ANNEXURE A

VODACOM’S RECOMMENDED CHANGES TO THE CONVERGENCE BILL

B9 2005

 

Recommended changes to specific sections of the Bill

Recommended deletions appear in bold strikethrough

Recommended amendments and additions appear in bold underlined

Vodacom proposed amendments to the Bill are focussed on those aspects of the Bill which relate to:

 

 

The grandfathering of current licensed rights and obligations and ICASA’s and the Minister’s authority to arbitrarily impose additional and substantially more onerous obligations at any time as well as provisions in the Bill which impose additional and substantially more onerous obligations on currently licensed operators. Vodacom’s proposed amendments relate to section 5, 84 and 85

 

Section 5 - Licensing

5(10) During the transition period, existing licences are considered to be individual licences for the provision of communications network services or communications services, as applicable, granted by the Authority in terms of this Act and, despite section 8, remain subject to all terms and conditions associated with such licences until such licences are converted and re-issued in terms of section 85.

(10) The holders of existing licences which was issued in terms of sections 32B, 32C, 36 and 37 of the Telecommunications Act, 103 of 1996 as amended, including any radio frequency spectrum licence issued in terms of or associated with such existing licences, and notwithstanding any provision to the contrary of this Act and/or related legislation:

(a) shall not be subject to section 84 and section 85; and

(b) shall be deemed to be the holders of communication network service licences, communication service licences, and associated radio frequency licence(s) in terms of this Act conferring all rights associated with such licences, until such time as converted by the Authority; and

(c) shall have the right to their licences being converted, in agreement with each licensee, within twelve(12) months from the effective date of this Act, on no less favourable terms and conditions than contained in the existing licences; and

(d) shall have the rights as provided for in the existing licences and only be subject to the terms, conditions and obligations associated with such existing licence;

(e) provided that the above rights will not confer any exclusive service rights or limit technological neutrality; and

(f) provided further that the above licensees, for the full duration of the licence period(s), shall not be subjected to obligations more onerous than those it was subjected to in terms of the existing licence, Telecommunications Act, 103 of 1996, and regulations promulgated in terms thereof, at the effective date of this Act; and

(g) provided further that the above licences may, for the full duration of the licence period(s), only be amended in agreement with the licensee if such amendment will not cause undue prejudice to such licensee.

 

Section 84- Existing licences

84. (5) The holder of an existing licence, excluding those listed in section 5(10), must, within 90 days of the commencement date of this Act, submit a written notice to the Authority offering to surrender its licence upon requesting conversion and to be granted one or more new licences in terms of section 85.

(6) Where the holder of an existing licence, excluding those listed in section 5(10), does not submit the notice within the time frame provided in subsection (5), such existing licence expires upon the 180th day from the expiration of the period of 90 days.

Section 85 - Licence conversion

85. (1) In any case where a holder of an existing licence, excluding those listed in section 5(10), notifies the Authority within the period of 90 days in accordance with section 84(5), the Authority must convert the existing licence of such licensee by granting one or more new licences that comply with Chapter 3.

(2) The Authority must, subject to section 84(5), publish by notice in the Gazette a schedule in terms of which the Authority plans to undertake the existing licence conversion process excluding those provided for in section 5(10). Such notice must—…………………….

(3) To the extent that existing licensees, excluding those listed in section 5(10), comply with section 84(5), the following framework must be used by the Authority for converting existing licences and re-issuing new licences:………….

 

ICASA’s authority to arbitrarily intervene in markets without proof of market failure and without due and proper process.

Vodacom is of the considered view that all provisions of the Bill that relate to market behaviour regulation, i.e. competition matters, irrespective of whether these provisions pertain to additional licence terms and conditions, regulations or determinations, should be amended to be in accordance with the Competition Act (No. 89 of 1998) i.e. "significant market power", "essential facility", "dominance" etc. Please refer to definitions of "essential facility" and sections 8, 41, 46, 47, and 61. In as far as process is concerned, Vodacom also propose wording below.

AND

ICASA’s authority to arbitrarily impose additional and substantially more onerous obligations at any time, based on an opinion;

Provisions in the Bill that arbitrarily impose additional and substantially more onerous obligations;

New sub-sections to be inserted under Chapter 2, section 4 and also the amendment of sections 61, 62 and 81:

 

4(7) Notwithstanding any provision to the contrary in this Act and/or related legislation, the Authority must in making a determination or a finding or prescribing any regulation or licence term and condition and regulating markets which includes regulation or determinations aimed to address ineffective competition or regulating wholesale or retail rates, in terms of this Act and/or related legislation, comply with the following:

(a) define the relevant market; and

    1. conduct a market assessment of the defined relevant market; and

    2. if market failure is found consider and evaluate all possible remedies and where necessary impose the least intrusive appropriate and proportionate remedy necessary to address the ineffective competition.

 

4(8) The Authority shall publish guidelines as to the criteria used by the Authority to give effect to subsection (7) which:

    1. with regard to subsection (7) (a) shall include but not be limited to:

      1. analysis of non-transitory (structural, legal, or regulatory) entry barriers to market; and

      2. analysis of dynamic character and functioning of market.

    2. With regard to subsection (7) (b) which shall take the following factors, among others, into account:

      1. assessment of relative market share in the defined relevant market; and

      2. forward looking assessment of the market power over reasonable period in terms of, amongst others:

        1. existence of potential competitors;

        2. overall size of the licensee;

        3. control of infrastructure not easily duplicated;

        4. technological advantages or superiority;

        5. absence of or low countervailing buying power;

        6. easy or privileged access to capital markets and financial resources;

        7. products and services diversification;

        8. economies of scale and scope;

        9. highly developed distribution and sales network;

        10. absence of potential competition;

        11. barriers to entry.

 

4(9) The Authority shall, when prescribing any regulation aimed at regulating markets which includes regulation or determinations aimed to address ineffective competition or regulating wholesale or retail rates, consider and apply the factors below:
    1. the costs of making, producing and supplying the goods or services;
    2. the promotion of competitive rates that will attract the market;
    3. any relevant benchmarks including international benchmarks for comparable economies for prices, costs and return on assets
    4. the financial implications, including cost and benefits of the determination;
    5. the consumer and investor interest;
    6. the return on assets in the regulated sector;
    7. any other factor which will be relevant.
  1. Notwithstanding any provision to the contrary in this Act and/or related legislation, the Minister in exercising her authority in terms of section 3 and the Authority in making a determination or a finding or prescribing any regulation or licence term and condition aimed at imposing any universal and service obligations, must comply with the following:

(a) The Authority shall, before imposing any universal service and access obligation, undertake a comprehensive market review which includes an assessment of:

  1. the market size and characteristics

  2. level of penetration and period sought for by government

  3. what operators are commercially offering or offering through their obligations;

  4. whether the intended services are being demanded by consumers

  5. whether the intended services are financially and technologically viable to be rolled out and provided on a sustainable basis by the relevant licensees with or without the assistance of the universal service fund

  6. what the potential implications of the additional obligations will be on the market, including the financial feasibility of supply of services.

(b) Any decisions related to obligations in subsection 10(f) which require significant financial investment must take into account:

  1. the total financial obligations that the licensees are currently exposed to, which include but is not limited to: licence fees, existing obligations, annual Universal Service Fund contributions, interception and monitoring infrastructure obligations, emergency service obligations; and

  2. the impact of additional financial obligations on the continued financial viability and sustainability on licensees.

 

(11) The Authority must comply with the principle of non-discrimination in considering imposing any universal service and access obligations.

 

Section 10 - Amendment of individual licence

10. The Authority may amend an individual licence in consultation with in agreement with the licensee and provided that such amendment will not cause undue prejudice to such licensee _

(a) to make the conditions of the individual licence consistent with conditions being imposed generally in respect of all individual licences granted in the same category, for the purpose of ensuring fair competition between those
licensees;

(b) to the extent requested by the licensee;

(c) to the extent necessitated by technological change;

(d) in accordance with an order under section 17M of the ICASA Act following a finding and recommendation by the Complaints and Compliance Committee;

    1. where the Authority is satisfied that the amendment is necessary to ensure the achievement of the objectives of the Act and of the related legislation following an adverse finding by the Competition Tribunal under the Competition Act, 1998 (Act No. 89 of 1998);

      2.  

    2. subject to section 4, if the amendment relates to universal access or universal service and is necessary, in the opinion of the Authority, as a result of—

(i) changed circumstances in the market; or

(ii) lack of communications network services or communications services in specifically identified areas of the Republic.

OR

(g) the Authority shall when amending an individual licence in terms of (f) above before imposing any universal service and access obligation, undertake a comprehensive market review which includes an assessment of:

(i) the market size and characteristics

(ii) level of penetration and period sought for by government

(iii) what operators are commercially offering or offering through their obligations;

(iv) whether the intended services are being demanded by consumers

(v) whether the intended services are financially and technologically viable to be rolled out and provided on a sustainable basis by the relevant licensees with or without the assistance of the universal service fund

(vi) what the potential implications of the additional obligations will be on the market, including the financial viability of supply of services.

(h) Any decisions related to obligations in subsection (g) which require significant financial investment must take into account:

(i) the total financial obligations that the licensees are currently exposed to, which include but is not limited to: licence fees, existing obligations, annual Universal Service Fund contributions, interception and monitoring infrastructure obligations, emergency service obligations; and

(ii) the impact of additional financial obligations on the continued financial viability and sustainability on licensees.

 

(i) The Authority must comply with the principle of non-discrimination in considering imposing any universal service and access obligations.

Retail and Wholesale tariffs

61. (1) The Authority may—

(a) only in respect of those markets or market segments where the Authority determines that no or ineffective competition exists; and or

(b) in order to protect consumer interests, to the extent required to reasonable protect consumer interest prescribe the manner of determining retail and wholesale tariffs which may be levied by a licensee in respect of the provision of—

(i) communications network services;

(ii) communication services; or

(iii) any other service contemplated by this Act or the related legislation.

(2) Ineffective competition exists where a licensee in any market or market segment has significant market power or control of essential facilities. (2) In determining that no or ineffective competition exists, the Authority shall adhere to subsection 4 of the Act.

 

Section 62 - Establishing of Communications and ICT Museum, information communication technology for government and other related services

62.(7) The cost of providing the government directory information service must be borne by the licensee.

62(7) Licensees transporting communication for the provision of the government directory information service by circuit switched voice, SMS and or data, shall be entitled to be renumerated by the the government directory information services centre(s) at rate which will allow the operator to recover the cost and a reasonable rate of return in respect of transporting such communication.

Section 81 - Contributions to Universal Service Fund

81.(1) Every holder of a licence granted or considered to have been granted in terms of Chapter 3 must pay, in addition to any other fees contemplated in this Act or the related legislation, the prescribed annual contributions to the Universal Service Fund.

(2) The Authority must prescribe—

(a) the basis and manner of determination of such contributions, which must not exceed 0.5% 1% of the licensee’s annual turnover (excluding Nett Interconnection and Transfer Pricing between categories of licenses) or such other percentage of the licensee’s annual turnover as may be determined by the Minister by notice in the Gazette; and…..

Other amendments

Definitions

    1. ‘‘communications network service’’ means a communications service:
  1. whereby a communications network service licensee makes available a communications network, or communications facilities, whether by sale, lease or otherwise—

(i) for its own use for the provision of communications services or any other services contemplated by this Act or the related legislation;

(ii) to another communications network service licensee for that licensee's use in providing communications services or any other service contemplated by this Act or the related legislation; or

(iii) for resale to a communications service licensee, or to any person providing content services or any other licensed service contemplated by this Act or the related legislation;

and shall include a communications service

(b) whereby a communications network service licensee makes available a communications service means any service provided in terms of this Act or the related legislation which is normally provided for remuneration to—

  1. the public;
  2. sections of the public; or
  3. the subscribers to such service,

and consists wholly or mainly of the conveyance of communications over communications networks, including transmissions over communications networks used for broadcasting, but excluding content services;

 

‘‘essential facility’’ means a communications facility or combination of communications facilities within a communications network that—

(a) are exclusively or predominantly provided by a single or limited number of communications network licensees and cannot feasibly (whether economically or technically) be replaced in order to provide a communications service; and or

(b) are declared by the Authority to be an essential facility in terms of this Act or the related legislation;