SOUTH AFRICAN VALUE ADDED NETWORK SERVICES ASSOCIATION

REPRESENTATIONS IN RESPECT OF THE TELECOMMUNICATIONS AMENDMENT BILL (B 65-2001)

The South African Value Added Network Service Association ("SAVA") is a voluntary membership association, not for gain, formed to represent the interests of licensed value added network services ("VANS") providers as well as users. As stakeholders in the telecommunications industry, VANS providers and users represented by SAVA have an interest in making representations to the Communications Portfolio Committee ("Committee") on the Telecommunications Amendment Bill (B65-2001) ("Bill").

SAVA has done it best in the short period of time in which to comment on this proposed legislation and hopes that the Committee finds these representations useful. SAVA, however, is concerned about the haste in which this legislation is being pushed through Parliament. This is especially so because in respect of a great majority of the proposed amendments, the industry has not been consulted on. What is surprising in this of course is that the Ministry of Communications has just gone through a consultative process with regard to policy directions that have now been issued in terms of the existing Act, but many of the issues were not raised in that process. It does however appear that certain individual players in the industry, namely Telkom, have, however, been consulted. It appears so in that many of the decisions of the independent regulator that have been held against Telkom, have been overturned in this Bill. Notably, important to the VANS industry are the South African Telecommunications Regulatory Authority’s ("SATRA") decisions that Internet protocol is a VANS, ICASA’s finding that a virtual private network ("VPN") is not a private telecommunications network ("PTN"), and ICASA’s determination of the appropriate definition of VANS.

We urge this Committee not to rush through this Bill in its current incarnation. As the Committee will see there are serious problems with certain provisions of the Bill as they currently are drafted. Should Parliament pass this legislation as it is written, not only will it be open to constitutional and other challenges as are detailed later in these submissions, but it also may be challenged because the consultation process was not adequate. Thus, we urge this Committee to carefully consider re-drafting the Bill in line with the representations that are made to it, and to call for further representations on such re-draft. In any event, SAVA would like to reserve its right to make further representations to Parliament after the hearings should additional issues arise that require comment.

  1. SUMMARY OF REPRESENTATIONS
    1. SAVA’s representations are based on a number of separate legal and policy arguments, surrounding South Africa’s World Trade Organisation ("WTO") commitments regarding multilateral trade in telecommunication services, the Constitution, Government’s policy on telecommunications articulated in the White Paper on Telecommunications, the current Act and the objects thereof as well as subordinate legislation such as regulations, policy directions and licenses. These representations also rely on several important findings made by the independent regulator, ICASA, over the past several years.
    2. These submissions are structured so that the first section deals with issues arising under South Africa’s WTO commitments, the following section deals with issues arising under the Constitution, and the last ones deal with policy issues. However, as the Committee will see, there are many instances where a proposed amendment will conflict with South Africa’s WTO commitments, the Constitution as well as being in conflict with Government’s policy. Bold headings are used to highlight issues. Also attached hereto is a glossary of acronyms used in these submissions and a summary schedule of the changes that SAVA is suggesting for the Bill.
    3. The issues that we would like to highlight as most important for the industry relate to the cumulative impact of the amendments narrowing the definition of VANS and expanding the definition of PSTS, which effectively destroys the competitive VANS industry in South Africa.
      1. Virtual private networks. The proposed definition reverses the independent regulator’s ruling that a VPN is NOT a PTN. It is written specifically to set out what Telkom’s arguments have been to the contrary. This definition read with the proposed expanded definition of PSTS and the addition to section 41, namely (1)(b)(ii), will mean that that VPNs may not be provided like VANS currently provide them, over shared facilities. This will be disastrous for the industry and for South Africa as a country. This issue is discussed in greater depth in the section hereunder dealing with WTO commitments.
      2. Definition of VANS. The proposed replacement of the phrase "value added network services" with "electronic transaction services" will have the effect of severely limiting what VANS providers are allowed to provide indeed taking away vested rights to provide certain types of VAN services. VANS is the appropriate term in line with international best practice and should not be changed. This proposed amendment, coupled with the fact that the accurate and appropriate definition of VANS proposed by the independent regulator after extensive consultation with the industry has NOT been included in the Bill, will result in the destruction of the competitive VANS industry. This issue is also discussed in greater depth in the section hereunder dealing with WTO commitments.
      3. Voice over Internet Protocol/VANS. The addition of the permission for Telkom, the SNO and under-serviced area licensees ONLY to provide voice over Internet protocol is problematic for several reasons. It is open to many interpretations, which will lead to unnecessary litigation. One interpretation is that all other VANS licensees are just being discriminated against, which is a violation of South Africa’s WTO commitments and the Constitution. Another interpretation is that Telkom and the SNO can provide voice over Internet Protocol in terms of their PSTS licenses, which would mean that the Bill would be overturning SATRA’s ruling that Internet protocol is to be provided in terms of a VANS license and not a PSTS licence. That decision has led to a dynamic Internet service provider industry that would be destroyed. It is also inappropriate because it introduces technology specific legislation that in this era of convergence is highly problematic. Finally, the continued bar on providing voice over VANS will be unconstitutional after the end of Telkom’s exclusivity period. This issue is also discussed in greater depth in the section hereunder dealing with WTO commitments.
      4. In this regard, SAVA is of the view that VANS providers would expect to incur a universal service obligation in terms of service provision and/or contributions to the universal service fund. Indeed, all telecommunications providers already contribute to universal service fund in terms of section 67 of the Act. Further, allowing VANS providers to carry voice will in no way turn them into PSTS operators. Thus, SAVA would expect the obligations to the universal service would be commensurate with their status as VANS providers.
      5. Definition of telecommunication facility. The proposed definition expands the definition of telecommunication facility, which will have the consequence of allowing PSTS licensees to argue that customer premises equipment is included in what VANS and PTN providers must obtain from Telkom (in terms of section 44), reversing the current position that the customer premises equipment market segment is fully competitive. This issue is discussed in greater depth in the section hereunder headed Government Policy.
      6. Definition of PSTS and PSTN. These definitions expand the boundaries of PSTS beyond basic services provided to the general public, effectively narrowing the boundaries of what VANS providers can do. This read with the proposed provisions regarding VPNs, voice over Internet protocol and the definition of VANS effectively destroys the industry. This issue is also discussed in greater depth in the section hereunder under the heading Government Policy.
      7. Independent Regulator. Finally, we would like to highlight the fact that the numerous amendments overturning rulings of ICASA, ignoring decisions made by it and stripping the regulator of many powers and functions, will have the effect of killing the effectiveness of the regulator to control the anti-competitive conduct of dominant players.
    4. SAVA is alive to the conflicting policy positions of government – it is necessary to create a regulatory environment so the initial public offering for Telkom will yield maximum benefits for South Africa and at the same time it is important that a clear and stable regulatory environment be created to encourage competition and thus access and universal service to communications.
    5. SAVA’s views expressed herein are not opposed to either policy objective. Indeed, the industry believes that the Bill will not achieve either of these goals and only benefit individual entities in the industry (notably, Telkom) to the detriment of the industry and ultimately South Africa as a whole. SAVA urges Parliament to take progressive decisions in respect of these matters and to enact legislation that will be instrumental in creating and maintaining a dynamic industry that will lead to greater access to a wide range of communications for all South Africans.
    6. However, should the Bill be passed as is, the industry will not hesitate to make the necessary challenges to it whether before the Constitutional Court, the WTO or any other appropriate forum. The industry believes that it must do so in order to protect the industry for the benefit of South Africa as a whole.
  2. WORLD TRADE ORGANISATION COMMITMENTS
    1. South Africa is a signatory to the General Agreement on Trade in Services ("GATS"). Generally, GATS provides that South Africa (or any other country) cannot treat service suppliers from other countries any less favourably than it treats service suppliers from South Africa. This is generally known as the most favoured nation principle.
    2. South Africa is also subject to the Annex on Telecommunications, which is attached to the GATS. The import of the Annex is specifically to require access to basic public telecommunications facilities on a non-discriminatory basis. In other words, those essential basic telecommunication facilities which usually the monopoly participant provides to other services providers, must be provided to all services providers, whether they are from South Africa or not, on a non-discriminatory basis. The categories of other service providers that have such guaranteed access are those providing services in the areas set out in the schedule of commitments made by individual countries. South Africa has made specific commitments with regard to non-basic telecommunications services, in particular with regard to VANS. Thus, in accordance with South Africa’s schedule of commitments read with the Annex on Telecommunications and GATS, the provider of telecommunications facilities (either Telkom or Telkom and the second network operator ("SNO")) cannot discriminate in favour of its own VAN services or in favour of any other South African VANS providers, to the detriment of other, foreign, VANS providers. These provisions became effective in 1994 and are still in effect.
    3. There is also an Annex on Negotiations on Basic Telecommunications attached to the GATS. This eventually lead to the Fourth Protocol on Basic Telecommunications, which Protocol now forms part of the GATS. South Africa is a signatory to the Fourth Protocol and has also made specific commitments (in addition to its earlier commitments on VANS) on moving to a competitive market for basic telecommunications. In addition to those commitments relating to opening up the basic telecommunications market segment to competition, South Africa made certain commitments with regard to establishing an appropriate regulatory environment (which are contained in the Reference Paper). These provisions became effective in February 1998.
    4. Certain of the proposed provisions of the Bill contravene South Africa’s commitments to the WTO – including commitments relating to the most favoured nation principle, access to basic telecommunication facilities, opening up of the basic telecommunications market to competition and regulatory principles.
    5. WTO commitments relating to VANS
      1. Virtual Private Networks. With regard to the issue of VPNs, SAVA strongly urges Parliament not to enact the provisions as they are currently formulated. The Bill adds a definition of "virtual private network" ("VPN"). It defines it to mean a PTN, in other words a private telecommunication network.
      2. This proposed legislative definition is fundamentally flawed from a factual point of view. It is like trying to set out in legislation that a dog is a cat – legislating it cannot make true, what is not.
      3. The proposed definition of VPN is also inconsistent with the definition of, indeed the very concept of, a PTN, and it is inconsistent with the concept of VANS.
      4. A PTN is a network where a company puts together its own telecommunication network (using telecommunication facilities leased from a PSTS licensee because of that peculiar restriction set out in the Act) and uses that network solely for itself. It is private – meaning it cannot be shared with others, it cannot be sold to others and the use of it cannot even be given away to others. If it could, it wouldn’t be private.
      5. A "virtual" private network on the other hand pre-supposes a shared network – otherwise there would be nothing "virtual" about the privateness of the network.
      6. Thus, ICASA was quite correct to find that a VPN is not a PTN in its findings released after extensive investigation and consultation with the industry and experts on the matter. ICASA’s decision in this regard was published in the Government Gazette 22349, Notice 1414 dated 1 June 2001 (and can be found at www. icasa.org.za/satra/publications2001.cfm)
      7. ICASA concluded in its findings – "The Act clearly distinguishes between a PTN and a VANS. Certain desirable service characteristics (normally associated with a PTN) can be achieved by software based technological intervention in the operation of any network (PTN or VANS) and is commonly referred to as a VPN. However, the VPN has no physical substance and is only manifested by the service characteristics it confers on the VANS." ICASA went on to state – "While the raison d’etre for the application of VPN techniques to a VAN is to create services that have some of the attributes associated with PTN, this does not per se mean that the network to which it is applied ipso facto becomes a PTN. Regardless of the stated similarities to a PTN, such services are provided on the Value Added Network in shared mode to many users."
      8. A virtual private network, according to ICASA – "is neither a MDNS or a PTN but is manifested as desirable service characteristics resulting from software based technological intervention in the management, configuration and operation of a VANS, which is a legal service in terms of section 40 of the Act, particularly section 40(4)(b)."
      9. It is accurate that it is the VPN technology that is added to a network to make end users perceive the part of a shared network they are using to be private. Thus, it is categorically inaccurate to state that a VPN is a PTN.
      10. We urge Parliament not to make the mistake of overturning the decision of ICASA in this regard.
        11.
      11. The inclusion of 41(1)(b)(iii) at first glance, appears to eliminate the objections of SAVA. However, a careful reading of the provision read with the definition of VPN and the expanded definition of PSTS, means that VANS providers can manage a PTN (which anyone can do currently without any license) but cannot provide an actual telecommunications service.
      12. This is just one way in which the bill is attempting to contract the definition of VANS and expand the definition of PSTS. This is contrary not only to South Africa’s commitments regarding VANS made as long ago to the WTO as 1994 but also a violation of the more recent commitments made in 1998 regarding basic telecommunication services. It is also unconstitutional.
      13. Finally, the proposed definition of VPN will create further uncertainty because it is not clear. It states that a VPN is a PTN that "makes use of public switched telecommunication network or other telecommunication facility". It is not clear how, if at all, this is different from other PTNs. Also, it is unclear what is the difference between making use of the PSTN and making use of other telecommunication facilities. The PSTN is defined to mean the system of the PSTS licensee used to provide PSTS. On the other hand, PSTS is defined to include telecommunication facilities used for the provision of private telecommunication networks, including virtual private networks.
      14. SAVA strongly urges the deletion of the definition in the Bill. We also suggest a deletion of the phrase "including virtual private networks" found in the proposed definition of PSTS. Finally, we suggest the deletion of the proposed additional section 41(1)(b)(ii) of the Act.
      15. ICASA has ruled on this matter. The ruling is logical from a technical and operational, as well as regulatory and legal point of view. We urge Parliament not to overturn such a ruling only to replace it with unclear and confusing provisions, which can only have the effect of causing uncertainly in the industry further harming our ability to encourage investment in South Africa .
      16. To do otherwise would result in a WTO commitment violation, a constitutional violation, and a departure from Government’s policy. Finally, it is bad for the industry, ultimately discouraging investment and even forcing current investment to be abandoned. It will kill the VANS industry and the benefits therefrom to the country.
    6. Same treatment for all VANS providers – most favoured nation principle
      1. Voice over Internet Protocol/VANS. The new section 40(3)(b) to the Act gives Telkom, the SNO and SMMEs (in terms of the new section 40A) the right to provide voice over Internet protocol. This, in turn, in terms of the new definition of voice over Internet protocol, means that Telkom, the SNO and certain SMMEs may provide voice over the Internet. ICASA’s predecessor, SATRA, determined in 1997 that the provision of Internet access is a VANS. It indeed determined that the provision of Internet protocol is to be provided in terms of a VANS license and not a public switched telecommunication service ("PSTS") license. See Pronouncement P-0001 dated 14 October 1997.
      2. Therefore, Telkom, the SNO and SMMEs would be given the exceptional right to provide voice over VANS. This, given the maintenance of the restriction of providing voice over VANS for all other providers (in the current section 40(3)), including companies coming from jurisdictions outside South Africa, is a serious contravention of the most favoured nation principle of GATS.
      3. The White Paper on Telecommunications Policy states about this matter – "Advances in digital voice compression make voice telephony by the Internet and other means a likelihood. These global forces cannot be ignored, and this policy must be realistic in accommodating them. Furthermore, this policy must be consonant with South Africa's general trade policy and its specific obligations as a signatory to the WTO."
      4. The best way to eliminate the problem is to change the Bill by deleting section 15(b) and the proposed definition of "voice over internet protocol" and to add a section deleting from the Act section 40(3) which is the restriction for all VANS providers with regard to the carrying of voice, alternatively providing a date to be fixed in respect of the provision of voice over VANS, which date should coincide with the ending of Telkom’s exclusivity period. Similarly, we urge Parliament not to remove from the Act, the reference to the fact that the requirement that VANS providers obtain telecommunication facilities from PSTS licensees, will fall away at some time in the future. This deletion is currently effected in section 15 of the Bill.
      5. The only other way to eliminate what would otherwise be a contravention of South Africa’s WTO commitments is to delete section 15(b) of the Bill and the new definition of "voice over internet protocol" and not to add a section amending section 40(3) of the Act by deleting the restriction for all VANS providers with regard to the carrying of voice. This, however, is problematic for at least three reasons.
        1. First, due to technological advances, it is extremely difficult, if not impossible, for the regulator to enforce the restriction because the distinction between voice packets travelling over Internet protocol and data packets travelling over Internet protocol is difficult to distinguish.
        2. Second, the argument that the restriction should be left in order to continue the protection of Telkom’s monopoly profits is misplaced. In line with the White Paper, the time for such protection is to end in 2002, latest 2003 (although Telkom has not applied for the sixth year in terms of its license). This policy is set out in the timeline for liberalisation included in the White Paper as FIGURE 1. Thus, there is no good policy reason to continue the restriction. In this regard, Parliament also should take note of what the International Telecommunication Union has stated about voice over Internet protocol, in recognising the economic benefits thereof (See the Report by the Chairman, World Telecommunication Policy Forum, 2001, which can be found at www.itu.int/ITU-D/e-strategy/internet/iptelephony/Documents/wtpf2001/Chaireport.html#OPINIONA)
          "that the deployment of IP-based networks and applications has the potential to benefit users, industries, and the economy at large, because it fosters technical and market innovation, and diversity and growth in the economy; that not forgetting the potential of upgrading of existing communication networks through use of other new technologies; that these new enhanced communication capabilities may be essential for the development of other service sectors, and for the production and distribution of goods in the global economy as a whole; that IP-based applications are likely to  become more readily available at cost-effective prices, for the benefit of all users and industries, particularly when supplied under competitive market conditions in which multiple, alternative sources or means are available to address user and industry needs; [and] that IP Telephony and other IP-based applications could be viewed as a significant opportunity for all countries to respond to the convergence of information and communication technologies and evolve their networks in order to expand the availability and use of a broader range of modern communication capabilities".
        3. Third, the continued restriction may be unconstitutional. A monopoly in the telecommunications industry necessarily encroaches upon the right to receive and impart ideas. See Retrofit (Pvt) Ltd v Posts and Telecommunications Corporation (Attorney-General of Zimbabwe Intervening) 1996(1) SA 847 (ZS) and T S Masiyiwa Holdings (Pvt) Ltd and Another v Minister of Information, Posts and Telecommunications 1998(2) SA 755 (ZS)). The question in the South African context is whether the limitation of the right is justifiable. The only argument that can be made for its justification is the protection of Telkom’s monopoly profits during the period of exclusivity. Once the period of exclusivity has ended, that justification falls away. Accordingly, we urge Parliament to remove the restriction by no later than the lapse of Telkom’s exclusivity period, which is in May 2002.
      6. We also note that it would be imprudent to include an exception to the restriction of voice over VANS for a particular type of technology, namely Internet protocol. This would have the result of artificially encouraging Telkom, the SNO and SMMEs to use internet protocol technology as opposed to other technologies that might be more appropriate in the circumstances but do not share the same exceptional niche, such as frame relay technology or ATM technology.
      7. We have been advised that there could be a possible alternative interpretation of the new section 40(3)(b) of the Act, namely that Telkom, the SNO and SMMEs may provide voice over Internet protocol in terms of PSTS licenses instead of VANS licenses. That would mean that Internet protocol could be provided in terms of a PSTS licence instead of a VANS licence. If that were to be the correct interpretation, the consequence would be the overturning of SATRA’s ruling that the provision of Internet protocol is a VANS and not a PSTS.
      8. This would not be consistent with other provisions of the Act in respect of which SATRA has already ruled. Furthermore, the provision is anything but clear in this regard and if indeed that is the intention of Parliament, then it should be clearly spelt out for the industry. The reason the industry must know clearly what is intended, is because if that is the correct interpretation of the provision, then the consequence would be that all Internet service providers ("ISPs") will immediately, after the coming into force of the Act, be in violation thereof. Such a consequence will have serious economic consequences on the ISP industry as well as the country as a whole. Further, it would be a violation of South Africa’s specific commitments to open up its VANS industry in 1994 to competition, to place what was formerly considered and provided as a VANS, now, in 2001, into the category of PSTS. That is the effect of the Bill.
      9. We urge this Committee not to attempt to create an extraordinary exception for Telkom, the SNO and SMMEs and not to attempt to place something that is clearly and has been decided by the specialist regulator to be a VANS into the category of PSTS. Both of the actions would violate South Africa’s WTO commitments and also would not be good for the industry or investment in the country.
      10. Definition of VANS. For the same reason that moving what was a VANS to the category of PSTS is a violation of South Africa’s schedule of commitments regarding VANS, the replacement of the term "value added network services" with "electronic transaction services" in section 40 of the Act, is also a violation of South Africa’s commitments.
      11. This proposed amendment in section 15 of the Bill must be removed.
      12. We urge Parliament to amend the Act to include the definition of VANS suggested by ICASA, which was drafted after several extensive consultative processes in terms of the Act. We draw to the attention of the Committee that the amendments currently set out in the Bill will be in direct opposition to what ICASA, the specialist regulator, found after such consultations. We therefore, suggest the addition of ICASA’s proposed definition of VANS to be included in the Bill. It reads as follows:

‘Value-added network service’ means a telecommunications services(s) provided by a person over a telecommunications facility, which facility has been obtained by that person in accordance with the provision of section 40(2) of the Act, to one or more customers of that person concurrently, during which value is added for the benefit of customer(s). Such added value can consist of:

Without derogating from the generality of this definition, value-added network services include, but are not limited to:

and any other telecommunication service in respect of which the conveyance of signals is no more than is incidental to, and necessary for, the provision of that service.
      1. Similarly, we suggest that the Bill should also include the introduction of the definition of PTNs as has been suggested by ICASA.
      2. The White Paper states with regard to the settling on definitions of different types of services – "because of the inherent flexibility of telecommunication technologies it has become increasingly difficult to define particular market segments or services and establish viable boundaries around them. Because of this reality, there will be to some degree an inevitable arbitrariness to such definitions. The key point is that with this legislation, it is the Regulator, not Telkom, who is now charged with settling upon such definitions and enforcing the rules around them. This fact should raise the level of legitimacy around these contentious issues."
      3. If this provision in section 15 of the Bill is not changed, the question that would have to be clarified for the industry would be what the role of the regulator in the future would be and whether the rulings of the regulator can be relied upon, in that Parliament by legislating in this manner overturns decisions made by the regulator when those decisions are not favourable to a stated position of one of the state owned players in the market. We note in this regard that the provisions relating to VPNs, ISPs, interconnection and facilities leasing all seem to specifically overturn decisions of the specialist regulator going against Telkom. We would like to impress on this Committee that such behaviour leaves little confidence in the regulatory framework of the industry and the certainty and reliability of decisions of the regulator as well as the certainty of investments in the industry. It in effect discourages investment in communications in South Africa to the detriment of our country. Furthermore, it is tantamount to unconstitutional infringement of the independent regulator.
      4. Multi-media services. It is also apparent that the provisions relating to Sentech being licensed to provide multi-media services violate South Africa’s commitments regarding equal treatment. In terms of the proposed new section 32C of the Act, Sentech will be licensed automatically to provide what is being termed "multi-media services". Multi-media services are defined to include, among other things, electronic transactions, Internet through television, data and text (but excluding what is already in the category of PSTS and mobile cellular telecommunication services ("MCTS")). There seems to be, however, a large, if not complete, overlap with that which are VANS. Yet, it appears that there are no restrictions on Sentech as a multi-media service provider like there are on VANS providers, such as restrictions on voice and on leasing basic telecommunication facilities from Telkom (and the SNO). This unequal treatment with regard to what are VAN services providers, even if they are also termed something else (ie, multi-media services) cannot be countenanced in terms of South Africa’s commitments to equal treatment in terms of the GATS.
      5. Thus, we recommend that the references to multi-media services and the licensing of Sentech to provide them as well as the definition of multi-media services be deleted from the Bill. Sentech could be licensed to provide VANS in terms of the current section 40 of the Act. With the amendment suggested herein, it can provide voice over VANS and thus provide all of the different types of services listed in the proposed definition of multi-media services.
    1. WTO commitments relating to access to telecommunication facilities
      1. Facilities leasing. The proposed amendments to section 43 of the Act, namely the addition of section (1)(b)(iii) and the amendment of section (1)(b)(ii) change the criteria of what is a reasonable request for telecommunication facilities. The reason why this is important is because, in terms of the Act, a request does not have to be processed by Telkom and the SNO if it is unreasonable as defined. That is not necessarily a violation of the WTO commitment with regard to guaranteed access to telecommunication facilities to VANS providers. However, if the criteria for what is reasonable has the consequence of allowing Telkom and the SNO not to provide telecommunication facilities on discriminatory grounds, then it certainly would be a contravention of South Africa’s commitments. It would also be a contravention of the commitment if the consequence were that Telkom and the SNO could refuse to provide telecommunications facilities to anyone because in effect, that would benefit Telkom and the SNO as VANS players discriminatorily. Allowing Telkom and the SNO to make such choices legislates their ability to decide who survives in the industry and who doesn’t. This is legislating for the PSTS providers a license to abuse their dominant positions.
      2. The changed criteria as to what constitutes a reasonable request is problematic in that it allows a PSTS provider now to refuse to process a request if the request does not promote the efficient use of the PSTN (in terms of subsection (ii)). This provision is ambiguous and will cause much litigation with only the PSTS operators benefiting from such delays in the provision of facilities. Further, it puts the decision in the hands of the PSTS operator. A PSTS operator could argue in each and every case that it simply does not want to provide facilities for anti-competitive reasons, and in so doing delay, if not eliminate, the provision of such facilities. Furthermore, it is just inappropriate that the efficient use of the PSTN is a criteria for leasing facilities to other providers.
      3. The addition of the criteria in subsection (iii) is similarly problematic in that it is ambiguous. It may further have the consequence of allowing a PSTS always to avoid providing telecommunication facilities because it is unlikely that such facilities provisioning could ever happen on a "reciprocal basis". The very nature of facilities leasing is that it is NOT reciprocal.
      4. We urge that the existing provision remain as it is.
    2. Commitments regarding an independent regulator

      3. There are provisions in the Bill that detrimentally effect the independence of ICASA. These provisions are set out and discussed under the heading below regarding constitutional issues. SAVA is of the view that the provisions which impair the independence of the regulator should be eliminated in order not only to comply with the provisions of the Constitution and the ICASA Act but also to comply with South Africa’s commitments that it made in 1998 to establish and maintain an independent regulator for the industry.

    3. Commitments to open up competition in the basic telecommunications market
      1. Liberalisation of PSTS. The provisions in the new section 32A regarding opening up competition do not meet the specific commitments made by South Africa with regard to resale of basic telecommunications services. South Africa’s commitment is that resale services be liberalised between 2000 and 2003. The provisions of the Bill allow the SNO to resale Telkom’s basic services, but only for a period of two years. The provisions also allow for the possible licensing of a single resale operator after 2005. These provisions do not appear to meet the commitment that South Africa will open the market up to competition in the resale services sometime between 2000 and 2003.
      2. Further, South Africa’s WTO commitments require a study about the feasibility of more than a duopoly of PSTS players by 2003. The new section 32A provides that such a study will only be completed in 2004, directly in contravention of the commitment.
  1. CONSTITUTIONAL ISSUES
    1. Independent Regulator. In accordance with section 192 of the Constitution, national legislation had to be enacted to establish an independent authority to regulate broadcasting in the public interest, and to ensure fairness and a diversity of views broadly representing South African society. ICASA was established as a juristic person in terms of section 3 of the Independent Communications Authority of South Africa Act ("the ICASA Act"). This Act also disestablished the IBA and SATRA with effect from 1 July 2000.
    2. The objects of the ICASA Act, as reflected in section 2 thereof, are to establish an independent authority to regulate broadcasting in the public interest and to ensure fairness and a diversity of views broadly representing South African society, as required by section 192 of the Constitution and to regulate telecommunications in the public interest and achieve the objects contemplated in the underlying statutes concerning broadcasting and telecommunications respectively. Section 3(2) provides that ICASA must be independent and subject only to the Constitution and the law, and must be impartial and must perform its functions without fear, favour or prejudice. It must function without any political or commercial interference. Sections 3(3) and (4) of the ICASA Act mirror substantially the provisions of sections 181(2) and (4) of the Constitution which entrench the independence and impartiality of the state institutions which support state democracy and whose independence and impartiality is guaranteed in Chapter 9 of the Constitution.
    3. ICASA performs functions relating to both broadcasting and telecommunications. Further, due to the convergence of the two industries, and the planned omnibus legislation being drafted by the Ministry of Communications to take account of such convergence, ICASA’s functions will increasingly apply more similarly to broadcasting and telecommunications. The provisions of the Constitution and the ICASA Act protecting the independence and impartiality of ICASA must apply irrespective as to whether ICASA is carrying out a broadcasting or telecommunications function.
    4. The importance of an independent regulator is also articulated without doubt in the White Paper on Telecommunications in which it is stated – "The key element in the new arrangements proposed by the Government is the establishment of an independent statutory telecommunications regulatory authority." The Paper goes on to explain – "The independence of the Regulator is necessary in order to ensure its impartiality. Independence has three aspects: independence from the operational organisation(s) responsible for building and operating the public telecommunications infrastructure and providing telecommunications services (e.g. Telkom); independence from other interested parties, such as industrial interests in the telecommunications sector; independence from the Government in dealing with its mandated functions, once the general framework of telecommunications policy has been set."
    5. Unfortunately, however, some of the provisions of the Bill interfere with ICASA’s functions and as a result of this interference, ICASA’s independence to perform its functions is threatened. In particular, the provisions amending the appointment procedures of ICASA and those provisions encroaching upon ICASA’s licensing functions may be unconstitutional. In addition, the interference with certain decisions made by ICASA in the past regarding the definitions of different types of services as well as with regard to interconnection may be unconstitutional.
    6. Section 3(2) of the ICASA Act provides for ICASA to act through a Council consisting of seven councillors appointed by the President on the recommendation of the National Assembly. The Bill introduces an amendment to section 5 of the ICASA Act regarding the appointment procedure. One of the consequences of this amendment is that the candidates nominated for the appointment to the Council of ICASA would have to appear before a selection panel consisting of five persons, all of who would be appointed by the Minister. This selection committee decides on the fitness of each candidate to serve as a councillor, publishes a shortlist and makes recommendations to the President who in turn consults with the Portfolio Committee and the National Assembly, and after receiving their consent appoints the councillors recommended by the selection panel.
    7. It is inevitable that the recommendations and short list of the selection committee would have a weighty influence on the actual appointments made. Indeed, no appointments can be made without such recommendations. The composition of this panel is thus critical for purposes of ensuring that the independence of ICASA is maintained and preserved. For this reason this selection panel should not be appointed solely by the Minister but through a process which is open and transparent and which results in not only the selection of persons knowledgeable about the industry but who are also able to make a selection independently and impartially and who can be perceived as being representative of all of the stakeholders in the industry and not only chosen by the Minister. In other words there should be consultation with the participants in the industry regarding the appointment of the selection committee.
    8. SAVA recommends that these proposed changes to the ICASA Act relating to the selection and removal of councillors be deleted. Alternatively, provision should be made in the Bill on the manner of selection of this selection committee so that it enhances the principles of openness and transparency. Further, it must be stated that the persons so appointed must not only be perceived to be independent and impartial, but must be representative of all of the stakeholders in the industry so that recommendations in respect of who should be appointed as ICASA councillors will be accepted as being truly independent and impartial.
    9. The proposed new section 30A(1) to the Act is peremptory in that ICASA is compelled to assign to the MCTS licensees certain radio frequency spectrum in the 1800 MHz band. Even though ICASA may prescribe the conditions of the license, the right to the license is prescribed in the Bill and ICASA will play no role in this decision. Similarly, the proposed section 30A(2) deems the SNO and Telkom to be holders of a radio frequency spectrum licence.
    10. Also, the new section 30B(1) compels ICASA to issue MCTS licensees a third generation telecommunication radio frequency spectrum licence. Once again, although ICASA may specify conditions in the licence, it has no discretion whether or not to grant the licences. Similarly, the new section 30B(2) deems the SNO and Telkom to be holders of third generation telecommunication radio frequency spectrum.
    11. The existing provisions of Chapter IV of the Act provide for the application to ICASA for frequency spectrum licenses and for the consideration thereof by ICASA. Today, any person may apply for frequency spectrum licenses with regard to 1800 MHz as well as third generation spectrum. SAVA urges the deletion of these amendments to the Act that interfere with ICASA’s functions with regard to frequency licensing. SAVA recommends that these amendments to the Act that effectively removes and restricts ICASA’s functions with regard to frequency licensing, not be given effect to as this will be contrary to one of the very objectives being sought to achieved by the Bill – opening up the telecommunications industry.
    12. There are additional provisions that encroach upon ICASA’s licensing functions as well. The proposed new section 32B of the Act, which deals with the granting of a PSTS licence to the SNO, prescribes that a percentage of the equity interest of the SNO has to be set-aside for Esi-tel and/or Transtel as the Minister with the concurrence of the Minister of Public Enterprises may determine. The proposed new section 32C grants a licence to Sentech, to provide international telecommunication gateway and multi-media services.
    13. The proposed new section 35A to the Act provides that notwithstanding the provisions contained in sections 34 and 35 thereof (which deal with applications for licences and consideration thereof), in the case of a PSTS or MCTS licence or any other telecommunication service prescribed for the purposes of section 34(2), the Minister may in specific instances determine the manner in which applications may be made and the licensing conditions that will apply. This amendment allows the Minister to bypass the procedural processes set out in the Act regarding the licensing and allows political interference in the licensing process. This would be inconsistent to the provisions of the ICASA Act that protect ICASA from political interference.
    14. In terms of the proposed new section 40A(4) to the Act, the Minister can grant under-serviced area licences. Subsection (3) prescribes that the licensee shall provide telecommunication services, including voice over Internet protocol services in respect of the area in which the licence applies. This could be done without ICASA even being consulted.
    15. The Bill (in section 26) also removes the powers that now vest with ICASA in terms of section 66(4) of the Act in respect of the disposal of funds from the Universal Service Fund.
    16. There are several fundamental functions of an independent regulator for the telecommunications industry. One is licensing and another is the ability to ensure access to communications. In this regard, what is stated in the White Paper on Telecommunications about the licensing functions of ICASA is in accord with international best practice – it provides that the independent regulator will have the following functions: "undertake the licensing of all telecommunications service providers according to the policy guidelines set by the Minister; license radio spectrum users, except those operating in terms of licences issued by the Independent Broadcasting Authority; undertake the review of existing licences, where applicable; monitor and enforce compliance with the relevant legislation and regulations; evaluate and prioritise tenders for new licences; determine appropriate classes of licences; hear complaints from users and service providers."
    17. With regard to Universal services, the White Paper is also clear that the best-placed entity with regard to administering a universal service fund is an independent regulator. It states that the regulator must "set goals for the achievement of universal service; liaise with Telkom with regard to universal service during the period of exclusivity; set universal service obligations; administer the universal service fund which will be managed by the universal service agency; [and] ensure that the needs of disabled people are taken into account in the expansion of universal service."
    18. The proposed amendments to the Act impair the functions of ICASA in these areas to such an extent as to amount to rendering the so-called independent regulator, ICASA, impotent. This is a violation of the spirit as well as the letter of the Constitution.
    19. South African case law, which deals with the question of "independence", does so in the context of judicial independence (South African Association of Personal Injury Lawyers v Heath and Others 2001 (1) SA 883 (CC); De Lange v Smuts NO 1998 (3) SA 785 (CC); S v Dodo 2001 (3) SA 382 (CC)). The principles applicable to judicial independence however also apply to the independence enjoyed by state institutions established in terms of Chapter 9 of the Constitution.
    20. The approach to the question of independence by the Constitutional Court in De Lange v Smuts NO envisages that there will be different kinds of independence depending on the circumstances. In the context of provisions relating to interrogation at meetings of creditors under the Insolvency Act, the Court held that these were in conflict with section 12 of the Constitution. This was because officials presiding lacked judicial independence (see especially paras [57] to [60]). The Court noted further that the issue was "a complex matter which will be developed more fully as cases involving separation of powers issues are decided" (at para [61).
    21. In order to determine the requirements of independence, regard must be had to the ordinary meaning of the word, namely "not depending upon the authority of another; not in a position of subordination; not subject to external control or rule; self governing, free" (see Law Society of Lesotho v Prime Minister and Another [1986] LRC (Const) 481 (CA) at 499, which refers to this definition from the Shorter Oxford English Dictionary).
    22. The Canadian Supreme Court in R v Valente (1985) 24 DLR (4th) 161 (CC) has identified three essential conditions of independence. The first is security of tenure, which embodies as an essential element the requirement that the decision-maker be removable only for just cause and is secure against interference by the Executive or other appointing authority. The second is a basic degree of financial security free from arbitrary interference by the Executive in a manner that could affect independence. The third is institutional independence with respect to matters that relate directly to the exercise of a tribunal's function. These core principles have been identified in respect of judicial independence and have been adopted by the Constitutional Court in the De Lange case (at para 70).
    23. A question this Committee must ask is whether with the proposed amendments ICASA will be perceived as enjoying the essential conditions of independence. Is it able to perform its functions in pursuance of the objectives of the Act without interference? Is the Minister empowered to usurp any of ICASA’s functions in a manner that prevents ICASA from enjoying material and sufficient independence and impartiality to perform its regulatory functions?
    24. SAVA is of the opinion that ICASA’s institutional independence with regard to matters relating directly to the exercise of its primary functions is undermined by the provisions of the Bill which vest the Minister with powers in respect of matters which should properly lie with ICASA. ICASA’s tenure of security may be threatened by the amendments to the Bill regarding appointing and removing councillors. This, coupled, with the fact that the Ministry controls the budget of ICASA, leads to the conclusion that the independence of ICASA will be fundamentally impaired in violation of the Constitution if these amendments are passed.
    25. This matter must further be considered against other provisions of the Bill which effectively overrule decisions previously taken by ICASA or its predecessor-in-title, SATRA, and which were not favourable to a particular player in the industry. These aspects of the Bill are discussed in more detail under other headings in these submissions. In summary, they include rulings that:
      1. a VPN is just a technology and not a PTN;
      2. Internet protocol is not a PSTN but a VANS; and
      3. the imposition of interconnection terms and conditions on Telkom.
    26. It is clear that the diminution of ICASA’s powers that lie with ICASA, by the Bill is an interference with its independence. This is inconsistent with the ICASA Act read with section 192 of the Constitution.
    27. Expropriation of the right to provide VAN services. The constitutionality of the Bill is also susceptible to constitutional attack on the basis that statutory rights, currently held by VANS licensees, will be unilaterally terminated by the provisions of the Bill. The inclusion of the following provisions in the Bill, constitute an expropriation of existing rights:
      1. the inclusion of the proposed definition of a VPN and other related provisions regarding VPNs in the Bill;
      2. the inclusion of the of the provisions in the Bill regarding voice over Internet protocol;
      3. the limitation of VANS to electronic transaction services;
      4. the expansion of the current meaning of PSTS and PSTN as a result of the new sections 36A and 36B to the Act; and
      5. the expansion of the current meaning of telecommunication facility as a result of the amendment to the definition in section 1 of the Bill.
    28. By way of example, we would like to highlight the problematic nature of the definition of VPN. The definition states that a VPN means a PTN, and thereby overrules the decision made by ICASA which confirmed that, "the application of Virtual Private Network techniques to a VAN results in some of the attributes associated with a PTN, this does not per se mean that the network to which it is applied becomes a PTN."
    29. The provisions in the Bill outlined above will result in VANS providers being able to operate many of the VAN services they now offer, including managed network services using VPN technology. Considering that ICASA’s ruling specifically allowed VANS to operate VPNs, SAVA is of the view that these provisions constitute an "arbitrary deprivation" or an "expropriation" of this right.
    30. SAVA’s view is based on section 25(1) of the Constitution, which entrenches the right to property. It states that "no one may be arbitrarily deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property."
    31. Section 25(2) of the Constitution provides that "property may be expropriated only in terms of a law of general application – (a) for a public purpose or in the public interest; and (b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court."
    32. SAVA submits that the statutory right to provide VANS amounts to property within the meaning of section 25 of the Constitution. Indeed, this conclusion is supported by a number of judicial and academic statements relating to the scope of the term property in the constitutional and expropriation context. The Supreme Court of Appeal in Administrator, Natal and Another v Sibiya and Another 1992(4) SA 532 (A) at 539, stated with regard to economic rights - "The word "property" would ordinarily tend to connote something which is the subject [sic] of ownership. In my view, however, the concept "property" to which the audi [alteram partem] rule relates is wide enough to comprehend economic loss consequent upon the dismissal of a public sector employee." In Constitutional Law of South Africa, Chaskalson et al eds, at para 31.2(a)(ii), Chaskalson and Lewis indicate that the "inclusion of incorporeals in the category of resources which can be the objects of rights, and therefore constitute property" has been acknowledged.
    33. The Constitutional Court has, within the context of the right to economic activity and with reference to legislative measures, held that if the measure does not have a rational relationship to the goal intended to be achieved by the legislation, then such legislative measure would be arbitrary. SAVA is of the view that the deprivation of the right to provide certain VANS does not have a rational relationship to the goal of the Bill as set out in the memorandum thereto, namely the managed liberalisation of the telecommunications industry. In fact it is a reversal of the liberalisation with regard to VANS that is the status guo. SAVA believes that the deprivation of the statutory right is arbitrary, and therefore unconstitutional.
    34. With regard to expropriation, the Constitutional Court has said that the word expropriate is generally used in our law to describe the process whereby a public authority takes property for a public purpose and usually against payment of compensation. The Constitution, in sections 25(2)(a) and (b) sets out further requirements for expropriation, namely that expropriations may only be effected pursuant to a public purpose or in the public interest. It was stated in Beckenstrater v Sand River Irrigation Board 1968(4) SA 209 (A) that "in statutory provisions…[the term ‘expropriation’] is generally used in a wider sense as meaning not only to dispossess, but also appropriation by the expropriator of the particular right, and abatement or extinction, as the case may be, of any other existing right held by another which is inconsistent with the appropriated right."
    35. VANS licensees will be deprived of their right to provide VPN, ISP and any other VAN services not considered electronic transaction services. Such deprivation will be permanent, not temporary. Furthermore, as a result of this "expropriation" Telkom and the SNO will acquire the benefit.
    36. For such an expropriation to be valid, it must be "for a public purpose or in the public interest". Within the context of expropriation law generally, public purpose has been held to include "things whereby the whole population or the local public are affected and not only matters pertaining to the state or government". However, the Supreme Court of Appeal has stated that expropriation cannot be considered to be for public purposes where it is acquired by expropriation for the benefit of third parties. SAVA is of the opinion that the "expropriation" will clearly be for the benefit of a third party, namely Telkom and the SNO.
    37. SAVA is of the opinion that the "expropriation" of the statutory right does not constitute a valid expropriation, but if it is established that it does, then the Constitution provides that in the absence of agreement as to compensation, a "just and equitable [compensation], reflecting an equitable balance between the public interest and the interests of those affected" must be determined by a court. Furthermore, in terms of section 25(3)(a)-(e) of the Constitution such compensation is to be determined taking into account: "(a) the current use of the property; (b) the history of the acquisition and use of the property; (c) the market value of the property; (d) the extent of direct state investment and subsidy in the acquisition and beneficial improvement of the property: and (e) the purpose of the expropriation."
    38. In conclusion, the termination of the statutory right to provide certain VANS will be susceptible to a Constitutional challenge on number of bases, namely:
      1. the fact that it may constitute an arbitrary deprivation;
      2. the fact that it may be an unlawful expropriation; and
      3. the fact that compensation will have to be determined and payable to VANS providers as a result.
    39. Thus, SAVA once again urges this Committee to pass through this Bill with the offending provisions in tact.
  2. GOVERNMENT POLICY
    1. The White Paper on Telecommunications released in March 1996 sets out government’s policy on the telecommunications industry in South Africa and the future development thereof. Significantly, the White Paper sets out policy with regard to, amongst other things, market structure of the telecommunications industry to entail a period of exclusivity for Telkom for basic PSTS and the opening up of competition in various segments of the industry (including PSTS) over a period of time. It also sets out policy with regard to how the industry will be regulated with emphasis placed on an independent regulator for specific regulatory functions such as licensing.
    2. The White Paper in providing for an immediate competitive VANS market, phased in liberalisation of the basic telecommunications segment, as well as the establishment of an independent regulator to regulate the industry, was in keeping with South Africa’s commitments in terms of WTO documents. It was also in keeping with the Constitution.
    3. Definitions of PSTS, PSTN, telecommunication facility, carrier of carriers and international telecommunication service. The White Paper states that the regulator would be charged with settling the definitions relating to market segments. The Bill, however, introduces a range of definitions of particular services, without taking into account the definitions drafted by ICASA, namely the definitions of VANS and virtual private networks. The definition of PSTS, to be inserted by a new section 36A of the Act, also arguably extends the definition of PSTS, which will have the effect of limiting competition in segments of the market that are currently open to competition. This is problematic in two respects. First, as will become apparent, the exact meaning of certain of the sub-provisions is not certain. This will lead to unnecessary litigation to the detriment of the industry. Second, if it is found that the correct interpretation has the consequence of closing down competitive segments of the market, the impact will not only trigger possible violations of South Africa’s WTO commitments, the Constitution, but will also be bad for the industry and in turn, South Africa as a whole.
    4. The definition states that PSTS include national long-distance telecommunication services. Does that mean other service providers, such as MCTS, VANS and PTNs, cannot offer national long-distance telecommunication services, as they are currently allowed to do? If so, it may very well be unconstitutional. The same concern should be had with regard to the inclusion of international telecommunication services, public pay-telephone service, amongst others. The question is whether the inclusion of, for example, a statement that PSTS licensees may provide international services, negate the ability, for example, of a VANS licensee from providing international VANS services.
    5. SAVA is of the view that it should not, but unfortunately, the proposed definition could be interpreted to mean that it does. What the definition should be saying is that some PSTS are international. What it appears to be saying however is that all international services are PSTS.
    6. SAVA is of the view that the proposed definition should be deleted. If a definition is to be included in the Act for PSTS, it should, however, deal with the nature of PSTS. In particular, PSTS includes basic services but not value added services; they are fixed services and not mobile services; and they are services that have to be provided to anyone who requests them, in a non-discriminatory manner.
    7. There is another particular problem presented by the inclusion of the definition of PSTS. This is that it could have the effect of closing down a currently competition market segment for Customer Premises Equipment ("CPE"). CPE is included in the definition of PSTS. That means that it is a PSTS. It also means that no one can provide CPE without a PSTS license. What that means in practice is that only Telkom and the SNO will be allowed to provide CPE in future, because they will be the only PSTS licensees for the foreseeable future.
    8. The White Paper states, as follows with regard to CPE. "Customer premises equipment (CPE) are currently partially deregulated. The remaining Telkom prerogative, that is, the right to provide the first telephone instrument, is removed. CPE are completely, immediately, subject only to type approval by the Regulator to ensure no damage is posed to the network. Customers may purchase the CPE they desire."
    9. The proposed inclusion of CPE as part PSTS is not only inconsistent with Government’s policy, it is likely unconstitutional as well as bad for the industry, plunging countless CPE providers into contravening the Act as soon as the Bill is passed.
    10. For similar reasons, the proposed amendment to the definition of telecommunication facility to include certain customer premises and provider premises equipment is not appropriate and ICASA suggests that the definition remain as is, alternatively an additional provision be added to the Act which makes it quite clear that the telecommunication facilities that VANS providers must obtain from Telkom in terms of section 40(2) of the Act do not extend to customer premises and provider premises equipment.
    11. Another potential problem with the definition of PSTS concerns the inclusion of reference to the use third generation and 1800 MHz facilities. Does this inclusion mean that all use of third generation and 1800 MHz frequencies is to be considered PSTS and if that is the case, how is the provision to be reconciled with the provisions indicating that 1800 MHz and third generation spectrum should be granted to MCTS licensees as well as PSTS licensees.
    12. These references, as well as the reference to VPN and VOIP are also problematic in that they indicate that a certain technology can only be used by one type of service provider. SAVA is of the view that regulatory restrictions and/or imperatives should be technology neutral allowing the industry to adopt the most appropriate technology for the provision of services in all circumstances. Indeed, the need for technology-neutral regulation is recognised the world over as important for regulating in the current era of convergence.
    13. For the same reasons that SAVA urges the removal of the proposed definition of PSTS, SAVA urges the removal of the definition of PSTN. SAVA urges the Committee to remove the proposed definitions of PSTS and PSTN from the Bill, alternatively draft and adopt definitions that go to the nature of PSTS as basic fixed telecommunication services provided on a non-discriminatory basis.
    14. Also for similar reasons, SAVA urges the removal of the proposed definitions for "carrier of carriers" and "international telecommunication services".
  3. APPROPRIATE LEGISLATION FOR THE TELECOMMUNICATIONS INDUSTRY
    1. In addition to those problems with the Bill relating to South Africa’s WTO commitments, the Constitution and the White Paper, SAVA believes that the amendments to the Act are not appropriate legislative interventions in a number of respects.
    2. The industry desires, indeed requires, if the telecommunications industry is to benefit South Africa, that legislation be clear and forward-looking, that it should make sure that adequate mechanisms are in place for the speedy and fair resolution of disputes, that it should set in place effective provisions to control anti-competitive conduct of dominant players and finally, that it should be objective and transparent.
    3. Clear Legislation
      1. There are a number of instances noted in these comments under other headings where it is demonstrated that there will be more than one interpretation of suggested new provisions to the Act, causing a great deal of uncertainty for the industry. Although this may be inherent in regulating in a dynamic industry where legislation should be reviewed on a fairly regular basis, it is obvious that some of the uncertainties are not at all necessary and indeed undesirable.
      2. Notably in this regard are the provisions with regard to VPNs. ICASA, the independent regulator, has held a highly inclusive consultative process and found, factually, that a VPN is a technology that can be used by PTN or VANS providers. This finding is indeed consistent with international best practice and supported by technical and operational evidence. Thus, we urge again, the Committee, to delete the provisions in the Bill relating to VPNs.
      3. Also notably are the provisions relating to voice over Internet protocol. Again, the independent regulator, has ruled that Internet protocol is a VANS and not a PSTS. Thus, the specific exceptions for Telkom and the SNO to provide voice over Internet protocol is either an attempt to overturn that ruling, with the logical consequence that all ISPs except Telkom and the SNO will have to be immediately shut down, or an attempt to carve out an uncompetitive exception in the VANS segment of the industry for Telkom and the SNO to the detriment of other VANS providers. This could not be countenanced in terms of South Africa’s WTO commitments or in terms of the South Africa Government’s policy on the matter. We urge that the provisions be deleted and that the restriction of providing voice over VANS be eliminated for every VANS provider, including Telkom as well as other VANS providers as well as potential licensees such as Sentech and the SNO and SMMEs.
      4. We also urge once again that the definition of VANS suggested by ICASA be included in the Bill in order to clarify the boundaries of VANS. Otherwise, the result will be endless new disputes (apart from existing ones being considered and decided by ICASA at present) about the outer boundaries of PSTS (which should be limited to basic telecommunication services) and the outer boundaries of VANS (which should be limited to value added telecommunication services). The Committee can observe that the definition of VANS suggested by ICASA is clear, technology-neutral and forward-looking, thus avoiding many of the disputes that would otherwise likely arise if it were not included in the Bill.
      5. Regulation Making. In addition, we are of the view that the Act must be amended to make it clear that ICASA has all of the powers necessary to prescribe regulations for regulating the industry efficiently and effectively. Unlike the enabling provisions in the Independent Broadcasting Authority Act, which provide ICASA powers to make regulations for broadcasting matters, the provisions in the Act do not explicitly indicate that ICASA may make all of those regulations necessary to regulator the industry. This has caused a good deal of uncertainty and dispute in the industry and it should be clarified that ICASA has that power in regard to telecommunications matters and to bring the procedures for making regulations for broadcasting and telecommunications in line with one another.
      6. Reference Corrections. We also draw to the attention of the Committee that the cross-references in section 36(1)(b)(i) and 41(2)(a) of the Act appear to be wrong and should be corrected. The reference in section 36(1)(b)(i) appears to be to nothing and should be deleted and the reference in section 41(2)(a) should be a reference to section 36.
    4. Forward-Looking Legislation
      1. The telecommunications industry is a dynamic one, ever changing, pushed both by demand and supply. The term convergence is one widely used these days in the industry and applies at varying times to convergence of services, technologies as well as providers in the industry. One example of convergence is with regard to Internet telephony. The PSTN – the basic circuit switched telecommunication network – was traditionally used to provide voice telephony. The Internet – a value added packet switched telecommunication network of networks – was traditionally used to allow terminal equipment (usually computers) to talk to one another. Now, voice telephony can be carried over the Internet due to advancements in technology. Does that turn the Internet into a PSTN for regulatory purposes? Of course not, but it does raise fundamental issues of how both the telecommunications, broadcasting, computer as well as publishing industries should be regulated in future.
      2. There is no attempt to deal holistically with issues of convergence or even to identify them in this Bill. One obvious example of pressing issues are the regulation of satellites used for both broadcasting and telecommunications. The industry is aware, however, that the Ministry of Communications is currently drafting legislation that would consolidate the legislation governing both broadcasting and telecommunications. We believe that, for the most part, issues that fundamentally are affected by convergence, such as multi-media services, should be provided for in that legislation so that there is holistic treatment of the issues. Thus, we urge again the removal of the provisions in the Bill regarding multi-media services and VOIP.
      3. We, however, believe that certain matters that may fall under the heading convergence, should be addressed in this Bill. One is the elimination of the restriction of providing voice over VANS. The reasons for this have been articulated herein.
      4. VANS over MCTS. Another issue that should be addressed that concerns the VANS industry in order to level the playing field with regard to all VANS providers. VANS providers that are not also licensed to provide PSTS and MCTS must obtain a VANS licence to do so in terms of section 40 of the Act. Telkom has a VANS license separate from its PSTS license in terms of section 40 and must operate within the same restrictions as other VANS providers when it provides VANS (as opposed to basic PSTS). However, the MCTS providers may provide value added network services in terms of their MCTS licenses. It is unclear, however, whether they may do so without adhering to the restrictions applying to other VANS providers (namely, the restriction of allowing voice over VANS and the obligation to obtain the telecommunication facilities that make up a VANS network from a PSTS provider). For this further reason, SAVA suggests that the requirement for VANS providers to obtain telecommunication facilities from only PSTS licensees be eliminated to coincide with the end of Telkom’s exclusivity period.
      5. In addition to these issues of convergence, we believe that legislation should look forward in regulating the industry rather than look back. This Bill looks back in a singularly invidious way and would overturn decisions by the regulator that have brought clarity, with the result of plunging the industry into greater depths of regulatory uncertainty. While it may be appropriate in certain circumstances to look back and correct legislation where it is unclear. A good example of this is the correction of the incorrect cross references in the Act referred to above. Another example is where the legislation needs clarification, such as where it is necessary to clarify ICASA’s powers with regard to regulation making also referred to above.
      6. However, to attempt to overturn substantive rulings of the independent regulator is not appropriate, especially in the telecommunications industry where there is a particular need for a specialist regulator. Furthermore, unless it is made abundantly clear that such decisions are being overturned and that any new provisions are not subject to alternative interpretations, will only serve to cause further legal disputes, which will cause tremendous harm to the industry. We are of the belief that Parliament should use its legislative powers to overturn decisions of the regulator only in rare circumstances after very considered analysis and a clear finding that the regulatory was so wrong in interpreting a provision in a certain way that clarity from Parliament is necessary.
    5. Resolution of Disputes and the Control of Anti-Competitive Conduct
      1. Resolution of Disputes and the Control of Anti-Competitive Conduct. SAVA would like to make Parliament aware of the fact that the resolution of disputes before ICASA currently is an inordinately long process. This is in regard to section 53, regarding anti-competitive conduct of dominant players, section 100 concerning violations of the Act or licenses by licensees, as well as sections 43 and 44 concerning interconnection and facilities leasing.
      2. South Africa as part of its WTO commitments with regard to opening up basic telecommunication service provision to competition also commitment to certain regulatory principles. Apart from the principle of an independent regulator, the principles of controlling anti-competitive conduct of dominant providers as well as the speedy resolution of disputes are set out.
      3. In regard to the speedy resolution of disputes, we urge the setting of time limits in the Act in order that dominant players are not allowed to drag out disputes indefinitely, effectively extending monopoly privileges beyond what is intended in the Act. In particular, SAVA recommends the following changes in section 18 of the Bill.
        1. Replace in the new section 43(1)(c), the phrase "the prescribed period" with "30 days".
        2. Add to the end of the new section 43(1)(d)(ii) – "provided that if such reference is not made within 15 days of the notification of any request to the Authority, the request will be deemed to be reasonable";
        3. Add after the phrase "make a determination" in the new section 43(4)(a) – "within 30 days";
        4. Add after the phrase "may" in the new section 43(4)(b) – "within 30 days"; and
        5. Replace in the new section 43(4A), the phrase "the Minster shall declare that the terms and conditions proposed by the Authority apply between the parties" with "the terms and conditions proposed by the Authority shall apply between the parties".
      4. SAVA also recommends that section 21 of the Bill be changed by replacing the wording in the proposed new section (2)(a) with the following – "The Authority must, with regard to matters referred to in subsection (1), make regulations for the efficient and effective monitoring and investigation of such uncompetitive actions and for the speedy resolution of complaints in regard thereto."
      5. SAVA is also concerned about the inclusion of the new section 53A to the Act. This is so because it is not clear which disputes the provision applies to but also because it is the Minister who sets up the mediation and arbitration rather than the independent regulator or the parties.
      6. Subsection (1) seems to suggest that the provision applies to all disputes. Subsection (4) seems to suggest that the provision applies to disputes between ICASA on the one hand and telecommunication licensees on the other hand with regard to their licensees. Subsection (6) seems to suggest that the provision applies to disputes only with regard to license conditions. Clarity is sought in this regard. It is also unclear from a reading of subsection (2) whether ICASA or any other party must submit to mediation and/or arbitration.
      7. Further, this section appears to allow the Minister to interfere in the licensing processing of ICASA, the very issue that was challenged by one of the parties as both inappropriate and not in accordance with the existing Act in the High Court regarding the licensing of the third cellular licensee. This is a backward-looking provision, which also does nothing to clarify the regulatory situation. More in this regard is discussed below under the heading objective and transparent legislation.
    6. Objective and Transparent Legislation
      1. SAVA does not believe that the drafting of this legislation has been transparent. This issue is discussed in the introduction to these comments and will not be repeated here. Suffice it to say that the process to date has been inappropriate and possibly a violation of the constitutional obligation of Parliament to consult with the industry and with the independent regulator.
      2. Public Participation in ICASA Processes. In addition to the foregoing, the Bill reduces the level of public participation in many of the crucial decisions that will affect the telecommunications industry and thereby threatens the principles of just administrative action, due public process and transparency.
      3. The amendment to section 29(5) of the Act deletes the requirement of an oral hearing in the drafting of the frequency band plan. The Bill further deletes subsections 34(3)(c) and 34(5) of the Act, thereby removing the requirement of public hearings in relation to applications for major telecommunication licences.
      4. SAVA is of the view that this reduction in public participation in decisions affecting telecommunications as a whole will impact negatively on investment in the South African telecommunications industry.
      5. SAVA is also concerned that the reduction of the notice period, set out in section 96 of the Act, before any regulation is made from three months to one month, will prejudice the stakeholders in the telecommunications industry. SAVA believes that one month is too short a time period and therefore suggests that the section in the Act should be amended to read – "The Authority shall, not less than 45 days before any regulation is made cause the text of such regulation to be published in the Gazette, together with a notice declaring its intention to make that regulation and inviting interested persons to furnish the Authority with comments thereon."
  4. CONCLUSION
    1. In the foreword to the White Paper, it was stated that "[t]here can be no going back to the authoritarian methods of policy-making of the past." SAVA understands and supports the Ministry’s intention to increase the value of Telkom, in order to obtain the highest possible return in its initial public offering. However, SAVA firmly believes that the Bill does not achieve this purpose and conversely results in the devaluation of the industry as a whole while at the same time returning South Africa to the authoritarian ways of the apartheid regimes. This is so with regard to a number of crucial issues.
      1. Virtual private networks. The proposed amendments in regard thereto overturn ICASA’s ruling about VPNs and will have the effect of shutting down a big part of the VANS industry.

      2. Definition of VANS. The proposed renaming of VANS and a dismissal of the definition of VANS suggested by ICASA will have the effect of destroying all of the VANS industry except for that part related to "electronic transaction services".
      3. Voice over Internet Protocol. The proposed exclusivity for certain PSTS players, which ignores SATRA’s ruling that Internet services are not part of PSTS, will have the effect of destroying the Internet services industry. It is an invidious anti-competitive provision.
      4. Definition of telecommunication facility. The proposed definition, which is contrary to Government stated policy, will have the effect of destroying the now competitive CPE market segment of the industry.
      5. Definition of PSTS and PSTN. These proposed definitions will have the effect of expanding what can be provided in terms of a PSTS license and thus the exclusivity (and later duopoly) rights of PSTS licensees to the detriment of the rest of the industry.
      6. Independent Regulator. The proposed provisions amending the appointment and removal procedures of ICASA and the fact that ICASA’s decisions regulating the industry have been disregarded and/or ignored in the proposed amendments, will lead to the untenable situation of a regulator that is not independent or credible.
    2. For all the reasons stated in these submissions, SAVA not to pass this Bill though for consideration by Parliament until the very serious problems with it are addressed.