ISPA has actively participated in all public consultation processes with regard to the communications sector, including the recent Monitoring and Interception Bill and the proposed e-commerce legislation. We suggested in the e-commerce process, as we do now that all the varying policy processes, including those under the Independent Communications Authority of SA ("ICASA") be streamlined and co-ordinated to ensure effective and efficient legislation and to bring much needed certainty and stability to this important economic and social sector. To this end, ISPA welcomes the beginnings of the finalization of the telecommunications policy process begun in March 2001 and are at all times most willing to participate in ongoing consultation and discussion in this regard.

It must be stated that ISPA has done it best in the short period of time in which to comment on this Bill and is concerned about the haste in which this legislation is being pushed through Parliament. What is further disconcerting is that many "new material" is submitted in the Bill that has never been raised during the extensive consultation process. In light of this, we urge the Committee not to be overly hasty and seriously consider the economic implications of this Bill should it be accepted in its current form or with only minor changes. Due to time constraints ISPA and some of its members, like Internet Solutions and UUNET, have collaborated to create this submission. There might thus be areas of overlap with their individual submissions, but this should be seen as views from the industry that are coherent and principally have identified the same problems in the Bill.

In essence we believe this Bill, as it stands, will defeat the objectives as set out in the Telecommunications Act and is purposed to benefit only the incumbent telecommunications operator, Telkom, and the SNO to the detriment of the VANS providers/ISP industry and South Africa. This Bill, as will be outlined herein, erodes the independence and regulatory powers of the regulator and even goes so far to blatantly ignore previous adjudications made by ICASA. We thus ask the Committee to scrutinize this Bill with the attention that it deserves.

This submission contains comments on the Bill, which amends portions of the Telecommunication Act of 1996 (the "Act"). The submission consists of a broad overview of the relevant issues concerning the Bill in part A. This is followed by a detailed clause-by-clause analysis of the Bill and suggested amendments in part B.

There are several broad issues arising from the Bill.

1. Constitutionality

• Firstly there is the issue of the overlapping of broadcasting and telecommunications regulatory regimes. In terms of the Bill, Sentech is granted a license to provide a "digital broadcasting service". This provision is in contravention of the Broadcasting Act 4 of 1999 as the only legal instrument by which broadcasting licenses might be issued. Thus the due process provision of the Broadcasting Act is being circumvented. In addition, the services mentioned as multimedia services are in essence incongruent with the definition of broadcasting as per the Broadcasting Act. It appears that Sentech may hereby offer services akin to that of a VANS operator/ISP. Furthermore, the Bill grants an international telecommunications gateway license to Sentech by legislative fiat without any tendering / due process procedures.

• Secondly, in respect of ICASA there is a substantial transfer of authority from ICASA and from Parliament to the Minister and President. Both this and the licensing process of Sentech may be unconstitutional (having regard to section 192 of the Constitution that orders the creation of an independent broadcasting body – thus an independent body in its converged form, namely ICASA) and is contra Clause 5 of the WTO GATS Agreement that explicitly states that the regulator should be independent and not be accountable to any supplier of telecommunications services. Thus ICASA should be independent from Telkom, and by implication, from the government and any state department/organ as Telkom is majority owned by the state.

• Thirdly, the Bill allows for the overturning of previous adjudications and decisions of ICASA specifically with regard to what constitutes a VPN, VANS and rulings on interconnection and facilities leasing. Such interference from the legislature with the adjudications and decisions of a regulator that is intended to be independent will leave little confidence in the South African regulatory system and will erode investor confidence in the communications sector in a material manner.

• Fourthly, the continued ban on voice provision by VANS, specifically Voice-over-IP, is in our opinion open for questioning on Constitutional and anti-competitive grounds. Now that the telecommunications sector is to be liberalized, there exist no economic logic to reserve these services to certain players. The rationale for the ban was to protect Telkom’s monopoly in the public interest. Now that liberalization is coming into effect, the public interest shifts towards having a free and open market that will lead to competition and thus better and cheaper services. There can be no reason to perpetuate this ban in terms of the Bill. It is submitted that this prohibition is also contra the GATS signed by South Africa.

1. VANS

Value-Added Network Services ("VANS") have been redefined and section 40(2) of the Act as amended no longer refers to VANS but to "electronic transaction services". This will have negative implications for VANS providers, Internet service providers ("ISP") and inevitably South Africa, as outlined in Clause 15 herein.

2. Multimedia

The Bill introduces multimedia services and licenses Sentech to provide such services. There is no mention of other parties that may provide these services and the licensing requirements for such provision. As stated above, Sentech is licensed without due process. Furthermore, the definition of multimedia is broad and will have drastic implications for the VANS providers/ISP industry, should they not be deemed to be allowed to provide such services due to the lack of an issued license. The multimedia services refer to services that is already offered by VANS providers/ISP’s and in many cases can be seen as converged technology platforms. Therefore, it would be ideal to foster growth in this new sector by leaving it unregulated. This is the Canadian position after having established that broadband have not reached a critical mass to pose a threat to the current and telecommunications and broadcasting sectors. This would also be true for South Africa, as we are even further away from broadband access that will allow the delivery of traditional broadcasting content. It is submitted that this license for multimedia services be scrapped and that it should be included in the envisaged Convergence Bill and accordingly dealt with in that legislative process. Further to this, the licensing of Sentech exclusively to provide multimedia services, is contra the "most favoured nation principle" in the GATS signed by South Africa.

3. Sentech licensing

Sentech is licensed to provide multimedia services and international telecommunication services as a "carrier-of-carriers". Since Sentech will not be allowed to provide international telecommunication services to "end-users" this may affect VANS providers/ISP’s if they are not deemed to be "end-users". This term needs to be defined and should include VANS providers/ISP’s.

4. Resale

Resale is redefined and may affect the rights of ISP’s to resell their VANS. Resale is now defined exclusively as provision of Public Switched Telecommunication Service ("PSTS") over facilities not owned by the PSTS licensee. With this definition of the right of resale it is unclear what the rights of resale of VANS providers/ ISP’s are of their value-added services, if any such rights exist at all. This definition might place the future business of VANS providers/ISP’s in grave danger as it may imply that VANS providers/ISP’s cannot resell and thus have to close their businesses. ISPA also requests clarification on the position of the ICASA ruling on VANS and indeed on the entire ICASA VANS and PTN licensing framework.

5. VPN / PTN definitions and usage in the Act

Virtual Private Networks ("VPN") are now defined as a sub-species of Private Telecommunication Networks ("PTN"). The implication is that as with PTN’s, VPN providers cannot sell VPN related services for profit. This contradicts the pronouncement and recognition by ICASA in June 2001 of VPN’s as a VANS. The definition of VPN’s as stated in the Bill is technically and operationally incorrect. Here is a clear example where ICASA’s adjudication and decision is patently ignored and redesigned to fit the interests of Telkom. We find it ironic that the Department of Communications, tasked with the responsibility to successfully deregulate South Africa’s telecommunications market, would resort to policy stances and the drafting of a Bill that clearly is uncompetitive and contra world trends.

6. Voice-over-Internet Protocol ("VoIP")

The prohibition on VANS providers providing voice services, and specifically voice-over-IP, remains in the Bill. This prohibition is legally and commercially unsound. If this prohibition is retained in the final Act, South Africa would be in breach of the Constitution and the "most favoured nation principle" of the GATS whereby the state is obligated to ensure that equal treatment of all players is effected in the market. To afford Telkom, the SNO and SMME’s the exclusive right to offer VoIP services is tantamount to artificially skewing the market forces in the communications sector to the advantage of the aforementioned parties that will be difficult to rectify later. The effect will be a new type of digital divide with a communications duopoly that can not be appropriately dictated by market forces to better its prices and service offerings.

7. Eroding of ICASA’s authority as Independent Regulator

There has been a shift of power from ICASA to Minister in respect of licensing discretion, assessment of licensing, appointment of Commissioners and control over the Universal Services Agency. This directly affects the independence of the Authority and violates Clause 5 of the World Trade Organisation agreement which requires member-states to ensure the independence of regulators, and Sections 2 and 3(2) of the ICASA Act that requires ICASA to be independent and subject only to the Constitution and the law. In all cases now the ultimate authority lies with the Minister or the President and it appears there is no circumstance in which the Authority as an independent body can take the Minister to court to prevent unlawful steps by the Minister. This is wholly undesirable.

8. Competition

The Bill maintains (and in some ways even exacerbates) the anti-competitive aspects of telecommunication service provision. There is nothing to stop PSTS providers from offerings VANS in terms of the Act, and thus compete with ISP’s and VANS providers in data service offerings. The advantage conferred on those allowed to provide voice-over-IP bundled up with data-service offerings would render those only allowed to provide data services uncompetitive and unattractive in the marketplace. In addition, Sentech’s rights straddle the service offerings of VANS and PSTS without any of these offerings defined as such. The question is whether this is envisaged as a sui generis license or not. However, whatever the nature of this license, it is submitted that the issuing of this license is contra the "most favoured nation principle" of the GATS and places Sentech on an unequal footing with respect to VANS providers/ISP’s and affords enhanced opportunity to a restricted category of competitors to address the growing and developing market for converged service, thereby affording them an unfair competitive advantage.

"(a) carrier of carriers" - This is defined as a service whereby an entity provides international telecommunication services through its own gateway to other carriers (telecommunication service providers) in South Africa (in this case Telkom and the SNO) and abroad, but not to "end-users". The term "end-users" is undefined. It appears the drafters’ intention is to prevent bulk buyers of bandwidth/telecommunication services from buying these services directly from Sentech. It remains unclear, however, whether VANS providers/ISP’s are to be considered "carriers", and thus entitled to purchase international telecommunication services from the carrier-of-carriers, or whether they constitute "end-users", and are thus disallowed from purchases such services.

It is submitted that for purposes of enhancing competition within the telecommunication industry to the benefit of the various players, consumers and the country as a whole, that VANS providers/ISP’s should be expressly entitled to purchase international telecommunication services from the carrier-of-carriers. We submit that a clause must be inserted to this effect that defines an "end-user" in such a way that it is clear that resellers of any telecommunication services (including VANS providers/ISP’s) are free to purchase international services, facilities and capacity direct from Sentech for purposes of integration into their infrastructure and subsequent resale to end-users. It must be clear that sale of international telecommunication services by Sentech is not restricted to Telkom and the SNO as the only customers.

"(i) . . . multimedia service" - This is defined as a digital broadcasting service combining various modes of communication such as interactive television, video-on-demand, and electronic transactions etc. It is expressly mentioned that this service cannot be provided by PSTS or Mobile Cellular Telecommunication Service ("MCTS") providers but no reference is made to VANS providers/ISP’s. Since reference is made to "electronic transactions" and VANS in section 40 of the Act are defined as "electronic transaction services", it is clear that VANS providers/ISP’s are allowed to provide this specific service. However, having regard to our submission in Clause 3 above, VANS providers/ISP’s not having been granted a multimedia license might imply that none of the services in this definition may be offered by them. It also conflates the broadcasting regime with that of communications. The definition of multimedia services furthermore creates a discrepancy in the Act as Sentech is being granted a license to provide services that fall under the VANS license terms (as per section 40). There is, however, no requirement in the Bill that Sentech obtain a VANS license and there is no reference to Sentech being restricted in the same way that VANS are (such as non-ownership of facilities, non-provision of voice services, etc.). The effect of this amendment would be to grant Sentech an unfair competitive advantage over the VANS providers/ISP’s in the competitive provision of data services.

To remedy the above problems, the requirement of a license to provide a "multimedia service" should be removed from this Bill. There should be no licensing requirements in order to provide the provision of "electronic transactions", "video-on-demand" and the other "multi-media services". If a license is provided to Sentech, however, this definition should be amended to provide that nothing in this definition or in the Bill is construed so as to limit the rights of VANS to provide any multimedia services and that Sentech shall have no competitive advantage over VANS providers/ISP’s in providing such multimedia services. Ideally Sentech should apply for a VANS license.

"(j) . . . public switched telecommunication services" - PSTS providers should not be defined as a party which provides any telecommunication services to the public on a subscription basis. Read together with the definition of "telecommunication services" as defined in the principal Act, such a definition would include VANS providers/ISP’s, and this cannot be the intention of the clause. Furthermore, it is unclear what purpose the reference to section 36 of the Act entails, and to what extent it either restricts or extends the rights of the PSTS.

"(l) resale" - The definition of resale is incorrect, as it implies that any party providing telecommunication services to the general public over leased facilities is engaged in resale. This would require any VANS provider/ISP to adhere to the restrictions of resale as per the Act and this is unduly restrictive. If the usage of the word "resale" has exclusive application to the Second National Operator ("SNO") (and later the third national operator (TNO)) in respect of its resale of PSTS services while leasing facilities from the incumbent PSTS licensee/s, then this should be specified and the definition amended accordingly.

"(n) telecommunication facility" - This definition expands the existing definition by including reference to ". . . equipment cabinet, rack . . . ". This will have the effect of requiring VANS providers/ISP’s and end-users to obtain certain customer premise equipment from the PSTS licensee and will not be allowed to source such equipment for itself. This will severely stifle development in the industry and will have a knock-on effect on the traditional providers of such equipment. The amendments to this definition should be removed.

"(q) . . . value-added network service" - In terms of the amended Section 40(2) a VANS is deemed to be an "electronic transaction service". This is a clear example where a finding by ICASA has been patently ignored. ICASA made a ruling on what constitutes a VANS and this definition is not reflected herein at all. Instead, a brand new term is introduced that is not defined and most certainly does not appropriately describe the various service forms that VANS may offer. It is submitted that ICASA’s definition must be restored.

"(q) . . . virtual private network" - This definition equates a VPN with a private telecommunication network. This is technically incorrect. A VPN is a software-implemented enhancement of a basic physical network that allows the service provider to segment the physical infrastructure of the network into "virtual" segments that give the appearance of private circuits to the end-user. In reality the physical network is one physical infrastructure that is shared by multiple customers. As such it is a type of managed data network service provided by a VANS provider. ICASA has also ruled that a VPN is a technology that may be used by VANS providers to provide VANS. This definition has been ignored by the Bill and thereby again erodes the authority that ICASA should carry. A PTN on the other hand is a dedicated physical line that connects two or more points of a single entity. There is no sharing of facilities or infrastructure as with a VPN.

The definition in this clause further defines a VPN as a PTN which "makes use of the public switched telecommunication network". The utilization of the public switched telecommunication network ("PSTN") by a PTN is not a distinguishing feature of a VPN. It is possible that a PTN itself can make use of the PSTN without constituting a VPN. This is recognised in section 41(1)(b) where it is stipulated that any PTN that interconnects with the PSTN (thus making use of the PSTN) requires a PTN license, whilst VPN’s which interconnect are exempt from such a license. If a VPN is simply a PTN that interconnects to the PSTN, the licensing requirements in this sub-section do not make sense.

Furthermore, a VPN is not a private network used "principally for the operation of that person" (as a PTN is defined in the Act), something which is not allowed to be resold. A VPN is created for resale. Defining a VPN as a type of a PTN is thus a contradiction in the Bill.

It is suggested that the definition for "VPN", as accepted by ICASA, should be considered by the Committee for adoption as the correct definition for "VPN". This definition is technically sound and correctly defines the service. The above contradiction would thus be resolved and there would be (correctly) no relationship between a PTN and VPN.

The inclusion of the promotion of "broadcasting" as a goal under the Act may be unconstitutional in light of the fact that the Broadcasting regime is the only legal framework which has the authority to regulate broadcasting in South Africa. The promotion and facilitation of broadcasting should thus be removed from this Bill.

The reference in this clause to "multimedia service" adds to the lack of clarity surrounding the new multimedia service. The amendment to this section creates the untenable situation whereby, for example, provision of pay-per-view and video-on-demand by Sentech would be unregulated by the Broadcasting regime and would be governed by the Telecommunication Act. It is submitted that these services are properly regulated by the current Broadcasting regime. Again, it is suggested that all references to "multimedia services" in this Bill be removed and that the Bill deal exclusively with telecommunication services.

In respect of the 1800 Mhz GSM and 3G radio spectrum bands, no reference is made in this section as to how such bandwidth and capacity is to be leased to VANS providers/ISP’s who may require such bandwidth to provide various value-added network services. Reference to such procedures needs to be incorporated into the Act in such a way that VANS providers/ISP’s are in no way prejudiced in the development and provision of value-added services via the 1800 Mhz and 3G radio spectrums and that facilities are available to them for such use.

S32A – This clause provides for a second national operator to provide PSTS services with effect from 7 May 2002, and mandates the Minister to conduct a feasibility study concerning the introduction of a third national operator with effect from 7 May 2005. In terms of sub-clause 8 where facilities are made available pursuant to section 44, it is stipulated that the holder of a PSTN license shall have the right of resale. It is implied that the right of resale is restricted to such holder of a PSTN license. This should be reworded to state that all licensees of telecommunication services (including VANS providers) should be entitled to resell the services (as per the definition in clause 1 of the Bill). This should not limit VANS providers to sell the enhanced value-added services based on the telecommunication services.

S32C – As stated in the Definitions, the term "carrier-of-carriers" needs to be redefined. It is unclear whether this term implies that Sentech has the right to sell international telecommunication services to VANS operators/ ISP’s who purchase bandwidth for resale to end-users. Any restrictions on resale to end-users should not affect VANS providers/ISP’s and Sentech should be able to compete with Telkom and the SNO for all resale customers (excluding end-users). Any restrictions on Sentech in this market would have negative anti-competitive implications for the industry insofar as international services are concerned, and this will ultimately affect consumers and the industry at large.

The effect of the definition of "multimedia service" grants Sentech the right to provide certain VANS services without the restrictions imposed on other VANS, thus allowing Sentech an unfair competitive advantage. This clause should be amended to remove the granting of a multimedia license to Sentech.

This amendment adds "multimedia services" to the kinds of licenses that can be granted in terms of the Act. The concept of a "multimedia services" license should be removed from the Bill entirely, as stated above.

It should be clarified what is meant in the existing provision of sub-section (2)(a)(v). It is unclear which "other telecommunication services are prescribed for the purpose of this sub-section". It should be expressly mentioned that this section has no application to PTN, VANS and Small, Medium and Micro Enterprise ("SMME") licensees.

The effect of the amendment to sub-section (2)(b) is as follows. Prior to this amendment, in terms of section 34 it was clear that the granting of a PSTN license did not include the provision of mobile cellular telecommunication services, national long-distance telecommunication services, international telecommunication services, VAN services, or the supply/installation of Customer Premise Equipment (CPE). This sub-section has been replaced with an entirely different sub-section 2(c), which makes no reference to such exclusion from a PSTN licence.

Furthermore, this new sub-section 2(c) requires the Minister, prior to issuing invitations to apply to potential licencees, to "consult with the Authority" in respect of "evaluation criteria" and "weighting factors" to be considered by the Authority. The effect of this amendment is two-fold. Firstly, the Minister gains new powers in determining the criteria for the issuing of Invitations To Apply ("ITA"), something which did not exist in terms of the Act prior to this amendment. Secondly, the amendment removes the restrictions on PSTN licensees which prevented such licensees from providing mobile cellular telecommunication services, national long-distance telecommunication services, international telecommunication services, VAN services, or the supply / installation of Customer Premise Equipment (CPE) in terms of the PSTS licence. It begs the question of what is implied by this amendment? It is submitted that the intent of the legislature surely cannot be to grant a PSTS licencee the right to provide these additional services in terms of its PSTS license. The governing principle must be that there is complete equality across-the-board between the various telecommunication service license-holders, and there should be no right, implied or otherwise, allowing a PSTS licensee to provide other services in terms of the PSTS license. We submit therefore that the existing clause 34(2)(c)(i) – (iii) should thus be re-instated.

34(3)(c) should not be deleted. It should remain mandatory for ICASA to hold hearings in respect of the license applications for major licensees, including the PSTS and MCTS providers. In accordance with this, sub-section 5 should also not be deleted. To flout this requirement goes against international trends and fair administrative procedure. Furthermore, it must also be clarified what the effect is of the substitution of the word "shall" with "may" in clause 34(3).

The exclusion in 34(b)(ii) should not apply to any confidential information that reaches the public domain through breach of trust or breach of any existing common-law or contractual duty to maintain the information in confidence.

Section 35(1)(a) reflects the above amendment whereby oral hearings in respect of license applications are no longer to be held. There is (in the amended section) thus no longer a reference to "any representations and further information or evidence tendered" but only to "any written submissions that may be called for by the Authority." As mentioned above, oral hearings should be restored and the existing sub-section in this clause requiring "any representations and further information or evidence tendered" should be re-instated.

The amended section 35 removes the authority to grant licenses from ICASA and grants such authority to the Minister. The only role played by ICASA in terms of the amended clause is that of making recommendations to the Minister. ICASA is effectively disempowered for important regulatory activity. This may be both unconstitutional and a breach of South Africa’s WTO obligations which require the Regulator to be independent and not under political control of the Executive. It is submitted that the old provisions of section 35 of the Act should be reinstated and ICASA should be granted the authority to grant licenses without consultations with the Minister. The third cellular licensing debacle aptly illustrated how easily perceptions of interference can arise. This easily occurs when there are overlapping and complicated roles for the Minister and the Authority in the licensing of services and new entrants. We strongly urge you to give the regulator full ability to carry out internationally accepted practices of licensing, which inter alia, facilitates easier and more efficient monitoring of licensing obligations by the regulator.

Section 35(5) mandates the Authority to grant "due preference for up to 30% of such equity ownership or such higher equity ownership percentage as may be prescribed." It is stated in this sub-section that this applies to all applications "for a license in terms of this Act." It is implied that this applies equally between the major licensees (PSTS and MCTS providers) and minor licencees (VANS, SMME’s and PTN licensees). Insofar as PTN licensees are concerned, the equity requirement should have no application, as the service is to be provided internally and not for profit. In respect of VANS and SMME licensees, the equity requirement should likewise not apply. A requirement of 30% HDC ownership may effectively remove managerial control from VANS and SMME’s and would have a negative effect on many small and medium sized businesses in the industry. This requirement should therefore have exclusive application to the major licencees and this clause should be amended accordingly.

Clause 10 Insertion of Section 35(A) in the Act

The newly inserted section 35(A) provides that notwithstanding sections 34 and 35, the Minister may utilise other methods of licensing for telecommunication services "in specific instances". Such instances are not specified in the Act. This constitutes the undue granting of discretionary authority to the Minister to apply new procedures without the confines of guidelines and due process. In no circumstances should the Minister be given carte blanche to determine "the manner in which applications may be made and the licensing terms that will apply", in respect of either section 34(2) licensees (major licenses) and other licenses. The granting of this authority to the Minister would constitute a grave erosion of the power of ICASA, and would cast uncertainty over the licensing application methods and terms and conditions and as to the due process of these procedures in general. This would undoubtedly have a major negative impact on the telecommunication industry. If it envisaged that at some time in the future the auctioning method of radio-spectrum sale or the legislative set-aside of strategic partners may be the best way to proceed in granting telecommunication licenses these methods should be specified in S35(A) and guidelines and due process provisions should be specified in this section.

The reference in S36A(1)(h)(iii) to the "provision of private telecommunication networks, including virtual private networks" is incorrect and must be amended. Whilst it is correct that in the case of PTN’s and VPN’s the PSTS provider will be responsible for the provision of facilities and certain equipment, it is incorrect to state that PTN’s include VPN’s. This has already been pointed out under the Definitions above, and is made clear in the submission to ICASA concerning this subject that the two are not to be equated on any basis whatsoever for purposes of this Act or any regulations in terms thereof. Rather the reference to VPN’s should be deleted and should instead be inserted in (iv) below, after the words "value added network services", as VPN’s have been recognised by ICASA in terms of Section 27 of the Act as VANS.

Clause 15 Amendments to Section 40 in the Act

The amendment to sub-section 40(2), whereby the term "value-added network services" is deleted and replaced with "electronic transaction service" is incorrect for a number of reasons. Firstly, the references to VANS in sub-section 40 (1) and 40(3) – (5) remain unchanged. This may mean that Telkom continues to be allowed to provide VANS as defined in its VANS license and not "electronic transaction services". The remaining references in this amended section 40 are to VANS and not to "electronic transaction services". This may create a discrepancy within this section which will ultimately lead to confusion and lack of clarity. The question beckons why the name is changed if the industry had a proper working name and definition?

Secondly, the usage of the term "electronic transaction services" does not define VANS. VANS are any value-added services that are provided in respect of networks. Such services do not necessarily include transaction services (though these may be provided inter alia), and to limit the definition of VANS to this type of service is misleading and factually incorrect. It is submitted that the definition of VANS as submitted to ICASA by ISPA (alternatively, the definition of VANS by ICASA) is the correct definition of VANS. The Act should therefore be amended to define VANS as per this correct definition either in section 1 under the Definitions or in section 40(2).

While dealing with VANS it is of utmost importance to note that virtual private networks have been expressly recognised by ICASA in terms of section 27 of the Act as a technology that may be provided by VANS providers. As such, virtual private networks should be expressly included under the definition of VANS and removed from section 41 (see below).

It is submitted that the perpetuation of the ban on voice-over-IP provision by VANS providers, as contained in the amendment to section 40(3), should be changed for a number of reasons. Firstly, the introduction of S 40(3)(b) which allows the SNO and "under-serviced area" licensees to provide voice-over-IP without restrictions, but maintains the prohibition in respect of all other VANS providers / ISP’s is unfair. The legislated discrimination between these two groups is unfair and provides for the enactment of anti-competitive behaviour, as a group of service providers are prohibited from providing a particular service, whilst its direct competitors (PSTS providers and SMME’s) are allowed to do so.

Furthermore, the continued prohibition on voice-over-IP in general is itself unconstitutional. It was envisaged in the Telecommunication White Paper which preceded the Act in 1996 that whilst Telkom enjoyed a monopoly in the provision of services in the PSTS arena, it was proper that the provision of voice services be restricted to Telkom. There was no intention that such a prohibition would remain in place after competition was introduced. In terms of the Bill, Telkom, the SNO, and SMME’s (in terms of section 40A) are now allowed to provide voice-over-IP services without restriction. They are thus able to provide a bundled service including traditional voice services and VANS/data services. They will be able to price this more competitively and this seamless offering will be far more attractive for a customer in the marketplace than a data-only offering which will require another service provider for other telecommunication services.

To prevent the above from occurring, the general prohibition on voice-over-IP should be removed. Sub-clause 40(3) should be removed and voice-over-IP should become a fully competitive service under this Act with effect from 7 May 2002.

As mentioned in the preceding paragraph, SMME’s should not be entitled to provide voice-over-IP whilst VANS providers / ISP’s are prohibited from doing so. Either VANS providers/ISP’s should be allowed to provide voice or sub-section 40A(3) should be amended to remove this unfair advantage.

A PTN is defined as any telecommunication network used by a person "principally or integrally related to the operations of such person." The amended 41(1)(a) provides that any person utilizing a PTN shall not be required to obtain a PTN license for this service, unless the PTN interconnects at any stage to the telecommunication system of a PSTS licensee (in section 41(1)(b)(i)). This portion of the section is acceptable. However, section S41(1)(b)(ii)) goes on to provide that a VANS licensee may operate a VPN without obtaining a PTN license. As already mentioned several times above, there should be no reference whatsoever to a VPN in this section 41 which deals exclusively with PTN’s. A VPN bears no technical or operational similarity to a PTN and has been expressly recognised by ICASA as a VANS service. As such it should be removed from this section 41 and referenced in section 40 above under VANS. Together with the required change to the definition in 1 above, this section would then reflect the situation accurately.

In section 41 as it stands there is further lack of clarity as to licensing requirements for an interconnected PTN. A VPN is defined in the Definitions solely as a PTN that makes use of the PSTN. If so, in terms of section 41(1)(b)(ii) the provision of a VPN by definition requires the issuing of a PTN license. This is unclear as it contradicts section 41(1)(b)(i). It is suggested that is resolved by deleting the newly inserted section 41(1)(b)(ii), together with amending the "VPN".

The reference in the new sub-section 44(3) to the "provisions of section 43(1)(b),(c) and (e)" is incorrect as there is no sub-section 43(1)(e). This should be replaced with a reference to the "provisions of section 43(1)(b),(c) and (d)".

In respect of sub-section 44(7)(b) it is suggested firstly that as per the guidelines of ICASA (then SATRA, attached, marked "C") Telkom should be required to commence unbundling the local loop immediately upon commencement of competition. In most international jurisdictions the introduction of competition has been coupled with the unbundling of the "local loop" and there is no reason for it to be otherwise in South Africa.

Should it be decided that unbundling is not to commence with immediate effect, at the very least the Act should provide guidelines now as to how the unbundling of the "local loop" is to proceed after the two-year period referred to in section 32A(2). It is imperative that once a services-based competitor is allowed to compete, that Telkom be required to unbundled the "local loop" and the provision of unbundling guidelines in this Bill would go a long way towards clarifying this process.

An important provision that is absent from the Bill is a section dealing with the prohibition of unilateral action being taken by any licensee against a customer without strict adherence to the provisions of the Act. Such unilateral action in the past by various parties has been responsible for an unlawful denial of services to such parties. A section is required which stipulates expressly that any provision of services under the Act cannot be unilaterally withheld in the sole discretion of the providing party but until such time as the Authority (as such other party enjoying jurisdiction over the matter) determines that the licensee is entitled to terminate and/or suspend services, it shall not be entitled to do so.

In respect of clause 45(3), it is provided that "… all public schools … shall be entitled to a 50% discount …" on all Internet related access costs, including both dial and leased line connectivity. This wording makes it unclear as to how this "discount" is to be funded. Use of the word "discount" implies that the service provider is to provide the school a discount on its standard charge, and is in effect required to subsidize the school. However in section 66(1)(c) reference is made to the provision of Universal Service Fund ("USF") fees being allocated, inter alia, towards "public schools . . . for the procurement of internet services . . .", implying that Internet services in schools are to be funded from the USF and that the cost to Internet service providers of any "discounts" provided by schools shall be reimbursed by the USF. To reflect this intended meaning, the words "… all public schools shall be entitled to a 50% discount" should be substituted with the words "all public schools shall be entitled to a 50% subsidy by the Universal Service Funds in accordance with the provisions of section 66(1)(c) below, on-….".

It is submitted that if the intention of the Act is indeed to require that Internet service providers are required to pay the cost of the 50% discount, this is unfair as ISP’s are already required in terms of the Act to contribute towards the USF, part of which goes towards education. This constitutes a "double-taxation" and would unfairly prejudice ISP’s.

Anti-competitive behaviour in the telecommunication industry has been pervasive since the inception of the Act. Provision must be made that any due process in terms of the Act (such as mediation and arbitration, hearings and appeals, etc) should not be at the expense of the perpetuation of anti-competitive behaviour against any party. This is especially important during the managed liberalisation process during which competition is limited and there exists potential abuse under a national fixed-line duopoly. Proper provision must be made in terms of section 53 that parties can make use of any relevant forums for the prevention of anti-competitive behaviour, including the Competition Commission.

The drafters of the Bill are to be commended for the creation of an alternative dispute resolution mechanism dedicated towards the telecommunication sector. This section is, however, in need of clarification. Sub-section 53A(1) states that the Minister will "at the request of the Authority and any other party to an unresolved dispute establish a Mediation and Arbitration Committee…". It is implied that any unresolved dispute in terms of the Act referred to the Minister by the Authority or any other party is capable of adjudication by this Committee. 53A(4)-(6) refers to unresolved disputes relating specifically to any "licensing agreement, any terms or conditions thereof, and any matter arising therefrom." It is unclear if the intention in this sub-section is to restrict the operation of these provisions to such disputes surrounding the licencing agreements exclusively. It is submitted that this Committee should have jurisdiction over any and all disputes arising from this Act and the wording must be amended to reflect this.

This amendment constitutes a further example of the erosion of the Authority’s regulatory authority under the Act, and the unacceptable widening of the Minister’s discretion within the regulatory arena. Whilst it is commendable that the Universal Services Agency ("USA") is to operate apart from ICASA, thus freeing up the resources of an over-strained and under-resourced regulator, it is unacceptable that the Minister should be solely responsible for the appointment of the members of the USA, without even any accountability to Parliament for such appointments. It is submitted that the better alternative is to have these members appointed by ICASA, and such members should then operate independently of the Minister.

Pursuant to the comment in respect of Clause 23 above, this amendment it undesirable. This sub-section should remain unchanged with its reference to the Authority.

This clause lessens the time period for comments on regulations and eliminates entirely the requirement to hold hearings in respect of such regulations. It is submitted that the 90-day time period previously provided is the correct amount of time necessary for such comment, and its reduction to 30 days together with the elimination of public hearings may be unduly prejudicial to the parties that may be affected by the regulations and goes against international best practice. It may also fall afoul of what is deemed to be reasonable in respect of administrative law in respect of such proceedings. It is suggested that the 90-day period, and the requirement for public hearings be reinstated.

The insertion of a new sub-section (c) in this section is incorrect, as the sections of the Act this amendment intends to change are no longer part of the Act and were repealed by Section 37(1) of Act 97 of 1998. This amendment must be removed.

Amendments to Act No 13 of 2000 – Independent Communications Authority of South Africa Act, 2000

The general effect of the amendments to this Act are the further erosion of the authority of Parliament, and the risk of the increased public perception of lack of independence of the Authority.

The amendment to section 5 of the ICASA Act, whereby the words "on the recommendation of the National Assembly" are deleted. The deleted words should be reinstated.

The insertion of section 1A further increases the authority of the Minister of Telecommunications at the expense of that of Parliament. The shortlist of members of ICASA is to be drawn up by a committee appointed by the Minister. The regulatory authority is thus to be constituted exclusively by the Executive with minimal input from the National Assembly. This may create a perception of non-independence of the regulator and may call into question South Africa’s adherence to its WTO obligations (referred to above) concerning the independence of the regulator. This amendment should thus be abandoned.

The deletion of the words "Subject to subsection (2)" at the start of section 8 removes the supervisory role of Parliament in dismissing members of ICASA. These words should be reinstated.

Greg Massel and Edwin Thompson

ISPA Co-chairs