with regard to the IPO and SNO process through the making of regulations in terms of the policy directions as well as undertake the relevant licensing processes (SNO), 1800MHz, Third Generation, Sentech, SMME's and Co-op's);
• deal with outstanding and future cases of litigation against the Authority (including the third cell licence litigation).

Each of the three elements outlined above will require outside assistance through the hiring of consultants.

ICASA has estimated its supplementary financial requirements to give effect to the above elements to be in the region of R36 million.

The key elements of the supplementary budget are as follows:

ICASA made government aware of this problem as far back as September 2000. (see attached documentation on ICASA Financial Requirements). This finance has been needed since October 2000. The original amount requested was R39 million. The Authority received a transfer of R3 million towards the costs of the third cell litigation in the last few weeks. Since then nothing further has been received. Cabinet promised additional finance three weeks ago. The clock is ticking.

The longer there is a delay on the part of the Government in making such finances available to ICASA, the less able will ICASA be to fulfil its regulatory and licensing responsibilities timeously with respect to the new telecommunications policy.

ICASA wishes to place on record that while it is fully committed to playing its part in implementing the new telecommunications policy of Government, ICASA at present is simply unable to do so and is unwilling to take any responsibility for any possible consequences flowing from the government's failure to properly provide financial resources to the Regulator.

It would be a crying shame if the country were to lose several billion rands worth of foreign investment on Telkom's IPO and the SNO licensing process for want of Government providing R36 million rands to the Regulator.