Report of the Portfolio Committee on Communications on the International Study Tour to the United Kingdom and Brazil, Dated 07 September 2010.

The Portfolio Committee on Communications, having undertaken an international study tour to the United Kingdom and Brazil on 17 - 31 July 2010 reports as follows:

EXECUTIVE SUMMARY

Between the 17 - 31 July 2010 the Portfolio Committee on Communications (the Committee) of the Parliament of the Republic of South Africa embarked on an international study tour to the United Kingdom (UK) and Brazil. The multi-party delegation was composed of the following members:

Mr S E Kholwane MP (Whip)

Mr I Vadi MP (Chairperson)

Mr J De Lange MP

Ms M N Magazi MP

Ms MR Morutoa MP

Ms W S Newhoudt-Druchen MP

Ms S R Tsebe MP

Mr N J Van den Berg MP

Ms J D Kilian MP

Ms P De Lille MP [only attended the UK section of the study tour]

They were accompanied by five support staff members.

The Committee visited several Information, Communication and Technology (ICT) sector companies and organisations in the UK and Brazil. In the UK, the delegation visited the Office of Communication (Ofcom) - the regulatory authority; the British Broadcasting Corporation (BBC) - the public broadcaster; Parliament and its Communications Committees; the Commonwealth Telecommunications Organisation (CTO); and DigitalUK – the entity responsible for digital switchover.

In Brazil, the Committee visited Sindicato Das Industrias de Aparelhos, Electricos, Electronicos, e Simalares do Vale da Electronica (SINDVEL) – an industry association; Agência Nacional de Telecomunicações (ANATEL) - the National Telecommunications Agency; Instituto Nacional de Telecommunicacoes (INATEL) – the National Telecommunications Institute; Mackenzie University Digital Television Laboratory; private television stations, namely, Globo TV, Bandeirantes and SBT; several manufacturing companies such as Linear Equipmentos and Screen Service do Brasil; the Ministry of Communications; and the Ministry of Industry, Development and Foreign Trade Esplanada dos Ministérios.

The primary objectives of the study tour were to:

1. develop an understanding of the governance and financing models of the BBC as well as the Brazilian System of Telecommunications;

2. understand the governance and operational model of the Office of Communication (OFCOM) as well as the Brazilian Agency of Telecommunications (ANATEL); and

3. understand how the UK and Brazil are managing their respective migration from analogue to digital broadcasting.

With regards to the UK, it is evident that Ofcom had taken significant strides in liberalising the ICT sector in collaboration with industry players. It had successfully privatised the once government-owned service provider, British Telecommunications. Ofcom is an independent entity that is entrusted with both industry regulation and policy-making. However, with the new Conservative Party-led government, there are indications that the regulator’s policy-making remit may change. The Committee noted that the BBC is regulated by the BBC Trust, a body which also plays a role as the broadcaster’s Board. While the private sector has to bid for spectrum, the BBC gets allocated spectrum for free and is able to use it to generate revenue for the corporation.

In terms of Digital Switchover, the Committee found that the UK has an elaborate strategy to ensure that by 2012 the analogue signal will be switched off across the entire country. It is also evident that industry has principally funded the process. The UK opted for a phased switchover approach, commencing the process from the more rural to the metropolitan regions. The DVB-T digital standard is an acceptable choice for the country’s terrain. The BBC has already implemented the latest version DVB-T2 to compress its current spectrum. Government is also contributing towards the Digital Switchover Help Scheme for the vulnerable. However, television owners buy their own Set Top Boxes (STBs) which range from £20 per box and upwards.

In Brazil, Anatel is not converged. Anatel’s remit is limited to technical telecommunications issues. According to Anatel, policy-making for the ICT sector, spectrum allocation and the regulation of the Broadcasting industry is the responsibility of the Communications Ministry. The regulator is autonomous and its decisions cannot be reversed by the Communications Minister. Brazil’s public broadcasters are subject-specific. There are public stations or channels for education, justice and agriculture. The others are free-to-air and pay-TV stations. Brazilians do not pay TV licenses and approximately 88 per cent of the population watch free-to-air television.

Brazil has adopted the ISDB-T digital standard. Its digital migration period is from 2007 to 2016. Regarding the migration process, the country’s main priority is to ensure that the following features are available:

• Robustness
• Standard and High Definition;
• Mobility and Portability;
• Interactivity (return path for e-government); and
• Royalty-free software or middleware.

Brazil is migrating using the Japanese ISDB-T standard which operates at 6MHz; modified with the Brazilian middleware, called Ginga, for interactivity. According to Brazilian government representatives, Ginga was chosen over the GEM middleware as the former is royalty-free. GEM middleware is compatible with the European DVB-T standard. Brazil has already manufactured STBs for converting the digital signal for analogue television sets. The price of an STB in Brazil is approximately US$200 (R1451.35)[1]. Brazilian representatives pointed out that during the FIFA 2010 World Cup Soccer Tournament, many Brazilians bought high definition, integrated televisions sets, instead of STBs. Government representatives stated that there is no subsidy or help scheme currently provided for the vulnerable.

Brazil’s interest in South Africa adopting ISDB-T standard is informed by its desire to strengthen its strategic economic partnership with South Africa. South Africa is seen as an important partner in extending the consumer base for STBs; thereby increasing economies of scale and reducing the costs of production. Selected private sector companies have produced STBs that are compatible with South Africa’s 8Mhz broadcasting environment.

REPORT: Portfolio Committee on Communications’ Study Tour to the United Kingdom and Brazil (17 -31 July 2010).

BACKGROUND

The Committee resolved to critically evaluate the existing South African institutions and processes against what is considered to be one of the best benchmarks in Europe as well as the benchmarks set in Brazil, which is a country with many challenges similar to those faced by South Africa. This has been necessary as later this year the Committee will be receiving substantive Bills relating to the public broadcaster (the SABC) and the Independent Communications Authority of South Africa (ICASA). Currently, government is also in the process of managing the complex transition from analogue to digital broadcasting. The Committee believes that an international perspective is critical, given the large sum of public money set aside to cover projects such as digital migration.

PROPOSAL

The Committee proposed to conduct a study tour of the UK Regulator, OFCOM, and the British Broadcasting Corporation (BBC) between the 17 July 2010 till 23 July 2010 and also of the Brazilian Regulator (ANATEL), Brazilian Agency of Telecommunications, and the Brazilian National Broadcaster, Brazilian System of Telecommunications, as well as a few selected private broadcasters between 24 July 2010 to 30 July 2010. It also desired to meet with the Parliamentary counterparts in the two countries.

The purpose of the study tour was to:

· develop an understanding of the governance and financing models of the BBC as well as the Brazilian System of Telecommunications;

· understand the governance and operational model of OFCOM as well as the Brazilian Agency of Telecommunications; and

· understand how the UK and Brazil are managing their respective migration from analogue to digital broadcasting.

DELEGATES

The multi-party delegation was composed of the following members:

Mr S E Kholwane MP (Whip)

Mr I Vadi MP (Chairperson)

Mr J De Lange MP

Ms M N Magazi MP

Ms MR Morutoa MP

Ms W S Newhoudt-Druchen MP

Ms S R Tsebe MP

Mr N J Van den Berg MP

Ms J D Kilian MP

Ms P De Lille MP [only attended the UK section of the study tour]

They were accompanied by five support staff.

· STUDY TOUR: UNITED KINGDOM

18 JULY 2010: ARRIVAL IN UK

The Committee arrived in London on 18 July 2010 and participated in the Nelson Mandela Day Celebrations held at the British Museum.

19 JULY 2010: MEETING WITH OFCOM

Mr Alex Blowers, an international director at the Office of Communication (Ofcom), made a presentation on Ofcom focusing on the following topics;

• Historical background

The main impetus for the creation of Ofcom was the convergence of broadcasting and telecommunications at both network and content level. Before Ofcom was established there was a pre-leg scrutiny, where Parliament debated extensively the principle of a converged regulator. Subsequently, a Bill on the creation of Ofcom was tabled before Parliament. Ofcom was established in 2002, but received its full authority from the Communications Act 2003 Chapter 21.

• Regulation

One of Ofcom’s major achievements was promoting a more competitive environment in the ICT sector by removing British Telecommunication’s monopoly over the fixed line industry. Ofcom also partially liberalized media by allowing foreigners to co-own British media companies. In retrospect, Ofcom feels that the organizations should have also demanded reciprocation from other countries on this matter.

• Media Literacy

The purpose of this remit is to empower the public with knowledge and understanding of the digital environment. As the digital environment can be harmful to children, Ofcom teaches the public about filtering technology.

• Digital Electronic Act

The purpose of this Act is to protect the creative arts industry and to end the era of downloading movies and music for free.

• Funding

Funds are sourced from licences and from auctioning spectrum. In respect of licences, the different industries contribute different amount towards to the regulator; 25 per cent is from broadcasting, 25 per cent from telecommunications and 50 per cent from wireless networks. Ofcom collects the funds and hands it over to government. The funds are then allocated to the regulator as a grant-in aid. Ofcom’s budget period is 5 years. The manner is which the funds are spread over the five years is at the regulator’s discretion.

• Spectrum allocation

The UK government was able to collect £23.4 billion (R265.40 billion) from selling off spectrum for 3G. It is not expected, however, that auctioning spectrum will always yield a similar dividend because the buyers may not attach the same value to available spectrum. Ofcom believes that the market is better placed than the regulator to determine the value of the spectrum.

• Governance and accountability

Ofcom regulates the ICT private sector. The BBC lies largely outside of the scope of Ofcom scrutiny and is regulated separately as a public entity from the broader ICT sector. The BBC is regulated by the BBC Trust, which also plays a conflicting role of defending the broadcaster in public. Ofcom in turn is accountable to Parliament and delivers an annual report to the Parliamentary Committees that bear an oversight role over it.

• Organisational Structure

Ofcom’s structure consists of a board and advisory committees whose functions are perceived to be overlapping and may need to be reviewed. The chairman works two days a week. Board members are appointed by the chairman. The Board focuses on strategic issues such as the future of the Next Generation Access, beyond switchover and the functions of public service broadcasting. The executive focuses on operational or “bread and butter issues”. One of Ofcom’s key challenges is regulating interconnection as it believes that all the operators have a monopoly over call termination on their respective networks – a matter which is difficult to regulate.

Ofcom has also been involved in policy making which, according to Blowers, should be government’s remit. This practice may change with the new government.

19 JULY 2010: MEETING WITH COMMUNICATIONS COMMITTEE

The Committee visited the UK Parliament and observed the Speaker’s Procession as well as the gallery of the Chamber of the House of Commons to observe the proceedings. Thereafter, the Committee met with the Earl of Onslow, Chairman of the Communications Committee for the House of Lords as well as 3 other members to discuss that committee’s interaction with the various ICT sector players and Ofcom. At the meeting the following issues were discussed:

• Ofcom and the perception that the telecommunications industry is over regulated;
• the BBC, broadcasting in the public interest and protecting the BBC from direct government interference; and
• the role played by the UK Parliament in insisting on subtitles in television programmes.

MEETING WITH CULTURE, MEDIA AND SPORT COMMITTEE

The Committee further met with MP John Whittingdale, Chairman of the Culture, Media and Sport Committee for the House of Commons as well as Adrian Saunders. At the meeting the following matters were raised:

• too much policy making at Ofcom;
• the incompatibility of the BBC Trust’s remits as an external regulator and as the top tier of management at the broadcaster;
• advantages and the challenges of switchover to digital television;
• the Digital Switchover Help Scheme and assistance for the elderly; and
• undertaking Digital Switchover for UK radio services.

20 JULY 2010: TOUR OF UK PARLIAMENT

On the 20 July 2010 the Committee attended a tour of the UK Parliament led by Mr Richard Edwards.

MEETING WITH COMMONWEALTH TELECOMMUNICATIONS ORGANISATION (CTO)

A presentation by Mr Bashir Patel, Director of Programme and Business Development at CTO, focused on the following:

• An overview of ATSC 8-VSB, ISDB and DBV digital television standards.

In South Africa, Sentech has achieved 78 per cent population coverage for Digital Terrestrial Television Broadcasting (DTTB), which implies that a significant amount of investment has already been spent on the DVB-T standard. The evolution of the standard is based on different requirements, needs and considerations. The Advanced Television Systems Committee (ATSC) standard is mainly used in North America and is designed for 6 MHz. Countries Broadcasting via ATSC 8-VSB are: Canada, El Salvador, Honduras, Mexico, Puerto Rico, South Korea and United States of America, including Alaska, Hawaiian Islands, Midway Islands and Wake Island.

DVB-T is a European standard that is flexible and adapts to different kinds of environments. It is used widely in Europe and in Asia and it is becoming a “de facto global standard”. Accordingly, it enjoys economies of scale. It has been adopted in more than 35 countries and over 60 million receivers had been deployed and in use by 2008. Japan refined the European DVB-T standard for its own environment and conditions, which include densely-populated regions, and developed its own ISDB-T standard.

ISDB-T BST-OFDM[2] was developed by the Association of Radio Industries and Businesses (ARIB) in 1998. It was first launched in Japan in 2003 and then the Brazilian government adopted ISDTV which uses ISDB-T as modulation. Japan is reportedly the only country broadcasting via ISDB-T BST-OFDM.

• UK experience

The UK had to modify about 2000[3] analogue transmitters to digital broadcasting technology, which cost the UK approximately 56 billion pounds. According to the CTO presentation UK’s released spectrum or digital dividend totals 112 MHz, which is released on a region-by-region basis as digital switchover takes place. When auctioning spectrum, matters other than financial gain have to be considered. For instance, how does a country deal with spectrum interference nationally and regionally? Freed up spectrum is said to create new industries and cheaper programming becomes available. Also, service level agreements play a fundamental role in ensuring a particular quality between transmission and broadcasting services. Furthermore, digital switchover has implications for growth in maintenance and support sectors.

Digital Switchover was announced in 2005 and is currently in the process of moving over from dual-casting, to broadcasting of high-power DTT. The UK’s Digital Switchover (2008–2012) roll-out by ITV region is as follows:

• 2008 – Border

• 2009 – West Country, HTV Wales, Granada

• 2010 – HTVWest, Grampian, Scottish Television

• 2011 – Yorkshire, Anglia, Central

• 2012 – Meridian, Carlton/LWT(London) Tyne Tees, Ulster.

Going forward and capacity development training

CTO pointed out that investment for public awareness campaigns is vital. Media campaigns such as advertising are also crucial for the success of the migration. South Africa needs to look at the best incentive scheme for the uptake of Set Top Boxes. Furthermore, the country must look at best practices around the world and for managing an implementation strategy effectively.

21 JULY 2010: UK GOVERNMENT’s DEPARTMENT FOR BUSINESS INNOVATION AND SKILLS (BIS) AND THE DEAPARTMENT FOR CULTURE MEDIA AND SPORTS (DCMS) PRESENTATION ON DIGITAL SWITCHOVER

Jonny Martin, Digital Broadcasting Manager and for Digital Switchover, made the following presentation:

• Costs and Benefits of switchover

The UK Government took a decision that the broadcasting industry should pay for switchover and public funds would be used for the help scheme and the public communications campaign. The help scheme fund was drawn out of the BBC licence fee. The costs were as follows:

o Transmitter Network £500m (R5787.65m)

o Digital UK: Operations £25m (R289.40m)

Communications £200m (R2315.05m)

• Digital Switchover Help Scheme £600 m (R6945.15m)

A basic set top box costs as little as £20 (R 231.50) each.

· UK Broadcast Infrastructure

Upgrading infrastructure requires scarce engineering skills which are costly to acquire. It is important to plan properly because when a region is powered up, other regions can get interference. The UK planned its switchover to minimize interference.

• Switchover Timeline

The Secretary of State determined that the country should undertake the switchover from 1999. The planned deadline is now 2012. Planning well in the beginning is vital for getting risks out of the way later.

• Managing Switchover

Switchover or migration is about stakeholder management. No single person or stakeholder is really in charge of the switchover project. Therefore, good communication and co-ordination between the participating stakeholders is crucial. The UK government placed emphasis on the importance of working together as broadcasters, manufacturers and other stakeholders as key to successfully implementing switchover. Policy making and regulation on switchover to digital broadcasting was managed by the Department for Media, Culture and Sport, the Department for Innovation Business and Skills and Ofcom.

Implementation is driven by an independent entity, DigitalUK. The entity is made up of representatives from Arqiva, an engineering company; manufacturers and retailers; the BBC and BBC Help Scheme; Teletext; ITV; Channel 4 and 5; S4/C and SDN. It is also important to manage regional relations in order to minimize cross border interference during switchover. Other groups that have been involved in the implementation process are advisory groups, such as the consumer expert group.

The switchover to Digital Radio is not likely to generate significant advertising revenue. Therefore, any future switchover for radio might have to be supported financially by government.

• Switchover help scheme

The scheme is for persons aged 75 or over; those who receive a disability living allowance; and those who are registered as partially blind or who live in a care home. Vulnerable groups are provided with a set top box, an aerial and with installation support. The service is for free for people on income support, but costs £40 (R463) for other citizens.

22 JULY 2010: COURTESY CALL WITH HIGH COMMISSIONER ZOLA SKWEYIYA

The Committee visited South Africa House for a courtesy call with the High Commissioner, His Excellency Mr Zola Skweyiya.

MEETING WITH DIGITALUK

The Committee met with Ms Alex Pumfrey of DigitalUK, who highlighted the following:

• DigitalUK is a temporary entity and at the end of switchover it will be disbanded. (Recruited staff members are fully aware of this.)
• When installing a mast, broadcasters have to agree on specifications.
• Currently, no analogue TVs are sold in UK retail stores.
• Communication on switchover is done from national to local level, right down to the last six months before switchover.
• DigitalUK steers away from promoting content, as it might prejudice other broadcasters.
• Communication campaigns must be visible and must include people that can answer question on the process.

23 JULY 2010: MEETING WITH THE BBC

The presentation on the BBC was led by Mr Daniel Wilson, Senior Policy Advisor at the BBC. He stated that BBC is overseen by the independent BBC Trust. Trustees are appointed on an open, non-political basis – to oversee delivery of the remit and to protect the BBC’s independence. The BBC Trust oversees how the BBC delivers the remit on a day-to-day basis; not the Government or an external regulator. The Trust is the “sovereign body” within the BBC; it sets the BBC’s overall strategic direction, approves high-level strategy and budgets for services and holds the Executive to account for its performance.The BBC’s remit is not limited to radio and television; it extends to other services such as internet programmes. The BBC reaches more people outside the UK than in the country. The corporation is, however, struggling with market fragmentation, funding constraints and increased competition from new broadcasters.

The BBC’s strategy regarding digitisation and the help scheme entailed considering the:

• quality of services that the BBC aims to provide;
• new character of a fully digital BBC; and
• the impact of digital switchover on the creative sector.

The BBC Charter outlines an approvals process for “non-services”, typically infrastructure projects. These include the BBC’s partnership proposal to bring together broadcast and internet services (Project Canvas), for which the Trust approved the BBC’s participation in July 2010. Its slogan “putting quality first” means that the BBC has to focus on quality in content, doing fewer things better, guaranteeing access, focus spending on what matters the most and setting boundaries. Important areas for the BBC include children’s programming, documentary, drama and a renewed energy for day time TV.

The wider framework of regulation and accountability

• BBC is subject to the following:
• competition law which is externally regulated.
• basic programme standards which are regulated by Ofcom.
• specific programming quotas which are monitored by Ofcom.

Ÿ Annual Report and Accounts are laid before Parliament and subject to scrutiny by key Parliamentary Committees.

Ÿ The National Audit Office carries out studies into particular uses of the licence fee (as agreed with the BBC Trust).

Ÿ Current Charter lasts only 10 years – the case will have to be made to continue the BBC’s work beyond 2016.

Ÿ Government sets the level of the licence fee (current settlement is for five years until 2012).

Ÿ The BBC and the Trust have to engage with licence fee payers, consult them and respond to their views.

Ÿ Every household pays a licence fee which is currently £145.50 or R1651.95 for colour television.

Ÿ In 2009 -10, the BBC received £3.4 billion or R38.6 billion from the licence fee and a further £119 million or R1351.10 million from commercial activities.

Help Scheme

A presentation on the Switchover Help Scheme was done by Ms Jackie Burdon. The Help Scheme is a mode by which the BBC assists vulnerable persons in the UK with the switchover process. It is run by the BBC through an agreement with the Government. It is paid for through licence fees. The UK Government developed the criteria for the country’s support scheme which included the following:

• People aged 75 and over.

• People who receive benefits for serious disabilities.

• People who live in care homes.

• The help costs £40 (R454.35) for eligible people who are on income-related benefits.

The UK government identified that 7 million UK households will be eligible for help over the lifetime of the switchover. The biggest barrier was that senior citizens and vulnerable people who live alone did not understand the switchover concept. Furthermore, the hardest people to reach could not even respond to telephone calls and mail that sought to explain the process. The scheme’s mantra nonetheless was “to make sure that no one is left behind". For the purpose of communication, television owners are sent letters and a call centre was established. Caller agents were trained to be patient when providing help, especially to vulnerable groups. A network of local community volunteers was built to contact the “unreachable”. Material was provided in different languages, including for those living with disabilities. Pharmacies were also used as communication points for older people. The UK spends £200 (R2315.05) per person on communication costs.

23 JULY 2010: WORLD CUP CELEBRATION EVENT WITH AU HIGH COMMISSIONER’S AND AMBASSADORS

The Committee attended a FIFA 2010 Soccer World Cup celebration at the South Africa House with various African Union High Commissioners and Ambassadors.

2. STUDY TOUR: BRAZIL

During the Brazilian leg of the study tour the Committee met with approximately three times the number of companies and organizations that were visited in the UK. Presentations in Brazil focused mainly on convincing the delegation about the benefits of the Integrated Services Digital Broadcasting - Terrestrial (ISDB-Tb) standard, which originated from the Japanese ISDB-T standard, but has been modified and adapted to the Brazilian telecommunications landscape. Comparisons were constantly made between the ISDB-T, Europe’s DVB-T standard and the North American ATSC standard. However, the Brazilian representatives were unable to provide a comparative argument on Europe’s DVB-T2 standard. The Brazilian representatives also expressed their eagerness to work in partnership with South Africa with regards to digital standards and equipment.

25 JULY 2010: ARRIVAL SẴO PAULO

The Committee arrived in São Paulo on 25 July 2010 and departed directly from the airport to Santa Rita do Sapucai.

26 JULY 2010: VISIT TO SANTA RITA DO SAPUCAI

The Committee was introduced to Santa Rita do Sapucai, a small, rural town, commonly known as the “Electronics Valley”. Originally, a coffee producing area, the valley is now one of Brazil’s main technology centres. The profile of the area began to change when the first school of electronics was established. The Escola Técnica de Eletrônica "Francisco Moreira da Costa", the first electronic technical school in Latin América, was founded in 1959 by Lady Sinha Moreira. Santa Rita now comprises 137 electronics companies, which produce approximately 11000 products that are exported to 41 different companies[4]. The Electronics Valley now boasts the following:

• Concentration of education institutions;
• Concentration of ICT research and development centres;
• Concentration of technological industries;
• Active local government support to these industries; and
• Support of government other relevant institutions.

The Committee visited the following institutions in Santa Rita do Sapucai:

· SINDVEL (Sindicato das Industrias de Aparelhos Electricos, Electronicos e Similares do Vale da Electronica) or the Association of the Electric, Electronic and Similar Industries of the Electronic Valley;

· Linear Equipmentos Electronicos (Linear);

· National Institute of Telecommunications (Inatel); and

· Screen Service do Brasil (Screen Service).

SINDVEL

The Association was formed to coordinate, protect and to legally represent companies in the electronic industry. It manages the electronics cluster, which consists of small companies specializing in different areas of the electronics supply chain. These include cable, assembling and packaging companies. Sindvel provides the cluster with financial support and training and development through its partners, namely, government and universities. According to Sindvel, there are also two incubators, which are a base for the electronics clusters. One incubator is located at INATEL (Instituto Nacional de Telecommunicacoes) and the other is run at a municipal level. The incubators provide entrepreneurs in the industry with financial, management, marketing and human resource support necessary for establishing a new company. The INATEL incubator offers support for two years to former students at a nominal fee.[5]

Linear

Linear is an electronics company of approximately 400 employees, which was established 33 years ago. Linear manufactures both analogue and digital transmitters, single frequency networks, microwave and multiplexers. Linear’s Carlos Alberto Fructuoso informed the Committee that the company has also been involved in testing digital standards such as ATSC, DVB-T and ISDB-T. Therefore, it has the capacity to assist in the digital migration process. The Committee noted that with the advent of the 2010 Fifa Soccer World Cup, there was a decrease in Brazil in the demand for set top boxes, but an increased demand for integrated (with in-built set top box specifications) High Definition television sets. Consumers chose to buy the more expensive integrated HD televisions on terms, rather than watch soccer on analogue television.

INATEL

Prof. Dr. Luciano Leonel Mendes delivered a presentation to the Committee on Inatel a Telecommunication and Computer Engineering College located in Santa Rita do Sapucaí, Minas Gerais. Inatel plays an important role as an:

· industry incubation program;

· technical support for products development; and

· supplier of competent engineers.

The institution reports that it has produced 45 factories in 9 years, created employment for 600 people with a total income of US$15,000,000 (R108 975 005, 00) annually. The institution’s areas of interest include:

· Academic Research

o International educational exchange of professors and graduated students with international universities.

o Mutual research on physical and MAC layers.

· Digital Television

o Development of broadcasting equipment.

o Development of reception and decoding equipment.

o Development of software for Digital Television – applications for broadcasters and final users.

o IPTV: compression engines for WEBTV and IPTV.

· Wireless Networks.

o Development of base stations.

o Development of control and analysis software.

INATEL’s major projects in product development include:

• ISDB-TB Set Top Box: based on commercial chipsets and tuners.

• ISDB-TB Multiplexer: based on FPGA, VHDL IP Core’s, embedded processor and mC-Linux

• DTV modulators, ATSC, ISDDB-TB and DVB-T

• Training Program for former engineers and undergraduate students on several areas:

– Computer networks and communication systems;

– Digital Television and IPTV;

– Project management;

– 3G and Cellular systems;

– Test and measurements;

Screen Service

Mr Júlio Prado Rocha, Export Manager of Screen Service led the presentation. Screen Service, a company with the clinical appearance of a laboratory, builds transmitters. It has already worked in South Africa with Sentech on a transmission project, which covered the country’s nine provinces. The Committee was shown the company’s transmission equipment at one of its plants.

27 JULY 2010: MEETINGS WITH MINISTRY OF COMUNICATIONS AND TV COMPANIES

The Committee met with representatives from Brazil’s Ministry of Communications and Digital TV Companies. The Ministry provided the Committee with the historical background of Digital Terrestrial Television Systems in Brazil, which entailed the following:

• 1998-2000: Laboratory and field tests of DTTV standards;
• 2000-2001: Analysis of the tests/definition of planning parameters;
• 2001: Final Report containing analysis of technical aspects, economic aspects, social and cultural aspects.

· 2002: ANATEL stopped any analysis of technical changes or inclusion of new channels in the analogue plan.

The major objectives regarding digitalizing the country were the following:

• television should be mobile and portable;
• television signal should be robust, especially for a densely populated region like Sao Paulo;
• respect legacy;
• spectrum efficiency;
• High Definition / Standard Definition;
• terminal costs, which includes a royalty-free standard, affordable modularity and antenna costs;
• interactivity for e-government communications such as e-education; and
• Long term decision-making over the next 30~40 years.

The country’s migration period began in 2007 and the switch off date for the analogue signal is 2016. The Brazilian Ministry of Communications believes that, “there is no motivation for the user to go digital without a better quality of image, audio and service”. According to Otávio Viegas Caixeta, Secretariat of Telecommunications in Brazil, the solution rested in the following;

• ISDB-T - for mobility, portability, robustness and spectrum efficiency;
• MPEG 4 - for high definition (HD); and
• Ginga - for interactivity.

Brazil adopted the Japanese standard ISDB-T over Europe’s DVB-T as the latter was expensive because royalties had to be paid for the use of its software. The former is an open source standard which is “free”. However, the Japanese standard uses MPEG2 (Moving Picture Experts Group 2). Consequently, Brazil made improvements on ISDB-T by installing MPEG4, which is more efficient than MPEG2.

Approximately 90% of the population in Brazil own a television set; whereas only 10% have access to the internet. The country, therefore, saw an opportunity to use the TV sets as means of bridging the digital gap in the country. In order to achieve this objective, it developed new middleware,[6] called Ginga, for interactivity. Ginga enables the viewer to access account statements, loans and income tax information, banking, voting, interactive games, news, replays and lyrics. Brazil has a population of 190 million people and currently about 40% are reportedly covered by Digital Terrestrial Television. A comparative study of the different standard, revealed the following;

• DVB-T+MPEG2

Spectrum Inefficient

Absence of HD and Free Mobile would threaten diffusion

• DVB-T+MPEG4

New system on the market (Limited economy of scale – may not use European devices)

No Free Mobile TV

• DVB-T2

Completely new system on the market

Unknown performance

No economy of scale at all.

• ISDB-T

New system on the market, which has virtually the same economies of scale as in DVB-T+MPEG4 if made compatible with 8MHz.

In an attempt to convince the Committee about Brazil’s ISDB-T standard, Brazil’s Telecommunications Secretariat stated that “we have no doubt that ISDB-T is the most appropriate DTTV system to our countries”. It invited South Africa to evaluate it before making any long-term decision on the matter, stressing the importance of a strategic partnership. Furthermore, Caxieta stated that if South Africa joins the ISDB “family”, the economies of scale for the ISDB-T standard will improve. Although the current ISDB-T standard applies to 6 MHz, Brazil reportedly has created a Set Top Box version that will be compatible with South Africa’s 8MHz spectrum.

The Committee received presentations from the following industry players;

• TQTVD – develops digital products and services. TQTVD’s Izaías Bras

spoke mainly about the company’s digital products.

· ITD – presented on digital inclusion and public service. ITVD’s Valdecir Becker stated that:

• 96 % of Brazilian households have television sets with free reception.
• 12 % of Brazilian households have Pay TV; however, free channels are the watched the most.
• 100 % of the Brazilian population own a cellular phone; hence the importance of a “free” mobile television.

The company showed examples of how public services such as e-health, e-education, Tax Payment and Traffic Information, can be accessed using the Brazilian ISDB-Tb standard.

· EITV - develops software and provides engineering services for the digital electronic products market with focus in two areas: digital television and digital mobile devices. Rodrigo Cascão of EITV stated that the company provides development and emulation tools which reduce the new products development cycle. Its customers are mainly Brazilian TV broadcasters.

·

· Zinwell do Brasil - Steve Chang of Zinwell reported that the company is a leading designer and manufacturer of STB and supplier of other satellite, terrestrial reception products in China. The company’s core business is STB including DVB-S/S2 SD/HD, DVB-T/T2 SD/HD, DVB-C SD/HD, IPTV, and Combo STB.

Professor Guido Lemos de Souza Filho of the Federal University of Paraíba and Tiago Maritan presented on Ginga interactivity and accessibility in the Brazilian Digital TV system. Among others matters, they pointed out that Ginga is being used to develop standards that support Audio Description and Sign Language. This is being conducted using animation to develop a system that enables automatic generation of LIBRAS[7] windows as Ginga applications which will provide:

· the ability to access sign language 24 hours a day.

· cost reduction in the generation of the sign window.

· cooperation with other sign languages.

Mackenzie University

The Committee visited the Mackenzie Presbyterian University, which has a Digital Radio and Television laboratory. In 1998 the Laboratory started doing comparative performance test of existing standards on the ATSC, DVB-T and the ISDB-T. A 4kW transmitter with an antenna at 150m height tower was installed for the standards test and field trials. According to Professor Fujio Yamada, test results showed that the ISDB-T is more flexible; robust against multipath, impulsive noise, Doppler Effect and fading; saves frequency spectrum and improved the signal coverage.

In his presentation, Prof. Yamada, stated that the ISDB-T standard has been adopted in Asia by Japan and the Philippines; and by Costa Rica in the Caribbean Islands. In South America, ISDB-T has been adopted by the following countries: Brazil, Argentina, Chile, Paraguay, Peru, Bolivia, Ecuador and Venezuela.

28 JULY 2010: Visit to Globo TV, Bandeirantes TV, SBT TV

The Committee visited Brazil’s major broadcasters, namely, Globo TV, Bandeirantes and SBT TV. Members were given a tour of the different news rooms and the main focus was on digital broadcasting equipment. Roberto Franco of SBT TV and former President of the Brazilian Digital TV Forum gave a historical background of Digital Terrestrial Television in Brazil. He stated that the most important consideration for migrating was to ensure that digital broadcasting added value to the consumer. For Brazil, this meant that the size of the television had to increase to provide the viewer with not only visual perception, but also subjective perception which entails a greater emotional experience when watching television. Furthermore, High Definition with MPEG 4 was also vital as it provided the viewer with wider angles and clearer pictures, thus adding value to the experience.

Franco also reported that interactivity was very important. Brazil included this feature using, GEM,[8] a European software. However, the country experienced legal problems with the software as they discovered there were ‘hidden royalties’ that had to be paid for using GEM. Consequently, Brazilian universities and relevant stakeholders were approached to develop software that is equivalent to GEM, but royalty free. For free-to-air stations, Franco stated that it is important to offer content that is free to the consumer, but will rake in viewership. Thus, the aim is to offer integrated services where a consumer can “press the remote and get everything from weather, news, stock markets (and) traffic”. He also mentioned that DVB-T is also used, primarily by pay-TV stations, and that both standards are available in Brazil.

29 JULY 2010: Ministry of Communications, Ministry of Industry, Development and Foreign Trade Esplanada dos Ministérios and ANATEL.

Welcome by Ambassador His Excellency Bangumzi Sifingo

The Committee flew from Sao Paulo to Brasilia, the capital city of Brazil. The Committee was received at the airport by the South African Ambassador to Brazil His Excellency, Mr Bangumzi Sifingo, who hosted the delegation for lunch.

Ministry of Communications and Ministry of Industry, Development and Foreign Trade Esplanada dos Ministérios

The Committee met with delegates from the Ministry of Communications in Brasilia and the Secretary for Innovations in the Ministry of Industry and Development. Among them was Andre Barbosa Filho who advocated for the ISDB-Tb standard. The delegation was led by the Deputy Minister of Communications, Fernando Rodrigues Lopes de Oliveira. The Brazilian delegation explained, justified and defended their choice of the ISDB-Tb and the Ginga middleware. It was emphasised that the choice of a standard was mainly informed by the demographics and the needs of the people of Brazil. The Deputy Minister stated that it was important for Brazil to have technology that is not a property of another country. He added that it was important that the technology should evolve and adapt to the needs of Brazilians and that the country should not pay anyone for it. When Brazil adopted the ISDB-T standard, the two countries (Brazil and Japan) went on road shows to encourage other countries to adopt the standard. The Deputy Minister pointed out that, except for Columbia and Uruguay which adopted the DVB-T standard, eight of Brazil’s neighbouring countries, namely, Brazil, Argentina, Chile, Paraguay, Peru, Bolivia, Ecuador and Venezuela, which consist of 550 million people, have adopted the ISDB-T standard. This has enabled these countries to exchange research knowledge and to collaborate further in future. The Deputy Minister extended an invitation to South Africa to join this group.

It was pointed out that the ISDB-Tb standard included interactivity properties that were appealing for Brazil’s objective of digital inclusivity. Further, that Brazil’s quest for a digital standard would, among others, accommodate concerns regarding the Amazon in the north and the country’s fields in the south of Brazil. Brazil’s problem was that of importing software chips, which are very costly. The country, therefore, decided to formulate policy to develop its technology sector and universities were involved in the process. The important factors influencing Brazil’s decision were robustness; interactivity; mobility and portability. These features are deemed as important for accommodating Brazilians who spend hours in slow moving traffic to and from work. Another important factor to bear in mind is that the majority of Brazilians do not subscribe to Pay TV and do not pay TV licenses. Brazil is very concerned about paying royalties for specifications in software. Hence, it developed Ginga middleware. Finally, Brazil does not have a subsidy scheme for helping those who cannot afford to migrate to digital television. Brazil sees such assistance as unsustainable in the future.

ANATEL (AGÊNCIA NACIONAL DE TELECOMUNICAÇÕES or NATIONAL TELECOMMUNICATIONS AGENCY)

Anatel is not a converged regulator. It is a telecommunications regulator and Brazil’s broadcasting industry is regulated by government. It is an autonomous entity that was established in 1997 to regulate the telecommunications sector. The Agency is responsible for the technical and service aspects of the industry. Policy making and spectrum allocation is the remit of the Ministry of Communications.

In 2001, Anatel conducted its own research on digital standards and concluded that the European and Japanese system performed better than others. Most Brazilian households have internal antennaes. Therefore, the robustness of the standard was crucial for ensuring that all Brazilian citizens had access to services without interference. This includes mobile services. Anatel concluded that the Japanese model was best suited for the country’s environment. Furthermore, High Definition services were also an important factor, not only for better quality images, but also to ensure that the country used the latest technologies. All 11000 stations in Brazil are expected to switchover to digital broadcasting by 2013 and analogue transmission will be disallowed in 2016. It was mentioned that although Brazil is operating at 6 MHz, South Africa is in a fortunate position because it operates at 8MHz. This means that in comparison with Brazil, South Africa has an opportunity to add at least two extra channels in its spectrum.

Corporate Structure

Anatel has 27 decentralised units; one in each Federal District and one in each capital. Regional offices and operational units enforce regulation and serve as the Agency’s point of contact with communities. Anatel’s organizational structure consists of a Board of Directors, an Advisory Board, an Ombudsman, Superintendence and Assistance offices.

Board of Directors

The Board is made up of five members who serve for a fixed term of five years. The members are chosen by the President of the Republic and approved by the Federal Senate. However, the regulator is said to be autonomous administratively and financially. It does not account to Congress, but Directors are usually invited to explain regulation to Congress members. Furthermore, the Minister of Communications cannot reverse Anatel’s decisions. A Board member is not allowed to exercise any professional activity as an entrepreneur, a union member or a political party director. Directors are, however, permitted to be academic teachers at a compatible time. They are also forbidden from having significant direct or indirect interest in telecommunications enterprises.

Advisory Board

This Board comprises 12 members appointed by the President of the Republic of Brazil for a term of three years. The members of the Board are identified by the Federal Senate, the House of Representatives, the Executive Power, Telecommunications service providers’ associations and by users’ association.

The Ombudsman

The Ombudsman is independent and is appointed by the President of the Republic for a fixed term of two years. The Ombudsman provides a critical analysis of the institution with the aim of improving its operations. The Ombudsman makes recommendations and reports to the Board of Directors, the Advisory Board, Ministry of Communications, National Congress and other entities of the Executive Branch.

Superintendence and Assistance offices

There are 6 superintendence’s which are divided into the following categories: Public Services; Private Services; Mass Communication; Enforcement and Radio frequency; Universal Access; and General Administration. Their remit includes guiding and co-ordinating the alignment of functions of the 6 areas.

One of the Agency’s accomplishments was the auction of the 3G spectrum which was bid at a minimum amount of R$2.8billion (R11.5billion), but sold at R$5.2billion (R21.4billion) representing a 90% premium[9]. Other achievements include:

o Allowing for the arrival of telephone, fax and internet to rural areas.

o Obligating landline telephone companies to create user advisory boards to evaluate the services, the quality thereof and to make recommendations on conflicts between providers and users.

o Enabling the program that would bring telephone use to over 8 thousand small communities.

o Creating facilities for people with visual, hearing and movement disabilities to use public telephones.

30 - 31 JULY 2010: DEPARTURE

The delegation departed for South Africa on 30 July 2010.

3. CONCLUSION

In respect of Digital Switchover, the Committee found that the UK has an elaborate and effective strategy to ensure that by 2012 the analogue signal will be switched off across the entire country. It is also evident that industry has principally funded the process. The UK opted for a phased switchover approach, commencing the process from the more rural to the metropolitan regions. The DVB-T digital standard is an acceptable choice for the country’s terrain and that the BBC has already implemented the latest version DVB-T2 to compress its current spectrum. Government is also contributing towards the Digital Switchover Help Scheme for the vulnerable. However, television owners buy their own Set Top Boxes (STBs) which range from £20 (R 227.15) per box and upwards.

In Brazil, Anatel is not converged. Anatel’s remit is limited to technical telecommunications issues. According to Anatel, policy-making for the ICT sector, spectrum allocation and the regulation of the Broadcasting industry is the responsibility of the Communications Ministry. The regulator is autonomous and its decisions cannot be reversed by the Communications Minister. Brazil’s public broadcasters are subject-specific. There are public stations or channels for education, justice and agriculture. The others are free-to-air and pay-TV stations. Brazilians do not pay TV licenses and approximately 88 per cent of the population watch free-to-air television.

Brazilian has adopted the ISDB-T digital standard. Its digital migration period is from 2007 to 2016. Regarding the migration process, the country’s main priority is to ensure that the following features are available:

• Robustness;

• Standard and High Definition;
• Mobility and Portability;
• Interactivity (return path for e-government); and
• Royalty-free software or middleware.

Brazil is migrating using the Japanese ISDB-T standard which operates at 6MHz; modified with the Brazilian middleware, called Ginga, for interactivity. Government representatives stated that there is no subsidy or help scheme currently provided for the vulnerable.

Brazil’s interest in South Africa adopting ISDB-T standard is informed by its desire to strengthen its strategic economic partnership with South Africa. South Africa is seen as an important partner in extending the consumer base for STBs; thereby increasing economies of scale and reducing the costs of production. Selected private sector companies have produced a STB that is compatible with South Africa’s 8Mhz broadcasting environment.

It is important to note that in both countries television stations did not have to wait for digital broadcasting in order to be accessible to people with hearing disabilities. Even during the analogue broadcasting period, considerable access to television services has been provided to deaf people in both countries. Subtitles are provided for nearly all the available television programmes.

The Committee advises that Cabinet should very carefully consider all the implications of a possible review of policy on digital migration.

ACKNOWLEDGEMENTS

“Nothing in life is ever successful without the corporate effort of many gifted people who are willing to network and submit their talent, experience and passion for a common goal.” [10]

In this regard, the Portfolio Committee on Communications wishes to thank all those who made the July 2010 Study Tour to the United Kingdom and Brazil possible. The Committee would especially like to thank the following people:

United Kingdom

His Excellency High Commissioner Zola Skweyiya

Niall Wilkins, First Secretary, SA High Commission

Brazil

His Excellency Ambassador Bangumzi Sifingo

Mr Yusuf Omar, Consul-General

Frank Steyn, South African Consulate in São Paulo

Alvaro Galvani, Secretary, Ministry of Foreign Affairs

Luciana Amorim, Officer, Ministry of Foreign Affairs

Francisco Javier Ferres, Interpreter

SUPPLEMENTARY REPORT OF THE PORTFOLIO COMMITTEE ON COMMUNICATIONS ON ITS MEETINGS WITH BROADCASTING INDUSTRY PLAYERS ON 17 JULY 2010 AND WITH ALTECH UEC ON 20 AUGUST 2010

Prior to its departure, the Committee attended a meeting on 17 July 2010 with broadcasting industry players in South Africa. The meeting was hosted by Multichoice at their offices in Johannesburg. Industry initiated this meeting in response to the current Digital Migration debate on whether South Africa should adopt the standards known as European Digital Video Broadcasting Terrestrial (DVB-T) or the Japanese Integrated System Digital Broadcasting Terrestrial (ISDB-T) for the country’s switchover from analogue to digital broadcasting. Industry representatives reported that at an April 2010 Digital Standards Symposium, they felt slighted after the Department of Communications refused them an opportunity to express their views on the debate, which they perceived as biased against the DVB-T and favouring the ISDB-T standard. They further alleged that a Japanese delegation was allowed to present extensively on its ISDB-T standard. Hence, they turned to Parliament for a platform to air their concerns and to contribute to the Digital Migration Standard debate.

Presentations on the country’s Digital Migration were made by the following industry representatives, namely SADIBA, Arion Bomema, Multichoice, Altech and e-TV. The following topics were discussed:

• The historical background of Digital Terrestrial Television.
• The inappropriate timing of the debate and the additional costs that will be incurred if the country were to adopt the ISDB-T standard.
• Risks of deploying ISDB-T.
• Debunking myths about the DVB-T standard.
• Important aspects of Digital Migration.

Members of the Committee had an opportunity to ask questions and make comments.

20 AUGUST 2010: VISIT TO ALTECH UEC (DURBAN, KWAZULU-NATAL)

The aim of the visit was to conduct a study tour of the technological capabilities of ALTECH UEC and how these apply in the broadcasting standard debate in South Africa. The visit is an extension of the recently completed study tour to the UK and Brazilian broadcasters, regulators and companies that deliver similar products and services for their broadcast standards. In particular, the Committee’s objective is to ascertain the facilities offered by this South African company regarding its technology capabilities and their value chain model, as well as the determination of the current broadcast standard hardware and software status in the country.

The meeting with Altech UEC was attended by a multi-party delegation composed of the following members:

Mr I Vadi MP (Chairperson)

Ms M N Magazi MP

Ms MR Morutoa MP

Mr N J Van den Berg MP

Rev. M Zondi MP.

Altech UEC is a South African company that specialises in the design, development, supply and support of integrated hardware and software solutions for the world-wide digital MultiMedia industry. Altech UEC has invested in research and development (R&D) and employs over 200 engineers that specialize in the creation of applications that could help boost the South African economy if they are deployed through the STB. Rodger Warren reported on the achievements of the company, which include manufacturing the world’s first DVB MPEG2 Set Top Box in 1995. He stated that the company has 15 years experience in MPEG/DVB product development.

Mlungisi Mhlungu made a presentation on the history of Digital Migration in South Africa since 2005 highlighting the following:

· June 2006 - South Africa becomes signatory to the ITU Geneva 06 regional agreement (DVB-T standard adopted);

· November 2006 – Digital Migration Working Group (DMWG) recommends the adoption of DVB-T after reviewing all standards;

· February 2007 – Cabinet decides that SA should migrate to digital broadcasting;

· April 2007 – Public consultations held on DMWG recommendations;

· September 2008 – Minister of Communications published the Broadcast Digital Migration Policy for South Africa which confirms the adoption of DVB-T and sets the following key policy objectives:

o will be used to grow manufacturing sector and ICT,

o will subsidise poorest of the poor, and

o STB specification;

· DTT trials start November 2008;

· Digital migration target: Start 1 November 2008 - End 1 November 2011;

· STB specifications approved in July 2009;

· 5m STBs to be subsidized (R400m already allocated);

· Digital Dzonga – Digital Migration Office Authority; launched 21 July 2009

· Draft STB manufacturing sector development strategy (Government Gazette No. 32421, Vol. No. 529) published in July 2009 for public comment; and

· Digital Migration Regulations published in February 2010.

Altech UEC took the Committee on a tour of its plant and showed exhibits of the company’s Set Top Boxes. Altech UEC has developed several STBs with different capabilities. These are listed in the table below:

Type of STB[11]	Capabilities	Estimated price
DTD450	Entry level STB that enables the reception of the terrestrial broadcast signal with limited usability of the USB port for video play out	$45 (R328.70)
DTD405	Mid-tier STB with broadcasting capabilities of the DTT signal with enough memory to allow for e-government services through a USB port	$55 (R401.75)
DTD4110	Hi-end STB with capability to receive DTT signal and also has a 3G modem that enables it to access the internet and could run additional value added services like downloading video content from the internet and playing it out on the normal TV	$165 (R1205.30)

Some of the key capabilities for the DTT programme are that the STB will be able to provide for e-government services and internet connectivity through a return path capability. A return path also empowers users by providing them with access to information previously unavailable. Students can access e-Learning materials from home. Users can also send and receive emails. The use and provision of Open Source Software information is more of a possibility for all to share.

Altech UEC argued that the South African government, through the South African Bureau of Standards set out minimum specifications standards for the STB that allow for the above capabilities to be possible in the STBs. It is important, therefore, that the current minimum standards are retained and the South African population is afforded the opportunity to bridge the digital divide.

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[1] All currency conversions in this document are approximations based on calculations using Conmill.com’s The Currency Converter. The different currencies mentioned are converted using August 2010’s rates.

[2] Band Segmented Transmission-Orthogonal Frequency Division Multiplexing

[3] However according to UK government co-ordinator Jonny Martin the figure is 1154.

[4] Sindvel publication (2010)

[5] Inatel (2010)

[6] Middleware is the "glue" between software components or between software and the network, or it can also be defined as the computer software that connects software components or some people and their applications.

[7] Brazil’s sign language

[8] Technology framework that is compatible with the DVB standard

[9] Anatel (2007)

[10] Dr Myles Munroe (2002)

[11] Mlungisi Mhlungu (2010)