At the outset Cell C notes that the Convergence Bill ("the Bill") has not been gazetted, nor has a Green and White Paper process been followed. In the absence of the above processes in the procedure leading to the drafting and publication of the Bill, Cell C would like clarity from the DoC as to policy formulation in respect of convergence. It is also not clear if there is a common understanding of what constitutes "convergence" (the term is fraught with possibilities for misinterpretation). The Bill, it should be noted, does not define convergence, nor is there a common understanding that the Bill, will when promulgated, provide for its achievement. A Green and White Paper process would have allowed for necessary crystallisation of thinking in this regard and hopefully for the development of a framework that would have addressed the concerns outlined below.

Cell C’s comments on the Bill address its concerns with five main issues:

• The relationship between the convergence process that has been embarked upon and the managed liberalisation process which is currently underway, and the transition between the two legislative frameworks;
• The proposed changes in the licensing framework and market structure;
• The application of sector specific regulation and competition law;
• ICASA’s role and powers; and
• The management of technology.

Cell C’s views on the above-mentioned issues are summarised in Part A of this submission. These issues are dealt with in greater detail in Part B of the submission which consists of detailed comment in respect of the provisions of the Bill. As will be evidenced from Cell C’s submission, although the Bill is an improvement from the last version, given the significance of the detailed comments on the various provisions of the Bill, substantial work still needs to be done, in consultation with interested and affected parties, before the Bill can be finalised.

Cell C hopes to make a positive contribution towards this very important process which will play a role in shaping the future of the communications industry in South Africa, and herewith confirms its desire to participate in the oral hearing process.

1. Introduction

1. It has become evident that the objectives, scope, powers and priorities of regulation for 21^st century network economies must be reassessed in light of information and communication technology (ICT) and media convergence on the one hand, and the network development in multi-sector utilities on the other.
2. A common assertion is that convergence is the joining together of telecommunications and broadcasting through digital technology. In the simplest of characterisations, telecommunications could be seen as the transmission of electronic signals through a network of copper wires/optic fibre or the radio spectrum. Similarly broadcasting could be seen as the transmission of electric signals encapsulated in radio waves sent through the air. The development of digital networks and broadband capability and common transmission protocols for the provision of telecommunications and broadcasting, has opened the possibility of addressing broadcasting and telecommunications in a common framework as would do away with the regulatory silos within which they have been managed to date.
3. Notwithstanding that convergence is occurring at a technological and market level and that regulation and legislation has not kept up with such developments it is questionable, given the pace, complexity and the levels at which it is taking place as well as the rationale for regulating broadcasting and telecommunications separately (which may only have some relevance to the technological medium used) that any legislative framework can address all these issues. Moreover, whether and to what extent regulatory convergence can and should take place is not self evident. These are some of the challenges that the Bill must respond to.
4. Cell C is of the view that it is important to acknowledge concerns about the nature, the unevenness, as well as the pace of convergence to assess the need for revision to telecommunication law, be it as thorough as envisaged or of a more limited change, as it will inform perspectives on the Bill and the urgency of this legislation.
5. Convergence as a Continuation of Managed Liberalisation

1. It is Cell C’s view that the gradual introduction of a convergence legislative framework in South Africa is not only desirable, it is to be commended, but that the implementation thereof should be in line with the managed liberalisation process set out in the White Paper on Telecommunications Policy (1996). This is particularly important given the phase of development that the communications sector in South Africa is presently at.
2. The process of managed liberalisation has picked up pace with the promulgation of the Ministerial Determinations in September 2004. In Cell C’s view measures provided for in the Ministerial Determinations represent a critical phase in the managed liberalisation process which necessarily precedes convergence. In the interests of policy continuity and the promotion of a stable, functioning and efficient communications sector, a phased approach to the further liberalisation and revision of the market structure and licensing framework is recommended.
3. In the phase between the implementation of the Bill and the abrogation of existing legislation it is important that a lacuna does not exist. It is therefore important that the transitional provisions are unambiguous as Cell C will discuss in its submission.

6. Changing the licensing framework and market structure

1. Cell C supports the intended shift from a vertical to a horizontal licensing structure, and is of the view that it is critical that the various licence categories ,and the markets they address, as well as the procedures for obtaining such licenses are clearly defined. Cell C is however concerned that the horizontal license categories proposed in the Bill are confusing and unclear as to amplify the problems attendant upon the poor service definitions and the manner in which licensing is addressed in Chapter 3 (Licensing Framework) and Chapter 13 (Transitional Provision). This will be discussed in greater detail in Part B where Cell C highlights areas in respect of which confusion exists, and proposes possible solutions thereto.
2. Cell C is also concerned about the transitional measures that have been proposed in the Bill to address the re-licensing of existing players in the communications sector. The lack of clarity in the various license category definitions, the absence of definitions of existing license categories, and the incomplete license mapping process detailed in the Bill does not facilitate stability, nor does it promote confidence in the new convergence licensing framework.
3. Cell C would further wish to alert the Portfolio Committee to the fact that any change in the licensing framework should not negatively affect the license rights of existing licensees. A license represents a compact between the regulator and an investor. Any license conversion processes that are embarked upon should ensure that when new licenses are issued under a conversion framework they do not prejudice existing license rights.

7. Regulation and Competition Law

1. Regulatory Trends: Ex post vs. Ex ante

1. A regulatory trend globally is the move from sector ex-ante regulation by sector-specific law towards the ex-post application of competition law. It is argued that even if convergent services are not yet a reality in developing countries, the recommended way of action is to proceed with a forward-looking approach to regulatory reform, in order to allow for the timely adoption of new and efficient regulatory models. Cell C believes that this approach is commendable and worthy of support in the long term, but notes that it must accompany the liberalisation of the communications sector and not precede it.
2. The Organisation for Economic Co-operation and Development ("OECD") noted that, internationally, regulatory reform has rarely consisted of simply abolishing regulations and leaving everything up to market forces operating within the general framework of competition law. According to the OECD, regulators must remain responsible for the promotion of competition and the formulation and/or application of general or sector specific competition laws or rules as is appropriate.
3. In ex ante regulation, regulatory intervention is triggered at a much earlier point in time due to the acknowledgement of unequal power between the market participants and the express need to address the competitive operation and orientation of telecommunications markets. Regulators have accordingly sought to ensure regulatory intervention prior to any instance of market failure. This is seen in the promulgation of interconnection and facilities leasing guidelines, the imposition of COA/CAM obligations, and other regulatory interventions that have been made by ICASA. Conventional competition law in its ex post orientation, requires intervention only in the case of actual market failure. Cell C is of the view that pursuing ex post regulation at this stage of the development of the South African communications sector would be a high risk approach, in particular given the unequal nature of competition in the primary telecommunications markets characterised as they are by a monopoly in one instance and a duopoly in the other which have been largely resistant to competitive forces.

2. Concurrent Jurisdiction

1. Section 3 of the Competition Act (No. 89 of 1998) provides for shared responsibility and co-operation between sector-specific regulators and the Competition Commission, termed "concurrent jurisdiction". This provision was included in the Competition Act to ensure that the inconsistent, investment-discouraging application of two sets of potentially conflicting policies is avoided and the opportunity to leverage the resources and expertise of both sets of regulatory authorities is taken up. The conclusion of a Memorandum of Understanding ("MoU") between the Competition Commission and ICASA has been a positive development in that respect. However Cell C is concerned with the difficulty in interpreting and implementing the MoU. The scarcity of specialised skills required to analyse the telecommunications industry from a competition perspective has also been a matter of concern.
2. It is therefore Cell C’s proposal that although concurrent jurisdiction must be maintained, the MoU should be reconsidered. Instruments used for the implementation of the MoU, such as the "working group" must also be reconstituted to ensure that they are properly skilled and resourced.
3. It is critical that the Convergence Bill comprehensively addresses competition concerns. In the discussion of sections 8(3) to (7) and 63, this regulatory concern will be discussed in greater detail.

3. ICASA’s Roles and Powers

1. Cell C believes that the Convergence Bill should, in all aspects, support the cornerstones of effective regulation – transparency, legitimacy and credibility. Transparency means that regulators operate in the open, as attend upon public decision making, publish their decisions, and explain them. Legitimacy means that consumers trust the regulator because they view the regulator as independent from the industry. Credibility means that investors trust the regulator because they view the regulator as dependable and impartial.
2. It is clear from the draft legislation that the intention of the drafter is to ensure that issues relating to process are dealt with by the ICASA Act and the proposed amendments thereto. Cell C consider it a matter of some concern that the Convergence Bill and the ICASA Amendment Act, two pieces of legislation which are complementary, were not published together. Without having had sight of the ICASA Amendment Act it will not be possible to assess whether transparency, legitimacy and credibility will be achieved in the new dispensation. This is because it is not clear what the proposals for the funding of ICASA are or how the constitution of its Council, its decision making and enforcement powers, amongst others matters, are addressed. The Bill, at the very minimum, must be read with the ICASA Amendment Act in order to provide certainty, avoid any ambiguity and facilitate its implementation.
3. Cell C notes that the subject of the Bill is not ICASA and its powers, but given the relevance of same to the application of the Bill, this issues is addressed in Annexure A hereto.

4. Digitisation

1. Digitisation underpins convergence. The Minister of Communications stated at the joint launch of the Digital Broadcasting Advisory Body ("DBAB") and South African Broadcast Production Advisory Body that:

"It is imperative that South Africa defines its technology needs and put in place a long-term framework for the digitisation of its broadcasting, internet and multi-media networks."

2. In light of the above initiative and the discussion document produced by the DBAB, Cell C is concerned that although section 30 makes provision for digitisation in terms of radio frequency planning, the Bill does not refer to any long term framework that would facilitate digitisation in South Africa, in line with the rest of the world. Should the intention have been to utilise section 4(1)(2) of the Bill to facilitate this process, Cell C wishes to emphasise the importance of prioritising the initiation of the process.

5. Broad Based Black Economic Empowerment

1. The Broad Based Black Economic Empowerment (BBBEE) Act establishes a framework for Black Economic Empowerment (BEE) which includes the creation of Codes of Good Practice which all organs of state, including ICASA, are obliged to use in licensing. Consequently, all licences issued in terms of the Bill will have a mandatory empowerment component.
2. Bearing this in mind, Cell C respectfully suggests that section 5(8)(b) be amended to incorporate the ICT Code of Good Practice as a basis for addressing empowerment in all licences issued.

1. Section 1: Definitions

Comment on the definitions will be with respect to how the definitions are currently drafted in the draft legislation. Proposals for additional definitions will be provided in the commentary.

2. Section 2: Object of the Act

1. Cell C finds it difficult to comment on the objectives of the Bill, as listed in section 2, without the benefit of a Green and White Paper process which outlines government’s vision with respect to convergence policy and legislation. However, although it only addresses convergence in section 2(a), the list of objectives appears to comprehensively cover the policy objectives that have been mentioned by government in the past with respect to both telecommunications and broadcasting legislation.
2. Cell C is accordingly of the belief that the proposed legislation seeks to facilitate the achievement of government’s previously stated economic and social objectives in a market characterised by convergence of technologies and markets. In addition, that it seeks to consolidate the existing communications legislation. These considerations underpin our response.

1. CHAPTER 2: POLICY AND REGULATIONS

1. Section 3: Ministerial policies and policy directions

1. The first phase of telecommunications reform generally involves the separation of network operation, policymaking and regulation. Incumbent operations are commercialised, often privatised, competition is introduced and network development objectives are established. Industry specific regulators are established to drive the process of policy implementation. The telecommunications sector in South Africa has followed a similar path, yet, even before this first phase of reform has been completed, technology and market developments are blurring industry boundaries and the effectiveness of industry specific telecommunications regulation.
2. In general this Chapter provides for a separation of roles and functions between the Minister and the Authority. Cell C supports the involvement of the Minister in providing policy guidelines to ICASA; however, the independence of a regulator is of significant importance to the industry, particularly as it assures its impartial management and provides the necessary credibility to its decision making. Cell C therefore proposes that subsection (4)(a) be amended to state that the Minister must consult the Authority when issuing a policy direction.
3. It is furthermore submitted that the requirements that interested parties are provided the opportunity to submit comments on policy directives and regulations is not sufficiently robust. There is also no requirement, for example, for the Minister to take the views that have been submitted into consideration.
4. Cell C lastly believes that section 3(1)(h) which provides that the Minister may make policies which may be necessary for the application of the Act or related legislation, is extremely broad specifically because there is no reference or any indication as to legislation which may be "related" to this Bill. It is also contrary to administrative law for Parliament to delegate authority in an Bill to make policy in terms of another Bill. Such delegation must be contained in the specific Bill in terms of which the policy is made.

2. Section 4: Regulations by Authority

1. Cell C supports the provisions contained in section 4, and applauds the level of independence afforded to the Authority by giving it the ability to make and promulgate its own regulations. Cell C is however concerned that section 4(1) provides that the Authority may make regulations with regard to any matter which in terms of this Act or the related legislation must be prescribed, governed or determined by regulation. In regard to the latter Cell C would reiterate its comments in 2.1.4 above.
2. Section 4(6)(b) provides that the Authority need not declare its intention to make regulations, nor invite written representations on such regulations where the "public interest" requires that such regulation should be made without delay. Although Cell C recognises that this provision is taken from the Telecommunications Act, this is again extremely broad and allows the Authority to make regulations without comment or input from interested parties as long as it can justify that the "public interest requires the regulations be made without delay." This would be easy to justify in almost any circumstance since ICASA is established to regulate all matters in the public interest. Cell C therefore proposes that this provision should only be applied in exceptional circumstances and only in instances of "national interest," and not "public interest".
3. Reference is furthermore made in subsection (2)(a) to section 17F of the ICASA Act. The ICASA Act does not currently contain a section 17F, and Cell C therefore reiterates its request for the DoC to provide it with clarity in this regard.

2. CHAPTER 3: LICENSING FRAMEWORK

1. Section 5: Licensing

1. Cell C notes that the Convergence Bill is fundamentally different from existing telecommunications and broadcasting legislation with respect to its approach to licensing. This approach will undoubtedly have an impact on the market’s structure. The Bill provides a framework for the shift from the current vertical market structure, where an operator is issued with a single, sector based and technology specific license to ‘build, operate and maintain’ a network and to deliver telecommunications services using that network, to a horizontal regime in terms of which separate licenses will be issued for the rollout of infrastructure (communications network service licence) and the delivery of services (communications service licence) and application service licences. Providers of communications network services will be issued an individual licence, and providers of communications services and application services will receive class licences.
2. Although Cell C in principle supports the shift from vertical to horizontal licensing and market structure, it respectfully cautions that the Bill is unclear in this regard and the re-licensing process may not result in the proper licensing of services in terms of the new licensing framework.
3. To begin with the term ‘communications services’ in the Bill is not used consistently. In the Licensing chapter, for example, it appears that the term ‘communications services’ is used in two ways – in some instances it is used, as per definition at the beginning of the Bill, to refer to services carried over a communications network. In other instances it is used broadly to include any service, including network services, for example in section 15(1) on the cancellation and expiry of individual licenses.
4. Although they are meant to be two distinct license categories, the definitions of ‘communication service’ and ‘communications network services’ seem to be circular.

1. The Bill provides that a communications service is "a service provided ….(consisting) wholly or mainly of the conveyance of communications over communications networks…" It is indicated that a "communications network service means a communications service whereby…" These two definitions are fundamental to the understanding of this Bill and therefore must be clarified.
2. Cell C’s understanding and the basis for its submission in this respect, is that a communications service is a service provided on a communications network, and that a communications network service is a service in respect to which network facilities are made available. A further complication is that the definition, of facilities is extremely broad, as will be discussed later in Cell C’s submission.

5. With respect to the differentiation between class and individual licenses, Cell C supports this approach, which is in line with international best practice to licensing. In terms of the Bill, individual licenses will be issued for communications network services (upon invitation by the Minister), spectrum, broadcasting services, and any other services that the Authority may prescribe.

1. Cell C agrees that individual licenses should be retained to govern activities where a high degree of regulatory control may be required. Such activities would include any activities involving the use of scarce resources (spectrum and numbers) and involving essential facilities. However, Cell C notes that individual licenses may exist across horizontal license categories; there may accordingly be individual network service licences, individual communications service licences, and individual application service licenses. The same is true for class licenses. In some instances, as provided for in section 6, license exemptions may be required.

1. To illustrate the above, the following example is provided;
2. A communications network service licensee such as a licensee providing bandwidth services, broadcasting distribution services or mobile cellular services would be granted an individual network services license. A person providing a two way paging network service, or a CCTV network, for example, would get a class network services license. Finally LAN services and private networks constitute communications network services, but should be exempt from licensing. In essence the level of regulatory oversight and the impact on scarce resources would act as indicators of the nature of licensing required.

6. Sections 5(2)(d) and 5(3)(c) provide that the Authority may grant individual and class licenses for "such other services as may be prescribed", however there is no indication as to who would prescribe such services. The statement is extremely broad and would allow either the Minster or the Authority to require that licenses be issued for any service that they may prescribe. There is also no process, such as the one followed in the drafting and promulgation of this Bill or Regulations under the bill, set out for prescribing such services.
7. Section 5(4) further provides that the Minister shall set a date as of which the Authority may accept and consider applications for communications network service licenses. Cell C supports the proposal that certain communications network service licenses be issued upon invitation only. As previously stated this should apply where such network services involve the use of scarce resources (numbers or spectrum) or the use of essential facilities or the scale of investment required for the provision of services warrants a limitation in the number of licenses issued. This, in Cell C’s view, is necessary to address the high investment and capital cost associated with rolling out communications infrastructure, as well the dependence, particularly in the mobile cellular environment, on access to a scare natural resource like the frequency spectrum.
8. Cell C is of the view that the invitation to apply (ITA) for an individual license should only be issued once a market study has been conducted and the feasibility of additional entrants in the relevant market has been determined. As such, Cell C proposes that phrase "after feasibility study has been conducted" be added to section 5(4).
9. Cell C is concerned that the application of section 5(8) is very narrow and makes provision for the ‘involvement of historically disadvantaged persons and the pursuit of diversity and broad representation" only with respect to communication services, and not broadly in the communications sector. It is Cell C’s view that "communications network services, and application services" should be added to section 5 (8) (a), and therefore the issuance of such licenses should take into account diversity and empowerment.
10. Cell C notes that black economic empowerment ("BEE") frameworks are being developed for the ICT sector and an Act has been passed to facilitate its implementation, in some respects the Convergence Bill is at variance with this process.
11. There appears to be a disjuncture between the various legislative instruments and terminology used to address one and the same issue. Accordingly, Cell C recommends that the terminology used should be consistent in the Bill should be consistent with that used in overarching legislation like the Broad Based Black Economic Empowerment Act, and codes such as the DTI’s Codes of Good Practice and the ICT Charter or ICT Code of Good Practice.
12. Section 5(9) (a) provides that all individual and class licenses will be issued for a period of 25 years, unless the applicant requests a shorter period. Cell C believes that while a long license period is warranted in the case of communications network service licenses due to the significant investment in infrastructure and the need to recoup such investment over an extended period and the time required to rollout such networks, the same argument cannot be said to be true for class licenses. Cell C proposes that the license period for class licenses be reduced; however the renewal process for such license should be simple (a re-registration process essentially), in order to ensure that proper records and statistics are kept although regulatory oversight over class licensees should in essence be minimal.

 

2. Section 7: Prohibition of provision of service without licence

Cell C supports the contents of this provision and will discuss a process in terms of which offenders should be dealt with in its discussions on section 64.

3. Section 8: Terms and conditions for licences

1. With increasing competition in communications markets it should be possible to reduce the complex and detailed information included in licences and required of licensees. Cell C supports the approach wherein general license terms and conditions are set for certain categories of individual and class licenses. Cell C notes that it has been a source of concern in the industry that different standards seem to apply with regard to different operators competing in the same market.
2. In the case of individual licensees, the license terms and conditions should only differ where:

1. an operator has significant market power ("SMP") status in which case Cell C believes that the additional obligations should not be included in the license, but should, for the sake of clarity and consistency, be contained in regulations that apply across the board to all licensees with SMP. This will obviate the need to amend license conditions once a licensee achieves SMP status or is removed from the list of SMP operators; or
2. an operator proposed additional license conditions in its application for an individual licence. In such instance, in Cell C’s view the additional obligation/s should be placed in an annexure to the general licence terms and conditions.

3. Section 8(5): Significant Market Power

1. One of the most important substantive changes to communications legislation evidenced in the Bill is the introduction of the principle of significant market power ("SMP") which, if implemented properly, will significantly alter the way in which ex ante regulation is imposed on companies in the communications sector.
2. Cell C notes the proposal in the Bill that a market power test be introduced in the new communications legislation. This is in line with international best practice and will provide for the objective determination of operators with SMP. Operators with SMP face additional obligations aimed, inter alia, at controlling the exercise of their market power. As a practical matter, the point of an SMP determination will ensure that the regulatory focus is on established communications operators that have market power.
3. In this respect, Cell C has two broad comments on the issue of SMP – firstly consideration should be given to the alignment of principles in the Competition Act and those used in the communications sector. Secondly, Cell C is concerned that a process for determining SMP is not adequately detailed. Each of these concerns will be dealt with in turn.

1. It is, in Cell C’s view, important that there should be alignment between competition legislation and communications legislation with respect to references to dominance in a market. Further, alignment between interconnection regulations and the legislation is advisable. The use of similar yardsticks and terminology across the communications sector and the broader competition framework will be of benefit, particularly in light of the fact that ICASA and the Competition Commission share concurrent jurisdiction. However, ICASA is the competent body to make such determinations, where necessary in consultation with the Competition Commission, in terms of the MoU.

4. Section 8(3): SMP Determination Process

1. Cell C is concerned that section 8(3) introduces the notion of SMP, but does not detail the process that ICASA is to follow in making an SMP determination. Given the impact of such a determination, it is important to ensure that due process is followed and to guard against disputes that may derail the process.
2. In Cell C’s view an additional section is required to deal with SMP determinations and the setting of SMP conditions. Such section should ensure that before making an SMP determination, ICASA :

• Identifies the relevant product and geographical markets and carries out an analysis of the same;
• Notifies the affected licensees of the process they propose embarking upon and the potential effect thereof;
• Provides reasons for embarking on the process; and
• Specifies the period (not less than 30 days) within which representations may be made to ICASA about it’s proposal.

1. Section 9: Application for and granting of individual licences

1. Section 9(2)(e) provides that "in the case of an application for an individual license the Authority must -…submit to the Minister the proposed licence conditions for approval." As stated above Cell C supports the separation of powers between the Minister and the Regulator and is of the view that the responsibility for making license conditions should rest solely with ICASA. Obtaining approval from the Minister for the license conditions for each and every license will also cause substantial delays in both the issuing of new licenses and the conversion of current licenses.
2. Definitions of communications network service, communications service and communications facility

1. In order for there to be clarity and a common understanding of the proposals in the Bill on individual licensing, it is critical that the definitions of communications network, communications network service and communications facility are clarified. The definition and treatment of communications network services is highly problematic. Communications network service is defined as meaning "a communications service whereby a communication network service licensee makes available a communications network or communications facilities…" The problem with the cross reference to a communications service was highlighted earlier.
2. ‘Communications facility’ is defined very broadly to include on one hand wires, routers, cables and masts, which clearly do not require licenses, and on the other, the definition includes cable landing stations, earth stations and international gateways which under the current framework require licensing.
3. It would appear that all facilities fall within the scope of a communications network service. Section 85(3)(e) provides confirmation of this in providing that the listed items are "communications network services or communications facilities". The apparent effect of section 85(3)(e) would be that any person with a telecommunications facility would have to have such facility converted to an individual network service licence. Similarly a mobile cellular telecommunications network (MCTN) or public switched telecommunications network (PSTN) would be converted to an individual network service license. In terms of section 85(4) the Authority could "grant additional rights to licensees with commensurate license obligations in order to convert existing licenses…" The effect of this is that any person providing telecommunications facilities today (e.g. a Least Cost Router) could in the convergence framework obtain a network service license and equal rights to a MCTS or PSTS. This clearly cannot have been envisaged by the drafters.
4. This situation can be corrected either by revisiting the definition of communication facilities and having a separate license category (horizontal) for communications facilities which is divided into class and individual licenses; or retaining facilities in the network services definition, but ensuring that a clear distinction is made between class and individual licenses within the network service category. Using the example above, LCR’s may get a class license or an exemption and MCTS would get an individual license although both may be providing communications network services.
5. Where a communication network service uses facilities such as routers, switches and cables, a class licence or licence exemption should be granted in the ordinary course as little or no regulatory protection is required, and no scarce resources are used. Use of these facilities should be clearly distinguished from the use of facilities such as MCTN, PSTN and international gateway, since all of them fall under the definition of communication facilities.

3. Individual Licence applications

1. The approach envisaged in the Bill of gradually increasing competition in the communications network services category is consistent with the historical approach taken by the South African government of ‘managed liberalisation.’ Cell C supports this approach since it is in line with the Ministers recent determinations on the liberalisation of the telecommunications sector, and the policy process outlined in the 1996 White Paper.
2. It is Cell C’s view that the market study and the decision to open the market to more network service licensees should rest with the communications sector regulator, ICASA. The Minister, as per Chapter 2 of the Bill, should be responsible for the setting of policy, and the Authority should be responsible for the implementation thereof which includes the determination of optimal conditions for market entry and licensing.
3. Cell C is of the view that in terms of section 5(5) the geographic areas and date must be determined at the time that the ITA is issued to give guidance to applicants and the sector with respect to the nature and scope of the envisaged licence.

4. Individual Spectrum Licences

1. The Bill seems to include spectrum as one of the categories of ‘individual licenses.’ In Cell C’s view, Chapter 3 should refer only to the individual licensing of services. The licensing of spectrum should be dealt with separately and differently. A spectrum licence is ancillary to a communications network service license or a broadcasting services license – a person should only be able to apply for a frequency spectrum license once s/he has been granted one of the two individual licenses which entitles him/her to build a network and to provide services on it. For example, a person cannot provide a cellular network unless they have been authorised to use the required spectrum in addition to being authorised to provide the network.
2. It is therefore impractical to make the process for applying for a spectrum licence the same as that for applying for a communications network service license or broadcasting services license, which is what the Bill in effect does. However, it is important that the spectrum licence is issued at the same time as the individual license which it complements in order to prevent any delays in network provisioning.
3. Cell C would therefore suggest that the licensing process for the frequency spectrum be removed from Chapter 3 (Licensing Framework) and dealt with instead under Chapter 5 (Radio Frequency Spectrum). References to spectrum licensing in sections 5(2)(b) and 5(6)(a)(i) should accordingly be deleted. Further, in Chapter 5, it should be clarified that only communications network services licensees and broadcasting services licensees, regardless of the manner in which they are licensed, may apply for spectrum.
4. Traditionally, spectrum has been allocated on a ‘first come, first served’ basis. Although from the perspective of the regulator this approach may be fast, practical and inexpensive, Cell C has, through experience learned that this approach has anti-competitive consequences and is not supportive of new entrants in a competitive market. Cell C would suggest that at all times equity be an overriding concern in the allocation of spectrum.

2. Section 16: Class licence

1. With respect to class licences, these are issued where less regulatory oversight is required, save for compliance with standard licence terms and conditions. Class licences should achieve the delicate balance of certainty and flexibility – they should allow operators the rights to provide a service under certain conditions, but at the same time, should not be so restrictive that they are ‘future-proof’ and ‘technology-proof.’
2. The Bill indicates that class licenses may be granted to communications service providers, including resellers; application services; and other services prescribed by ICASA. Cell C supports the approach of granting class licenses, but is concerned with the manner in which the provisions on class licenses are drafted in the Bill. Firstly, as discussed with respect to individual licenses, it is Cell C’s view that class licenses should be capable of being issued in all the horizontal license categories (See paragraph 3.1.5).
3. In addition, Cell C is concerned about the definition of a reseller. It is not clear, in looking at the definitions, how a reseller differs from a communications service licensee. Cell C seeks clarity in this regard.
4. Of concern is the fact that the Bill envisages a formal application process for class licenses. Cell C’s concern stems from the fact that while the Bill purports to support a class licensing/general authorisation scheme, the provisions which detail the licensing process for class licenses (sections 16, 17 and 18) are not consistent with what Cell C understands to be class licensing. The notion that a class license must be "applied" for is contrary to the purpose of a class licence which is to allow entry into competitive markets and reduce regulatory and administrative burdens.
5. Issuance of class license should involve (a) the definition of license eligibility criteria; and (b) the determination of license conditions. In the interests of transparency, these two processes should be subject to a public consultation process conducted by ICASA. Once the eligibility requirement and license conditions are determined and published, no selection process is required since all eligible operators or service providers will be licensed. Given the absence of a selection process and the open and transparent nature of the class license category, it is Cell C’s view that sections 16(1) and 17, dealing with the application for a class licence; section 18, dealing with the refusal of an application for a class licence; and section 19 which addresses a class licensees requirement to inform the Authority of changes to the service being provided, should be deleted in their entirety.
6. Cell C notes that the Authority may need to keep a register of class licensees for information and statistical purposes, in circumstances where they do not control market entry. In light of this, it is important that class licensees notify ICASA of their intention to provide services. Cell C would therefore proposes the insertion of the following clause on class licensing:

1. A person shall not provide a service described in section 5(3) unless before the date of commercial service provision she/he has given a notification to ICASA of his/her intention to provide that service.
2. A notification for the purposes of (1) must

1. be sent to ICASA in such manner as ICASA may prescribe; and
2. contain such information as ICASA may prescribe.

1. Section 21: Guidelines for rapid deployment of communications facilities

1. Cell C believes that the current procedure for site acquisition and build is generally time constrained by the numerous environmental studies and authorisations that have to be obtained. Cell C appreciates the necessity thereof and concedes that such studies and procedures may be required to ensure that environmental standards are maintained.
2. We do however note that the section on "rapid deployment and provisioning of communications facilities", a section we assume that was inserted to provide for an expeditious network rollout mechanism, is unclear in that it does not describe situations in which speed is the motivating factor, nor does it detail the criteria that are to be met to qualify for rapid deployment, as opposed to normal deployment.

2. Section 22: Entry upon and construction of lines across land and waterways

Cell C notes that no mention is made of access to land owned by private parties in this provision and believes that it should be included into the section.

3. Section 24: Pipes under streets

In terms of section 24(2) and 24(3), Cell C notes that the Authority or other persons are entitled to observe works in progress if the works are being performed by the communications network service licensee or any of its contractors. The communications network service licensee will accordingly not be liable for the costs of observing the works in this instance.

4. Section 27: Trees obstructing communications network facilities

1. Cell C would prefer the option of costs incurred in this regard to be for the account of the communications network service licensee if it is capable of performing the work at the same or better standard as the authority responsible for the care and the management of such State owned land, road or private land.
2. The notice period should also be more specific and we propose a period of 30 days.

4. CHAPTER 5: RADIO FREQUENCY SPECTRUM

1. Section 30: Control of radio frequency spectrum

1. Cell C acknowledges that spectrum management is a key function of ICASA and supports that provision that the function remains with the regulator. However, it is unclear what the reference to planning, controlling, managing and administering of the frequency spectrum referred to in section 30(1) constitutes. Cell C seeks clarity on the Authority’s specific responsibilities in carrying out each of the above-mentioned functions with respect to the frequency spectrum.
2. In terms of section 30(2)(b), Cell C supports the practice of efficient utilisation of the radio frequency spectrum but is unclear as to what is meant by shared use of frequency spectrum. Cell C, like many other operators in the telecommunications sector, is licensed nationally. It is therefore of the opinion that access to the frequency spectrum must be granted on a national basis. This means that in most instances the possibility of ‘sharing’ the spectrum (geographically) will not exist as this will cause harmful interference. Only geographically licensed communications network service licensees would be able to ‘share’ specific spectrum, unless a different frequency spectrum regime is envisaged from that which is commonly understood.

2. Section 31: Radio frequency spectrum licence

1. Cell C supports the proposal that the Authority should have the mandate to withdraw or amend any frequency spectrum licence should the licensee be in breach of the conditions and terms contained in that licence.
2. Furthermore the Authority should have the power to conduct an audit process to ensure the most efficient use and re-use of the frequency spectrum. It is submitted that regulations should be made to state the principles and requirements of efficient use and re-use of spectrum.

3. Section 33: Frequency co-ordination

Section 33 is vague and a repetition of the statement in section 31 including the terms and conditions contained in the communications network service licence. Cell C therefore proposes that section 33 should be deleted in its entirety.

4. Section 34: Radio frequency plan

1. Cell C notes that the radio frequency band plan is a critical element of the regulatory framework. Cell C believes that based on the fact that frequency spectrum is a national asset, public access to frequency allocations should be mandated, unless for security reasons such information must be kept confidential. It is suggested that a register/database of radio frequency allocations should be made available within 12 months of this Bill being enforced and should be updated every six (6) months..
2. Cell C is concerned that the roles of the Minister and the Authority with respect to spectrum management are not clearly delineated. While the Minister should be responsible for spectrum policy (as per Chapter 2 of the Bill), the actual management of the spectrum should be performed by ICASA. Although, per the provisions of section 34(14), Cell C recognises that there may be a need to allocate frequency in the national interest (i.e. to Department of Defence), it is important that the function of allocating spectrum remain with the Authority. Cell C suggests that in such instances ICASA should allocate spectrum on the advice of the Minister.
3. Cell C believes that the Minister should only approve the migration process as stipulated in the frequency band plan and the Authority should be mandated to implement and co-ordinate it.

5. CHAPTER 6 TECHNICAL EQUIPMENT AND STANDARDS

1. Section 35: Approval of type

1. Cell C supports the inclusion of type approval provisions in the Convergence Bill, and proposes that the heading of this section be amended to refer to "Approval of equipment" rather than "Approval of type." This change should be effected throughout this section.
2. Cell C notes with concern that it was decided to do away with section 54 of the Telecommunications Act that deals with the registration of suppliers of telecommunication facilities and equipment. Cell C believes that the retention of section 54 of the Telecommunications Act is critical as equipment approval (type approval) protects consumers, operators and the network. The importance of having a registration process for communication equipment providers cannot be over emphasized. First of all the objectives of the Convergence Bill include protecting consumers, encouraging investment and innovation in the sector and encouraging research and development, amongst others. It is therefore important from a regulatory perspective for ICASA to be aware of the players in this space.
3. The registration process will assist ICASA to contact suppliers, should the need arise. It will also be to the benefit of the economy to control, to the extent possible, the importation of illegal or defective equipment and the importation of unapproved equipment and the dumping of obsolete equipment.
4. Any equipment approval (type approval) obtained should also only be valid for a limited period of time (5 years renewable for 2 year periods thereafter). Equipment type approved could accordingly be limited to defined services, applications and functionality. Cell C believes in the evolution of technology and the drive toward the digitisation of communications and in the provision of affordable advanced communications services and equipment to consumers.
5. Cell C therefore proposes that the following be included into the Convergence Bill:

"(1) No person shall supply communications equipment unless, subject to subsection (2), the person has been registered by the Authority.

(2) The procedure for obtaining registration in terms of this section shall be as prescribed."

6. Finally, Cell C believes that clear provisions must be added to allow ICASA to confiscate any equipment that has not been type approved and to dispose of such equipment in the required manner.

2. Section 36: Technical standards for equipment and communication facilities

1. Past experience has revealed that developing countries often become dumping grounds for outdated or older technology. In order to ensure that South Africa remains at an advanced technological level, Cell C proposes that ICASA should not only consider technical standards from a utility perspective when approving equipment, but also from a technical and technological development point of view. This approach will empower ICASA to respond to any situations wherein unscrupulous manufacturers or distributors dump technology that is being phased out elsewhere or is unsuitable for use in the South African context.
2. Proper regulations should be promulgated to first of all ensure that the Regulator is aware of the suppliers of equipment, but also that South African port and border authorities are able to confiscate unauthorised equipment. Allowing dumping or the continuous influx of phased out technology will have a grave effect on technical innovation, market development and the provision of competitive services, as no investments will be made in new technology if operators know that consumers are utilizing outdated technology which cannot support their services. It is a well known fact that technological development and investment are purely market driven and will not be instigated unless it is economically feasible.
3. In order for South Africa to keep up the pace with the rest of the world, equipment approvals (type approvals) should not be for an unlimited period of time, as is currently the case, but should be granted for a specified period as referred to in Cell C’s comments on section 34 above.
4. Cell C furthermore wishes to bring to the attention of the Department that the disposal of mobile handsets in an environmentally friendly manner is an issue that has recently come to the fore. It is therefore proposed that provision should be made for regulations which address the orderly disposal of equipment that is potentially hazardous to the environment.

6. CHAPTER 7: INTERCONNECTION

1. Section 37: Obligation to Interconnect

1. Cell C is broadly in support of the provisions in the Bill relating to interconnection. Specifically Cell C supports provision in Section 37(1) that interconnection must occur between individually licensed communications network service licensees and individually licensed communications service licensees. For example VANS will have a class communications service license and therefore cannot interconnect, however Mobile Virtual Network Operators ("MVNOs") will have an individual communications license and can interconnect.
2. Cell C is of the view that all networks must connect in order to enable communication across networks and between end users; however, it is Cell C’s view that such connection does not necessarily imply interconnection. Interconnection, and specifically any-to-any interconnection, must be understood to take place in a context where parties have a reciprocal right, and in fact a need, to terminate traffic or transit on another network.
3. It should further be noted in this respect that interconnect arrangements must be reciprocal. There must accordingly not simply be a desire to interconnect but an understanding that interconnection, when it takes place, must always be on a reciprocal basis. The Bill is consistent with this view point.

2. Section 38: Interconnection regulations

Cell C would like to express its support for the provisions of section 38. Cell C believes that it comprehensively addresses all issues that would need to be considered in respect to interconnection, further that the principle of dealing with additional matters in the anticipated regulations is a practical approach.

3. Section 39: Filing of Interconnection agreements

1. Transparency is a major policy objective of multilateral trade agreements as well as the national telecommunications policies of many countries. Confidential treatment of interconnection arrangements would provide incumbents with an opportunity to act strategically to thwart competitors. Publication of agreements also makes it easier for regulators and all industry participants to compare interconnection rates and their terms and conditions. Transparency also assists in developing industry standards and benchmarks, as well as best practices on operational and administrative issues.
2. Cell C therefore supports the provisions of section 39 relating to the publication of interconnection agreements.

4. Section 40: Notification of interconnection disputes

1. Dispute resolution in interconnection, is a strategic issue in telecommunications regulation. Interconnection disputes raise issues that are fundamental to the sector’s development. Disputes often arise from concerns regarding the availability of the infrastructure necessary to provide competitive services. Prolonged unresolved disputes can make interconnection effectively unavailable. Therefore, this can have the effect of seriously hampering investment and competition. An efficient and effective interconnection dispute resolution process is a hallmark of a successful and competitive telecommunications market.
2. It is Cell C’s view that parties to interconnection and resale negotiations must have confidence from the outset that workable and effective procedures exist to bring about timely and binding decisions if parties are unable to reach agreement among themselves.
3. Section 40 provides that a party to an interconnection agreement shall notify the Complaints and Compliance Committee of the dispute and the Committee will resolve the dispute on an expedited basis. The Committee is to be established in terms of the ICASA Act. Without the ICASA Amendment Act having been promulgated or drafts circulated for comment, it is difficult for Cell C to comment on the potential effectiveness of the Committee as a dispute resolution mechanism. Cell C therefore remains concerned at the absence of an effective mechanism to deal with interconnection disputes.

5. Section 41: Interconnection pricing principles

1. Cell C believes that the determination of interconnection rates within the context of an interconnection framework should be left to ICASA, as is currently the case and not be fixed by legislation. Further, pricing principles should only be applied to operators that have been found to have SMP. Access and access charging should be included as the additional obligations for operators determined to have SMP. A clause to this effect should be included in the section.
2. Cell C believes that forward looking incremental cost (plus an appropriate mark-up for forward looking fixed and common costs) should be the basis for pricing interconnection services which form part of a SMP operator’s networks. Any departures from this standard will distort and deter investment by new entrants.
3. Therefore and in line with the draft interconnection guidelines and the COA/CAM regulations, Cell C proposes the following amendment to substitute section 41(2)(a) and (b):

"41(2) Where an operator has SMP, interconnection rates shall be determined on the basis of the principles that rates must be related to economic costs.

7. CHAPTER 8: COMMUNICATIONS FACILITIES LEASING

1. Cell C earlier in its submission (see paragraph 3.4.2) argued that the definition of communications facility was unclear. The definition is so broad as to include nearly any ‘thing’ used in connection with telecommunications. Given the wide definition, Cell C is concerned that facilities from wires and routers to masts and earth gateway stations, fall under the scope of facilities leasing regulation by ICASA. Cell C cautions that there may be unintended consequences should this term be used with respect to licensing.
2. It should be noted in this regard that in some jurisdictions communications network facilities form a separate licensing category and this distinction had been considered in previous discussions on the Bill. The treatment of communications facilities in this Bill as both a license category in terms of the transitional provisions and as a component of the communications network services in terms of the definitions is confusing. Cell C seeks clarity in this regard.
3. Finally, it is Cell C’s view that as is the case with interconnection, additional obligations with respect to cost, pricing principles and the duty to provide, should be restricted to operators with SMP, in the interests of fair competition.

8. CHAPTER 9: BROADCASTING SERVICES

1. Section 48: Application

1. Cell C notes that despite the fact that it seeks to address both broadcasting and telecommunications, the main focus of the Bill has been towards resolving the complexities that the current legislative framework for the provision of telecommunications services has given rise to and not to address broadcasting and content services which may be delivered on telecommunications platforms. Cell C notes that there is bound to be difficulty in addressing telecommunications and broadcasting in one piece of legislation given the differences that still exist in the two markets and the rationale for regulation of the industries differs and that they are, accordingly, regulated differently.
2. Unlike telecommunications which is regulated, for the most part, in accordance with principles of economic regulation, broadcasting is governed in accordance with both economic principles (networks and access), as well as principles related to democracy, plurality and diversity, amongst others. The central issue of convergence is the interplay between content and the means of conveying that content (the network). It would seem that the challenges posed by content creation and information provision, manipulation, storage and display in the unfolding digital environment and in which any network may increasingly be used for narrow (point to point communication) or broadcasting, has not been thought through and have been a secondary consideration to telecommunication licensing and infrastructure licensing reform agenda.
3. Although Cell C is not a competitor in this market, the point to be made is simply that the limited reference to the content side of the broadcasting industry in this major policy review represents a glaring omission. The intention of the legislator may have been to include requirements attendant upon content provision into the licence conditions of all broadcasting service licensees, however specific regulations are provided for in the legislation for subscription broadcasting service licensees, as well as communication service licensees whenever they provide signal distribution or multi-channel distribution. It is therefore submitted that the position regarding "free-to-air" broadcasting service licensees should be clarified.
4. Cell C further notes that broadcasting service licences are individual licences, unless otherwise provided for in terms of section 6. However, because the radio frequency spectrum for broadcasting is regulated, the practicality of this provision where temporary licences are under consideration is questionable. Therefore it is proposed that provision should specifically be made for temporary licences.

 

 

9. CHAPTER 10: CONSUMER ISSUES

1. Section 60: Code of conduct and customer service charter

1. Codes of conduct and customer service charters are effective means to create a culture of consumer driven self-regulation, and Cell C supports these provisions. Cell C does however wish to bring to the attention of the Portfolio Committee that these codes should make specific reference to people with disabilities in order to ensure their inclusion at all levels in the communications industry.
2. As stated throughout this submission, Cell C is not in a position to provide meaningful comments on intended amendments to the ICASA Act, as it has not had sight of the proposed changes, for example the reference made in section 60(6) of the Bill to section 17G of the ICASA Act.

2. Section 61: Retail and wholesale tariffs

1. As an initial comment, Cell C is of the view that the definition of wholesale needs to be reconsidered.  Cell C proposes that the following definition be included in the Bill:

"wholesale" means the sale, lease or otherwise making available a communication network service to any licensee or reseller.

2. ICASA has been actively developing and implementing accounting principles during the past couple of years in the telecommunications industry, with the objective of levelling the playing field and ultimately ensuring that consumers enjoy the benefit of a stable and competitive market. Cell C supports this approach and stresses the importance of the retention of a Chart of Accounts and Cost Allocation Manual (COA/CAM) or accounting separation obligation on operators with SMP. However, Cell C would urge the Authority to ensure that the required market studies should be conducted in order to ensure that the policies it adopts and implements are based on sound research. The market definitions which have been used globally, generally relate to specific telecommunications markets, and within the framework of the Bill, may require further research, consideration and refinement.
3. The problem of defining the relevant markets in a converged environment may have the effect of further delaying the implementation of these accounting principles. Cell C maintains its argument raised in Part A of this submission, that it would be in the best interest of consumers to follow the evolutionary approach to convergence into the South African communications market. We would accordingly recommend that the current telecommunications licences and regulations should remain in place until the relevant studies has been conducted to ensure that the convergence legislation will in fact address converged networks, markets and services as envisaged and will be capable of implementation in the converged communications sectors in a transparent, fair and equitable manner.

10. CHAPTER 11: GENERAL

1. Cell C notes that Chapter 11 appears to deal with issues from the Telecommunications Act that the Bill seeks to retain. While Cell C supports the managed liberalisation process, and the need to ensure continuity, Cell C respectfully cautions the Portfolio Committee that importing clauses directly from the Telecommunications Act into the Bill, which has a different policy and legal context, may have unintended policy and legal outcomes. This is evidenced in the carry over of the current section 89(1), which addresses number portability, into the Bill.
2. Section 65: Number Plans and Number portability

1. Cell C is currently involved with ICASA and the other mobile operators in the implementation of mobile number portability ("MNP"). The introduction of MNP must occur by 31 December 2005 in terms of the Telecommunications Act. ICASA has embarked upon a regulation-making process in this regard and the finalization of the number portability regulations and MNP functional specification is expected shortly. Cell C is therefore concerned about the manner in which the number portability provision has been carried directly from the Telecommunications Act into the Bill. One unintended consequence is that number portability may, in the context of the Bill, be interpreted to include service provider portability, and portability between geographic and non-geographic (fixed and mobile) numbers given that number portability applies "when changing service from one communication service licensee to another communications service licensee" and that despite the change in the definition of the scope of number portability, all communication service licensees, both current and prospective will be bound to a December 2005 deadline!
2. With respect to section 65(1)(b)(ii), Cell C wishes to raise its concerns that cost allocation and cost recovery should be considered carefully by ICASA, as the objective of number portability is to stimulate competition in the communications market. Accordingly the costs related to MNP must be kept as low as possible, otherwise the ultimate goal of ensuring more efficient and affordable services to consumers will not be achieved.
3. It is furthermore not clear to Cell C, how number portability will be applied in a converged environment. The question arises whether porting from traditionally fixed operators to mobile operators and vice versa should be provided for in a converged environment, as the technical impact will, should that be the intention be severe and costs prohibitive. Needless to say it will render nugatory all the preparatory work that has been done in this regard to date.
4. Given the above, Cell C recommends a phased approach, whereby mobile number portability is first implemented between the current MCTS licensees, and further broadening of number portability happen thereafter and nothing be allowed to delay the implementation of mobile number portability beyond the end of 2005.

3. Section 62:

1. Ad section 62(6) of the General provisions, Cell C notes the retention of the government directory information services, and seeks clarity on the cost recovery mechanism for same which the Bill proposes be provided ‘free of charge’. Cell C seeks clarification on who will carry the costs of the provision of such services to the public.

4. Section 63: Competition Matters

1. Further to Cell C’s comments under Part A of this submission, Cell C would like to express its support for the application of the Competition Act to the communications industry, subject to the proposal that there be closer co-ordination between the Competition Commission and ICASA.
2. A very important aspect of the communications industry is the fact that communication is a right entrenched in the Constitution and that the communications industry is an industry which inherently makes use of scarce national resources, such as numbers and the radio frequency spectrum. Accordingly, Cell C would propose that ex ante regulation of fair competition be applied in instances where particular licensees have SMP. The nature of communications regulation requires that steps be taken before there is market failure. The approach that has been taken in a number of international jurisdictions, is that fair trading rules should apply to all, while stringent rules should apply to dominant operators.
3. Cell C reiterates the importance of conducting a market study in order to determine the level of competition in the different communications markets, as well as obtaining a clear understanding of the different markets in the communications industry, particularly in a converged environment.
4. Of equal concern to Cell C is ICASA’s lack of capacity in enforcing compliance. Cell C believes that the Authority should not only be in a position to direct the licensee by written notice to cease or refrain from taking particular action, but should also be able to impose appropriate penalties for non compliance.
5. Section 63(4) is an important element in providing the necessary assurance that the communications market provides for free and fair competition and it is submitted that a comprehensive complaints process be included into the regulations anticipated in this section. This will be elaborated on in our comments on section 64.
6. Cell C lastly wishes to caution against the inclusion of a provision such as the one contained in subsection 5, as it will have the effect of severely inhibiting the application of section 63 to all the different types of anti-competitive actions, to the detriment of the industry. It is therefore proposed that subsection 5 be amended to state the following:

"The Authority may publish guidelines that indicate the different types of behaviour that the Authority regards as anti-competitive."

5. Section 64: Offences and penalties

1. Cell C notes, with dismay, that the Bill does not include a provision dealing with offences by licensees, similar to section 100 of the Telecommunications Act. This is a critical enforcement provision. It is therefore submitted that the a provision be added to section 64 in order to ensure that any interested party, including ICASA, consumers and licensees, can complain against any contravention of the Act, licence conditions, relevant agreements, consumer codes of conduct, customer services charters and regulations. It is of particular importance that the roles and functions of ICASA be structured in such a manner that they have the capacity to adjudicate on matters, without exceeding the boundaries of fair administrative justice.
2. It is accordingly proposed that the following provision be included:

1. The Authority does not have the powers to impose imprisonment as a penalty and therefore the provisions providing for the imprisonment for the contravention of the Act have been excluded.
2. Cell C would furthermore wish to draw to your attention to the fact that under this section there is no provision for interim or urgent relief. It is submitted that it would be to the benefit of an efficient communications industry if the players in the industry can have the confidence that the regulator will, under specified circumstances, ensure that any conduct which may cause serious harm to the market will be urgently resolved by the regulator. It is of great importance that an interim relief provision should also be made applicable to complaints or concerns made to the Authority in terms of section 63.

1. Section 67: Carrier pre-selection
2. In order to define the relevant market or market segment that is referred to in subsection (1)(b), it is Cell C’s submission that, an extensive market study be completed, before ICASA will be in a position to make regulations. The intention of including carrier pre-selection provisions into the Telecommunications Act was to facilitate competition in the provision public switched telecommunications services. Cell C therefore proposes that this policy intention be attended upon, as it is vital to the competitive provision of PSTS; further, Cell C suggests that its extension into the market for converged services should only take place after a thorough market study.

4. CHAPTER 12: UNIVERSAL SERVICE AGENCY

1. Continued existence of Universal Service Agency

1. The White Paper on Telecommunications Policy envisaged the establishment of the Universal Service Agency for a defined period.
2. The White Paper further envisaged a review of the Agency by the Minister in conjunction with stakeholders after this period. This has not happened. Instead the 2001 amendments to the Telecommunications Act established a Board which was to have oversight over the agency and increased the beneficiaries to the Universal Service Fund. However, to date the Universal Service Agency has had difficulty in performing its mandated statutory obligations in accordance with the Telecommunications Act. It has elected to focus on infrastructural rollout projects as opposed to its advisory and research functions.
3. It would, in Cell C’s opinion, be prudent to evaluate the USA’s effectiveness before exporting all the provisions in respect of its operation from the Telecommunications Act into the Bill.
4. Universal access and service policy in most jurisdictions remain within the ambit of the Regulatory Authority. The statutory separation of the function, as has been the case in South Africa, has not been successful and we would suggest that there is scope for the incorporation of the Universal Service Agency into the Regulator.
5. Should the continued existence of the Universal Service Agency be deemed the most suitable method of bridging the digital divide, Cell C respectfully makes the following recommendations:

1. Greater institutional links between the Regulator and the Universal Service Agency must be created in legislation.
2. The USA’s functions and powers must be limited to –

• Assessing and evaluating the achievement of access to communications
• Defining universal access and service
• Identification of market segments where market forces have failed to achieve universal service
• Identification of needy people who require subsidization
• Subsidization of infrastructure and service provision in markets identified above
• Managing the Universal Service Fund
• Advising the Minister in respect of universal access and service
• Advising the Regulator in respect of universal access and service

1. Cell C is of the view that any investigations the USA may undertake must be subject to public consultative processes with findings published in the Government Gazette as a General Notice.
2. It is further Cell C’s opinion that subsidization in accordance with section 80(1)(b) should be limited to a competitive process as contemplated in section 82 of the Bill.
3. Cell C supports the provisions outlined in section 82 of the Bill on "Competitive tender for universal service projects" as it serves as an incentive to licensees to construct, operate and maintain communication network services in under-serviced areas on a least cost basis. Service provision on a sustainable basis is critical to "bridging the digital divide".

1. Section 80: Universal Service Fund

1. A variety of mechanisms could be employed to address access and these could include licence obligations or in the alternative the imposition of levies. In various jurisdictions where the Universal Service Fund (USF) contributions are set at 1% of turnover, licensees have no licence obligations. However, in South Africa licensees have traditionally had to contribute to the USF and have had universal access and /or service obligations. It would seem that they will, in addition, have to incur Corporate Social Investment obligations in terms of the ICT Charter process. These obligations are carried over into the Bill.
2. The Bill makes provision for contributions to the Universal Service Fund to constitute 1% of annual turnover of each licensee. Cell C notes that the number of licensees will increase greatly with the change in the licensing framework. Cell C seeks clarification on whether it is intended that the Agency and the USF’s scope be extended to include all communications licensees, including broadcasters, and therefore the contributions will be made by all communications licensees.
3. In Cell C’s view, the increase in contributions to a maximum of 1% of turnover is an extremely onerous and unnecessary imposition. Cell C notes that this increase is proposed notwithstanding the fact that the maximum for USF contributions is set in the current Act at 0.5% of annual turnover.
4. Despite current contributions being set far below the maximum prescribed in the Bill the Agency has failed to make effective use of the funds made available to it since inception. Historically the Agency has rolled over funds allocated from year to year.
5. Cell C therefore questions the rationale for the proposed amendment and would respectfully recommend that the proposed contribution of 1% of turnover is unrealistic and should remain at 0.5%, the maximum as set in the current Act.

4. CHAPTER 13: TRANSITIONAL PROVISIONS

1. Section 84: Existing licenses

1. Cell C appreciates the assurance provided by section 84 of the Bill that its existing license will remain valid under this act until converted. This ensures that Cell C’s license rights will be protected and that no licensing or regulatory lacuna exists in the short term. Cell C, however, has several concerns with respect to the license conversion process. We note that the process of converting licenses will require the time and resources of the Authority and are cognizant of the fact that there are a multitude of licenses, issued in terms of several statutes that will require conversion. Cell C is of the view that the one year timeframe provided for this mammoth task is insufficient. Cell C therefore proposes the reconsideration of this timeframe. Cell C’s concerns with respect to the process of conversion will be discussed in its comments on section 85.
2. The Bill makes reference in several areas to ‘guidelines’ that are to be issued by the Authority. Cell C seeks clarification on what the intended legal status of such guidelines is, and the difference between guidelines and regulation. Cell C’s query arises from a concern about the enforceability of guidelines which are to be made on critical issues such as license conversion (section 85(3)(d)).
3. Cell C submits that subsection 84(5) which provides that the holder of an existing license must submit a written notice to the Authority offering to surrender its license upon conversion and to be granted one or more new licenses should be amended. The words "to be granted" should be amended to "being granted". The license holder should offer to surrender his or her license on conversion and be granted a new license. ICASA will have to provide guidance to current licensees as to what will be contained in the notice and whether licensees will be required to state which licenses they would require in future for the services they currently provide. Should the latter be a requirement, it is Cell C’s submission that it would be very difficult without a framework setting out the standard conditions of the different licence categories, for a licensee to make a decision as to which services it should apply for.

2. Section 85: Licence conversion

1. Cell C finds the process proposed in section 85 to be unclear. It notes that the Authority must convert licences, should the licensee notify the Authority within 90 days, however, it would be a nearly impossible task for the Authority to develop all the required process documents as well as standard licence conditions within the 12 months before they are allowed to convert licences. It is therefore Cell C’s submission that South Africa should follow the policy approach found to be most successful globally, of gradually introducing convergence regulations into the market. South Africa cannot afford a communications industry that does not provide quality services and access and a licensing and regulatory process that is rushed and unstructured may have precisely such unintended consequences.
2. Cell C believes that a clear provision should be added that licensees should at the very least retain the rights that they had before the introduction of convergence, and would like to have clarity regarding such licence rights and obligations both during and after the convergence process. Mobile Operators and in particular Cell C have made great efforts to provide universal service and access, and invested substantially in services like CST. Cell C is committed to meeting its licence obligations in this regard and would like its efforts to be acknowledged and its continued operation guaranteed in the move towards a converged industry.
3. Cell C appreciates the attempt made in the Bill to clarify the conversion process by setting out the existing’ licenses and in the effect determine whether they will fall under communications service, or communications network services. Cell C notes that no similar explanation is provided for application services. Cell C notes that the applications services falls into the class license category. Cell C seeks clarity with respect to the definition of application service. Application is defined as a "technological intervention by which value is added to a communications network service, which includes…" It is Cell C’s respectful opinion that what is intended, in line with the Malaysian and Indian models, is a licensing framework wherein a the applications services sit on top of communications services which in turn sit on top of communications network services. If Cell C’s understanding is correct, the definition of applications service, in the Bill, will need to be amended to refer to a ‘communication service’ not a ‘communications network service’. Cell C seeks clarity in this regard. We further request that the mapping exercise performed in section 85(3) (e) and (f) be extended to application services.
4. Although Cell C appreciates the improvements made to the Bill with respect to the clarification of services that would be converted to communications services and communications network services in sections 85(3) (e) and (f), there remains some concern, over the services listed and their definitions. Cell C is concerned that the terms used are not defined, and that the lists provided are not exhaustive – and that the only result will be ambiguity. These concerns are discussed in greater detail in the following paragraphs.
5. It is noted that some of the communications services listed in section 85(3)(e) currently form part of existing license categories, and are not defined in either these licenses or in existing legislation. Notwithstanding this, even where these categories are defined in existing legal instruments, the intention of this Bill is to withdraw such licenses and repeal the legislation. Therefore, there is a serious risk with respect to definitions and in the interpretation of this clause. An example of the problem is in the inclusion of mobile cellular telecommunications services (MCTS) as a communications service. In terms of the Telecommunications Act, an MCTS license includes the construction, operation and maintenance of a mobile cellular telecommunications network (MCTN). If this definition were used, then the result would be that the network would be defined as a communications services and regulated as such. This is clearly not the intention of the Bill. The same is true for multimedia services and public switched telecommunication services.
6. Cell C proposes, therefore, that all the license categories listed in section 85(3)(e) and 85(3)(f) be defined in the Bill, for the avoidance of doubt. Cell C further proposes that, for the sake of clarity, the identification of communications network services and communications facilities be dealt with in two separate clauses instead of being combined in section 85(3)(f). The implication of addressing them together as is proposed in the Bill, is that ambiguity is created with respect to which services are meant to be network services and which are meant to be facilities. It is Cell C’s understanding that broadcasting signal distribution (not defined), mobile cellular network (not defined), and a public switched telecommunications network (not defined), are network services. Cell C notes that some other existing licence categories, such as under-serviced area licensees, are not included.
7. The other listed items, namely a local exchange facility (not defined), radio apparatus (not defined), a radio station, and a telecommunications system (not defined) are communications facilities. The ambiguity created by combining the two matters is that a person, for example, with a radio station, or a telecommunication system in the existing dispensation, may claim to be entitled to convert same into a communications network service license. Cell C questions the need to list communications facilities at all given that no license is required to provide communications facilities specifically, and therefore no conversion will be sought.
8. Cell C respectfully submits, that given the challenges listed above with respect to section 85, the Bill should be revised so as to either:

1. provide definitions for the terms used in sections 85(3) (e) and 85(3)(f), or approach the conversion through a listing of existing licenses (with definitions) and a mapping of the current vertical licenses to future horizontal license categories. Currently the opposite is done and as such the exercise has not been thorough and the mapping is incomplete – certain existing license categories have been omitted such as USALs, public payphone services and private telecommunications networks. There is yet more ambiguity to be dealt with -. For if the mapping is done from existing to future categories, the Bill would, for example, read:

• Mobile Cellular Telecommunications Service – applications service, communications service and communications network service;
• Public Switched Telecommunications Service -- applications service , communications service and communications network service;
• Value Added Network Service – applications service, communications service.

1. Section 87: Existing regulations

1. The Bill proposes in section 87(1) that the Authority be given twelve months to repeal existing regulations made in terms of the legislation that will be repealed. This, in Cell C’s view, is problematic. Once the primary legislation is repealed, it is Cell C’s view that the necessary effect is that the regulations made there under must also be repealed. If not, they will have no legal basis and no context.

2. Section 88: Repeal and amendment of laws

1. Cell C appreciates that the Bill is not intended to capture all issues addressed in preceding legislation; however, it is Cell C’s view that where the issues addressed in the Telecommunications Act are critical for the development and regulation of the communications sector, they should be retained. Cell C notes that the following sections/chapters of the Telecommunications Act will no longer be addressed in legislation as they have not been carried into the Bill:

• Chapter III – Committees, Appointment of Experts and Enquiries
• Section 46 – Accounts and Records to be kept by licensee (including COA/CAM)
• Section 53—Uncompetitive actions
• Section 91 – Delegation of functions
• Section 92 – Register of licenses and approvals
• Section 93 – Confidentiality
• Section 94 – Financial year and auditing of accounts of Authority and Agency
• Chapter XII – Enforcement (which includes, section 100 on offences by licensees, and section 102 on penalties).

1. Cell C notes that the intention may be that some of the above-mentioned sections will be captured in the ICASA Amendment Bill; however, we would wish to reiterate that we have not had sight of this Bill and issues should in any event be addressed in the Bill. This underscores the importance of carrying out this process in parallel with the ICASA Amendment Bill process as discussed earlier in the submission.

One of the primary objectives stated in the Convergence Bill is the promotion of competition within the South African communications sector. A number of economic principles used to advance competition, and which underpin our submission, are:

• Economic regulation should be minimised and only apply where it can be demonstrated that the benefits to society of imposing regulation outweigh the cost. Accordingly, Cell C notes the indication that SMP tests may be introduced to provide effective and proportionate regulation.
• Timely and effective competition will require clear rules governing incumbent and dominant operators’ obligations and provide the basic requirements for market entry. These include specific rules setting out the scope of interconnection, and resale and the principles underlying the pricing of essential facilities and interconnection. It should further include rules on how the regulator will function.
• It is imperative that ICASA establish timely and effective dispute resolution mechanisms to ensure fair competition. The objective of any dispute resolution procedure should be to expeditiously arrive at pro-competitive and binding agreements among the parties to ensure that the objects of the Bill are achieved.

Cell C through its submission, seeks to ensure that the legislative framework encourages stability and protects the rights of existing players, particularly in the transition between the existing dispensation and the convergence framework. Cell C has outlined in its submission its proposals in respect of the above, and has further, where possible, put forward its views on how it envisages the communications legislative framework can be amended to facilitate sector development through the encouragement of investment, the protection of consumers and a structured approach to addressing social obligations and universal service concerns.

Cell C’s comments on the Bill contained in this submission are not exhaustive. The extensiveness of the comment provided on the Bill is evidence of our commitment to the process. It further highlights the fact that despite an improvement in the redrafted Bill currently before Parliament, a substantial amount of work is still to be done before the Bill can be finalised. Clarification is required both conceptually, and in terms of drafting on a number of critical aspects of the Bill.

We appreciate the opportunity afforded to us to make comments on the Bill and look forward to addressing the DoC and the Portfolio Committee on Communications in any hearings that are held on this matter.

It is clear from the draft legislation that the intention of the drafter was that issues relating to process be dealt with by the ICASA Act and the proposed amendments thereto. Cell C does however find it concerning that the two pieces of legislation, which are complementary, were not published together. Cell C therefore wishes to raise issues, which may be addressed during the amendment process of the ICASA Act, but which play an important role in the application of the Convergence Bill.

There are different schools of thought regarding the effect of the funding of a regulator on its independence, with an argument on the one hand that an industry funded regulator may be influenced by the industry, and on the other that government will influence the regulator, should it be government funded. It is Cell C’s view that ICASA should be allowed to retain a percentage of the licence fees it charges and pay the rest over to government coffers. This will ensure that ICASA is amongst others in a position to retain and acquire sought after skills, as well as conduct all its required market studies.

A further very important issue is that ICASA as regulatory body will be performing the function of both regulator and adjudicator. It is Cell C’s proposal that a separation of regulatory powers be considered, in order to ensure a sound administrative process. To this end, Cell C believes that it would be beneficial to consider the separation of powers as endorsed by the Competition Act, wherein the Competition Commission performs the function of investigator and prosecutor; whilst the Competition Tribunal performs the function of adjudicator. This concept has also been applied with great success in the broadcasting industry, wherein the Broadcasting Monitoring and Complaints Commission ("BMCC"), adjudicates complaints about broadcasting licensees which are mostly initiated by ICASA. ICASA does have representation on the BMCC whilst avoiding any concerns regarding flawed process. Cell C notes that reference is made in Chapter 9 which deals only with Broadcasting to a "Complaints and Compliance Committee", and it is believed that this concept should be expanded to apply across the communications industry. Reference is further made in section 60 to an Investigation Unit in accordance with the provisions of section 17G, however without access to the intended amendments to the ICASA Act, it is not possible for Cell C to make meaningful comments on this provision. Should the intention be to separate ICASA’s regulatory and adjudicatory powers, Cell C wishes to express its support in that regard.

Cell C would lastly wish to raise the very important but cumbersome issue of process. It is Cell C’s firm belief that all processes and procedures to be followed by ICASA must be clear, unambiguous and be reduced to regulations. This approach will assist in stabilising the industry, and will ensure efficiency. An example of past frustrations related to the lack of clear processes, is the absence of a policy dealing with access to information and confidential information. Although the Access to Information Act sets the broad guidelines, ICASA needs to have a transparent policy that will show the following:

• the prescribed manner and form to obtain access to information;
• the prescribed manner and form to claim confidentiality of information;
• the prescribed process to be followed by ICASA to make a decision regarding the extent to which the claim of confidentially has been accepted, and the ability to make the appropriate order concerning access to that information;
• The extent to which ICASA may take confidential information into consideration in making decisions;
• The process to be followed, if the reasons for decisions by ICASA may reveal any confidential information.