ICASA'S PRESENTATION OF ITS ANNUAL REPORT FOR THE PERIOD 1 APRIL
2002-31 MARCH 2003, TO THE PARLIAMENTARY PORTFOLIO COMMITTEE
ON COMMUNICATIONS.


1. INTRODUCTION

Chairperson, Honourable Members of Parliament, Ladies and Gentleman. It gives me great pleasure to stand before this Committee of Parliament to present the annual report of the Independent Communications Authority of South Africa (ICASA) for the period 1 April 2002 to 31 March 2003.

Our presentation will focus on three key themes, which are highlights of the successes and challenges that faced ICASA during the financial year under review. These are: Outcomes of the Merger Process flowing from the amalgamation of the Independent Broadcasting Authority ("the IBA") and the South African Telecommunications Regulatory Authority ("SATRA") to create ICASA; the Broadcasting Regulatory Activities; and the Telecommunications Regulatory Agenda.

2. OUTCOMES OF THE MERGER PROCESS

The Honourable members of this house will recall that not so long ago, Parliament passed the ICASA Act 13 of 2000 to merge the then IBA and SATRA. The first ICASA Council took office on 1 July 2000 to oversee the merger and transformation of the newly created communications regulatory Authority. Passing a law to facilitate the merger of two business entities, as we have now learnt, is one thing; and the implementation and management of a change process, quite another. Notwithstanding the often monumental challenges that confronted us during the merger process, we are proud to report to Parliament that ICASA's merger and transformation process has been managed with a reasonable measure of success as demonstrated by the following achievements:

- A new vision, mission and values statement for ICASA.
- Organization of ICASA's business activities on the continuum of a value chain, which identifies rulemaking and licensing as the very essence of the organisation's life, existence and business.
- Organizational structural design merging the operations of the IBA and SATRA into ICASA (Refer to Appendix "A" of the Annual Report). McKinsey & Company, a multinational consulting organisation, has endorsed this structure as "robust and effectively dividing strategic from operational roles".
- Development of a bottom up, zero and cost centre based, budget
- Standardisation of remuneration benefits and other conditions of service, such as pension, leave, medical aid, service bonus and home owner's allowance, for all employees of ICASA taken over from the former IBA and SATRA.
- Production of a rolling three-year strategy and business plan, which has not only enhanced ICASA's credibility with government and the communications industry, but going forward is seen as a tool for creating organizational and stakeholder value (Refer to Appendix "C" of the Annual Report)
- Successive unqualified audit reports for the first three years of ICASA's life. This might seem mundane, but is a major achievement for an organization like ICASA whose predecessors' administrative and financial management systems were a matter of great and constant concern to Parliament and the Auditor General.
- Production of corporate policies, i.e. Administration, Finance, Human Resource Management & Development; Information Technology & Services, Telephone and Transport, Subsistence & Travel.
- Successfully seeking financial assistance for ICASA's capacity building initiatives from multilateral organizations such as the Worldbank and donor agencies like the British Department for International Development (DFID)

Not only has the transformation process been successfully managed, this feat was achieved against massive Stakeholder expectations for ICASA to deliver on its core rulemaking and licensing functions. To this end, I refer you to pages 7-17 and Appendix B of the annual report; and proceed to highlight some of our achievements as they relate to the regulatory work of ICASA in both in the Broadcasting and Telecommunications spheres.

3. BROADCASTING

ICASA has actively pursued its mandate, derived from the Independent Broadcasting Authority Act 153 of 1993 ("the IBA Act") and the Broadcasting Act 4 of 1999 ("the Broadcasting Act") to further open up the broadcasting sector to competition and to provide further access to programming to the majority of South Africans. During the period under review we have published a policy and regulations on Sports Broadcasting Rights. ICASA has also published discussion papers on Ownership and Control of Commercial Broadcasting Services and on Low Power Sound Broadcasting Services. After the promulgation of amendments through the Broadcasting Amendment Act, 64 of 2002, ICASA gazetted regulations, which set out a revised Code of Conduct for Broadcasting Services.

ICASA's Position Paper and Regulations on Sports Broadcasting Rights includes the listing of national sporting events that cannot be acquired exclusively by subscription television. In developing this policy, ICASA was mindful of the need to balance the viability of broadcasters and sports administrations with the need for the public to have access to these events.

Hearings on the Review of Ownership and Control of Existing Broadcasting Services were conducted in February this year and ICASA heard submissions by representatives of various leading media companies, industry bodies, interest groups, academics and members of the public. The subject mailer is extremely complex - ranging from issues of control empowerment and foreign ownership to questions of coverage areas and secondary markets.

The Broadcasting Act, as amended, has ensured that ICASA will have proper regulatory oversight over the SABC and its licensees and provides for the separation of the SABC into two operating divisions, namely the public service and commercial service divisions. We are currently processing the SABC's applications for the renewal of all its sound and television broadcasting licences. These renewal applications will be dispensed with before the commencement of a comprehensive licence amendment process. ICASA expects that the amendment of the SABC licences will take place in the first half of 2004. The amendment process will involve extensive public participation and will be the first time that each SABC radio and television service will have detailed and substantive licence conditions, as has been the norm for community and commercial broadcasting services or categories.

Another requirement of the Broadcasting Amendment Act is that by 7 December 2003, the SABC must apply to ICASA for the licensing of additional regional television services. Because of this statutory requirement, ICASA has decided to fast track the inquiry and feasibility study into the future of regional television, including local and community television. As matter of fact ICASA has finalised the position paper on Public and Commercial Regional Television services, which will be gazetted in the next couple of days and therefore creating an enabling environment for the SABC to submit an application for additional services as required by the Broadcasting Act.

ICASA has also completed the four- year Community Radio Licensing process in the Provinces of Kwazulu-Natal and the Western Cape. The Gauteng province four-year Community Licensing Process has also, since the publication of the Annual Report, been finalized. A number of Commercial Radio licenses have been renewed and amended.

Similarly, the Position Paper and Regulations on Low Power Sound Broadcasting was finalized and published, subsequent to this publication of this Annual Report.

4. TELECOMMUNICATIONS

In the coverage of ICASA's work by the media, telecommunications issues have dominated the news agenda. There is great public interest in whether the Public Switch Telecommunications Service (PSTS) market will be successfully opened to competition as required by section 40 of the Telecommunication Act 103 of 1996, as amended ("the Telecoms Act"). Throughout the Second National Operator ("SNO") licensing process, we have restated our commitment to the introduction of competition as well as to independent and credible regulation. Notwithstanding the delay in licensing the SNO, our commitment to these principles has not flagged. The SNO had been scheduled to be licensed before the end of the 2002 calendar year. This has not been possible for reasons that are set out in detail in page 16 of the Annual Report. However, since the publication of the annual report we made a recommendation on the SNO and the Minister has since made a decision that the license will be awarded to an entity called the SNO and that the 51% stake will be warehoused.

As for the Under-Serviced Area Licences (USALs), a number of processes, which create an enabling framework for the licensing process, have been put in place. To mention but a few, the Ownership and Control regulations for the USALs have been finalized by ICASA and forwarded to the Minister of Communications ("the Minister') for promulgation and gazetting. The framework for the implementation of the Universal Service Fund (USF) was subsequently finalised and published.

Other than the SNO and USALs, ICASA has successfully managed and completed the following regulatory initiatives: the re-issue of the mobile cellular telecommunication service licences of Vodacom and MTN; the development of Volume 1 and 3 of the Chart of Accounts and Cost Allocation Manual ("COA/CAM") providing accounting framework to be employed by incumbent fixed line operator, i.e., Telkom SA ("Telkom") in its presentation to ICASA of detailed statement of accounts for its business activities. COA/CAM 2 for mobile operators is currently being reviewed and will be finalised in the next couple of months.

As promised, by preparing a tranche of regulations, which created a more certain regulatory environment, ICASA ensured that the Telkom Initial Public Offering (IPO) could take place in the financial year 2002-3, as planned. These included section 52 regulations on Limitations on Ownership and Control for Telecommunication Services; Carrier Pre-Selection Regulations (CPS); and Facilities Leasing and Sharing Regulations.


5. ROUNDING OFF

Chairperson, Honourable Members. ICASA has over the last three years come a very long way. Our administration and financial systems are sound and we have mission and value proposition The challenge, though, remain the attraction and retention of human resource capacity. This can be attributed to a great measure to ICASA's budget which is funded through Parliamentary appropriations. For this and other reasons such as regulatory capture, we have proposed to National Treasury that ICASA be funded from a combination of licensing, regulatory, and spectrum fees. For all fees collected by ICASA, we have suggested that fifty percent of these should accrue to the National Revenue Fund (NRF). Twenty five percent of the remaining fifty-percent should be retained by ICASA and the other twenty five percent, held in reserve, for unforeseen regulatory projects and litigation. At the end of each financial year, ICASA should account to National Treasury for any funds, held in reserve and spent; and transfer unspent funds to the NRF.

If National Treasury disagrees with the funding model as proposed above, a second option would be to allow ICASA to retain a minimum of twenty-five percent, each financial year, from all license fees collected and to pay the balance to the NRF. The effect of this approach for the MTEF period 2004-7, currently under review, is that ICASA's existing base line allocations must increase by at least R233 million spread over a three-year period as shown in the table below: