ICASA strategic mandate; ICASA court case about Vodacom deal

Meeting report

After an all-day meeting with the SABC, the Committee met with the Independent Communications Authority of South Africa (ICASA) delegation from 7.30pm until 10pm.

ICASA 2009-2010 strategic mandate and budget: presentation
Mr Paris Mashile, Chairperson: Independent Communications Authority of South Africa (ICASA), said that due to the number of new members in the Committee he first wanted to sketch a broad picture of what ICASA was about. Its role was to execute government policy objectives within the confines of the Electronic Communications Act (ECA) and the ICASA Act. In doing so they had a relationship with the DoC about implementation. ICASA was acting in the public interest dealing with competition, the allocation of scarce resources and with service licensing and delivery.

Chairperson Vadi suggested that Mr Mashile begun his presentation at the core, dealing with licensing and compliance. Mr Mashile pointed out that the language of the presentation was quite technical but that he would try to fill in the gaps as he went along.

Mr Mashile then looked at the strategic objectives emanating from the ECA. The ECA was in essence a convergence Act dealing with the current technical transition where all kinds of services could be provided on one network. For example, telephone, broadcasting and computer services could all be facilitated via fibre-optic cables. ICASA’s role was to promote socio-economic development of the country through ensuring competition, in the area of Information and Communication Technology (ICT) and this was done mainly through issuing service licences.

The key issue of licensing was to create competition which in turn created a vibrant economy and an increase in choice quality and service for consumers. In doing so it had to ensure an efficient use of the frequency spectrum, which was very scarce. ICT contributed to about six percent of the GDP and had been standing strong in the current economic demise. ICT facilitated all other kinds of business and practices. Without ICT infrastructure there was no way to achieve economic development. There was a problem with universal access since not all areas were profitable enough to ensure ICT investment by the private sector and that was were policy implementation came into the picture. Since about 80% of South Africans still belonged in a low-income group, one needed to make sure that they all had equal access to technology.

The structure was informed by the strategy, which was informed by the mission which was informed by the vision. What were the stressing issues in licensing? The main issue was that technologies were converging and they now had to issue licences for operating broadcasting services using a mobile phone for example. Digitalisation also spurred on the technological progress and opened new doors and the analogue network’s glory days were over.

With licensing it was also important that certain rules and regulations were adhered to after the licences had been awarded. There was at the moment some contestation about this regarding mobile phone networks who had for example demanded payment for itemised billing which ICASA believed should be supplied without costs. Also there was an issue on the fine print in mobile phone contracts which did not clarify to what an extent the monthly payments were for the phone or for airtime. Licences represented both rights and obligations. One example here was the public election broadcasting requirements which had represented a huge cost to the SABC, but the SABC was obligated to provide those services under their licence. There was also the issue of public content requirements that had to be met by the SABC. People who used subscription services were also entitled to the public broadcast and the question was therefore whether the subscription broadcaster would have to pay the SABC for this content or whether the SABC had to supply it for free.

Looking at digitalisation, there was to be dual illumination with both analogue and digital broadcasting provided between 2008 and 2012 which carried a large cost and during which there would be no digital dividend. It was possible that this period would be extended to 2015 which was in fact what ICASA was recommending to the Minister.

A final issue with licensing was that of telephone numbers. The number of 11 digit numbers issued could run out so it was important that they were used efficiently. Therefore a database was needed to record whether those who had numbers licensed were using them sufficiently. With number portability this policy had not resulted in as big an increase in competition as was hoped. This was probably because of contractual lock-ins and unawareness about the policy amongst consumers. An analysis was needed to determine what could be done to give effect to competition through portability.

In terms of a player with significant market abusing its power, the regulator had to propose pro-competitive measures. For example, Telkom was providing service bundles including competitive services, thereby eliminating the competitiveness of the market. ICASA was therefore considering banning competitive services from bundle deals. The aim was to list all the services provided, calculate the cost of them in order to establish the profit margin of service providers. This was useful to increase ICASA’s negotiating power with both mobile and fixed line service providers.

With consumer protection one of the most important pricing policies was that the interconnection price had been fixed. Areas that needed to be covered were rural areas, townships and so on. E-rate regulations had been developed where the DoC would pay 50% of the cost of broadband to schools. However some of the schools could not even afford 50% so the policy needed to be reassessed. However someone needed to pay the other 50% and the question was who. ICASA believed that the Universal Service Fund should be utilised for this purpose.

Mr Karabo Motlana, CEO of ICASA, took over presenting on the operational issues and promised to keep it short and concise and simply list the main operational issues of ICASA. A new ICASA webpage had been launched following a study done in conjunction with the National Treasury and Public Works. ICASA was also looking into the location of all regional offices and they would have a new office in Cape Town shortly which would be more accessible than the previous office. There was also a continuing process of realigning ICASA to the mission statement contained in the ECA. To this effect a number of audits were being conducted such as a skills audit, a qualification audit and an assessment of whether ICASA was in a position to carry out its mandate in terms of ECA. They needed to make sure that they were ‘fit for purpose’. The ECA mandate stated that ICASA could only charge operators licence fees that were proportional to what it had cost ICASA to provide regulation which meant that extensive cost analysis had to be done on ICASA services. On the IT side they were working through processes of tendering whereby an enterprise resource platform was being purchased to yield a better utilisation of services and a more effective organisation. As far as the process of relocation was concerned, two regions were still located at head office and they had to be relocated to areas of need. There was also an extensive stakeholders’ communication process which aimed to make ICASA and its goals more well known, not only in Parliament but also to their stakeholders and the country at large.

Their budget was not at all as complex as that of the SABC since ICASA was a fairly straightforward organisation in terms of structure. They operated on grants from the DoC. This year the allocation was R269 million. There was a dispute between the DoC and ICASA about the postal regulation of R10 million since the responsibility had been transferred but not the funding. Cost of administration was R 37 million, staff costs were R149 million, audit costs just under R2 million and operating costs were R50 million. On the project side the expenses for the year were R35.5 million. In total the allocation amounted to R229 million.

Discussion

Mr Kholwane wanted to know if ICASA had the financial leverage to fight the industry. He thanked Councillor Zokwe, who was leaving ICASA, for the stability that he had brought to the authority. He noted that when the South African Post Office (SAPO) had presented to the Committee recently, they had mentioned that there was a problem with the 1kg letter regulation, where SAPO had exclusive rights. It seemed as though ICASA was not sufficiently monitoring compliance with this right, for example some municipalities were delivering their own bills to constituents. Another question was that of the progress of the E-rate. He was mostly satisfied with what had been said in the presentation; however the problem with schools that could not even afford to pay the E-rate needed to be solved. Also, clarity was needed on whose role it was to ensure that the SABC adhered to the public election broadcasting requirements. On the issue of inter-connection Mr Mashile had indicated that it was driving costs. He knew what ICASA had attempted to deal with it but he wanted to know the outcome of this attempt. Finally the issue of the Vodacom deal and ICASA’s involvement in the court case. What had really happened? Accountability for this had to be established.

Ms Kilian added two considerations on the issue of Vodacom. It was strange that the two entities, the DoC and ICASA, had split on the decision and the DoC had said that they were surprised and unhappy with ICASA about this outcome. Why had the board reversed its decision at the very last minute and was it a unanimous board decision or did people vote against it? If so, how many votes were against? Finally what was the cost implications? The ruling had stated that ICASA had to pay for Vodacom’s court costs.

Mr Mkhize asked about the working relationship between ICASA and Sentech. The reason for this was that commercial radio stations sometimes disappeared just to reappear one or two hours later. Another worrying thing was that ICASA surrendered their regulatory mandate to operators or individuals. The concern was then what would happen to the poorest of the poor and who would defend and protect them. If ICASA was regulating the industry, ICASA had a responsibility to protect those who could not protect themselves. The free market system had often failed, even in the USA. Further, was the environment really a conducive format for unregulated competition?

Mr Radebe asked when ICASA intended to put into effect the handset regulations. Secondly he wondered about the cost implications of extending the dual illumination programme. Thirdly he wanted clarification of the relationship between ICASA and ESKOM. Looking finally at the budget, the biggest cost was staff. How did ICASA ensure that the project expenses and the engineering resources were given due funding?

The Chairperson wanted to find out what “Independent” actually meant in the case of ICASA. Looking at the Vodacom issue he was lead to believe that the former President had signed off the deal committing the government and its entities to the Vodacom/Telkom deal. Then ICASA went on to contest related issues in court. So the question was if ICASA was in fact independent of the government? ICASA did have a relationship with the DoC but they also contested the Department in court. And ICASA joined the court action with COSATU. As what? Not as a friend of COSATU, but as a co-litigant. Since when did an independent regulator join court action with a civil society organisation against the very government they was supposed to be supporting. Was that an act of independence?

The second question was that of the Councillor responsibilities. The post was a full time position, so did they have an individual work plan which was evaluated with key performance indicators? Did they have earmarked projects? Who monitored their attendance and how did that process work? The law allowed the Committee to remove Councillors but at the moment it had no way of monitoring their performance. The Chairperson estimated that their packages were somewhere in the one million region. What value did the Committee get from each of the Councillors for one million Rand? Some form of reporting standards needed to be set up including specific targets and quality assessments.

Finally ICASA Councillors had undertaken many international trips. In what way were these trips work-related? They seemed to be a very large portion of the costs. Were all these trips justified in terms of adding value to the organisation? Who authorised them? Again, since this was a state owned entity that fell under the Committee they needed to start working on managing the relationship and the accountability over the next five years.

Mr Mashile answered that he wanted to make it clear to the Committee and the world at large that the Vodacom/Telkom deal had not been properly handled by ICASA. They were filled with contrition, remorse and regret in terms of how they had dealt with the matter. They had fallen off their horse and it had been a very bad experience but they had all had to learn from it. With regret he said that without any equivocation they had been wrong in reversing their decision. Under normal circumstances this should not have happened. They were all aware of their role and responsibilities. What they should have been doing was to implement government policies in terms of the ECA. Again he said that they were all filled with contrition and regret and they were self-flagellating. He apologised and guaranteed that something like that would not happen again. In the future they would be guided by logic and reasoning.

What “Independent” represented for ICASA was that they should handle issues objectively and transparently within the legal parameters. It was not about disregarding all and everyone.

The Chairperson asked if he was speaking on behalf of all Councillors.

Mr Mashile said that he spoke with the full understanding that the Councillors did concur with that view.

The Chair followed up and said that Mr Mashile had to understand the seriousness of the statements he had made. Had the CEO been present at the meeting leading up to the court case? Was the company secretary present? Were there minutes taken? Were proper procedures followed instructing legal representation to act on behalf of ICASA? Had the CEO authorised the expenditure? If he had not, then he wanted to know who was liable for the cost. He wanted to put on record that he would be seeking guidance from National Treasury on this matter since he did not have a full understanding of the regulations. Could the CEO, as the accounting officer, please respond?

Mr Mashile stated that the ICASA Act allowed any two Councillors to approach the chairperson or the acting chairperson at any time to call for an urgent meeting to discuss pertinent issues. Although he had been in Lesotho at the time, he believed that the meeting had a full quorum when the decision had been taken.

Mr Motlana responded that he was not present at the meeting where the decision was taken but that he was in the building. He was only informed of the decision after it had been taken. The issue of the instruction of the General Manager was normally constructed through the Office of the CEO but this had not happened. The instructions had gone directly from the Council to the General Manager of the Legal Section (GM Legal). 

Mr Khumalo wanted to know if the CEO had been invited to the meeting.

Mr Motlana responded that had not been invited; it had been a meeting of Councillors only.

The Chairperson asked if there were minutes of the meeting.

A member of the ICASA delegation answered that the Council caucus was responsible for taking minutes of the meeting but that they would certainly be made available to the Committee.

Mr Radebe asked the Chair to make these minutes available to the Committee as soon as possible so that they could be scrutinised.

The Chairperson returned to the implications of the cost. Did Mr Motlana take responsibility for that?

Mr Motlana responded that the Council had the right to instruct legal representation, but ordinarily when doing so it had also to issue an instruction to the CEO to instruct GM Legal to seek external attorneys. The accounting would normally fall on the CEO Office. However, in this instance he had not been told to issue instructions to GM Legal and he assumed that when the invoice for the legal proceedings arrived at ICASA, the Council would have decide on how to deal with it.

Mr Kholwane asked if there had then been a breach in procedure.

The CEO said that all instructions to staff had to come through the CEO.

Ms Magazi said that this seemed to be what was classified as a ‘fruitless expenditure.’ According to the Public Finance Management Act (PFMA), when money had been used in a manner that was not budgeted for there had to be procedures for disciplinary hearings dealing with the culprit. Would the CEO ensure that such procedures were initiated? The Council had authorised the expenditure. She did not know if that fell under the legal mandate of the Council.

Ms Kilian wanted to know if the GM Legal was present. If he was, could he offer his opinion on what had happened. As a person who would have directed the actions and who should have made sure that they were in line with the PMFA, could he please explain how he proceeded to get the legal representation involved.

Mr Stanley Namaregane, General Manager for the Legal Department of ICASA, responded that the matter had been before ICASA for quite some time and legal advice had been furnished on several occasions. On this specific day he had been called and informed of the decision that Council had taken and he then immediately contacted the CEO to alert him and inquire if he was aware of the decision and its implications. With that he asked the CEO to continue.

Mr Kholwane said that he was sure that the Council had been aware of the problems related to this matter since it had happened. Mr Mashile had indicated that things had not gone well in relation to this matter. So what had they done so far in terms of accounting for this matter? There should be a process within the Council itself to deal with issues of accountability. If they had not done anything about such a serious matter, it seemed clear that they were not performing their duties.

Councillor Robert Nkuna who had been present at the meeting explained that there had been six Councillors present to take the decision. They had since reflected and all agreed that the decision had been problematic. They admitted that they did not do what a good regulator was supposed to do and as such they took full responsibility. About the cost, the CEO outlined the procedure when a wrongful decision had been taken. It had to be decided whether the expenditure was fruitless or irregular, because the decision had not been taken by individual persons. To his understanding they were now at the point where they had reflected on the matter and had realised that the decision had been wrong and that something similar should never happen again. There were regulatory issues that had an impact on the decision and therefore had to be addressed. There seemed to have been confusion around ownership and control regulation which was very difficult to interpret and that diverged from the ECA. So to resolve the problem in a wider sense the regulatory issues recognised by the authority needed to be dealt with. The minutes those would be forwarded to the Committee without any delay.

Ms Morutoa said that simply reflecting on the situation would not be enough to deal with the accountability for the wrongful decision. They had to be held accountable somewhere. Also where on the budget report was the cost reflected. Could this be elaborated on?

Mr Nkuna answered that in terms of the costs they were not reflected on the budget because the invoices had not yet been received and the total sum was not known. Perhaps when the information arrived they could file a submission to the Committee so that they could account for it. If it meant that they had to make a separate presentation in front of the Committee, so be it.

Mr Kholwane asked why the Councillors had ignored the normal procedure of going via the CEO. What was the reason for this?

Mr Kilian commented that from listening to the GM and the CEO there seemed to have been some discrepancies, could it be clarified what had actually happened. They needed to know if the six Councillors had taken the decision unanimously and if anyone had brought up the issue of the compliance risk and other implications?

The Chairperson followed on that question and asked what the CEO had said when approached by the GM? Had he authorised the appointment of legal council?

Mr Nkuna replied that four out of the six Councillors present at the meeting were currently present. As some of the discussion that took place at that meeting affected the operators, they asked kindly if the detail of the meeting could be relayed behind closed doors.

Ms Magazi asked if the matter had been so urgent that they could not wait for the regular chairperson to return.

Councillor Fungai Sibanda responded that he had been the acting chairperson that day and he wanted to reiterate what Counselor Nkuna had said. They were more than happy to account in a detailed manner about what had been said at the meeting, but they wanted to do so behind closed doors.

Mr Mkhize suggested that they finished all other points first before having a closed meeting.

The Chairperson agreed with this and urged the delegation to answer the other questions.

Mr Mashile spoke about the councillors’ work plan. They were allocated projects individually that were accounted for on a quarterly basis in terms of progress. Some councillors could have two or three projects simultaneously. What was looked at on a quarterly basis was the expenditure, timing as well as the quality output that the councillors had to account for.

The Chairperson asked to whom they accounted?

Mr Mashile responded that the Committee would be provided information as to whom was responsible for which project and information relating to the evaluation.

The Chairperson asked if this represented a commitment to submit such information and Mr Mashile said that it was.

Mr Mashile continued by accounting for the international trips. He said that ICASA, being an international player, had to know what was happening in their area around the world. ICASA was also often invited to speak at conferences, which was important since the information they provided on regulatory issues had implications for Foreign Direct Investment.

The Chairperson said that he wanted to be presented a schedule for past and future trips, including their purpose.

Mr Radebe reminded Mr Mashile to answer the question of who authorised the trips.

Mr Mashile answered that it was authorised by the Council. All Councillors had to agree if an individual trip was feasible.

On that point Ms Magazi asked if ICASA had obligations to attend international conferences on technology. What was the relationship to the Council and the Presidential Committee on ICT?

Mr Mashile responded that he as an individual representing ICASA was part of the Presidential International Advisory Council. He advised them on matters related to regulation.

Mr Nkuna added that internationally they were part of several institutions. For example, in the regional postal sector they were part of SAPRA (Southern African Postal Regulators Association). Then on the continental level they were part of IPAPU, the Pan-African Postal Union, which fell under the African Union. On the international level they participated in the Universal Postal Union, which was a UN specialised entity on postal matters. That kind of trend was repeated for telecoms and broadcasting and understanding this could help explain the large amount of travel involved. As a Council they allocated areas of responsibility in terms of international representation and they had a budget allocated for travel expenses which was known before hand. He pointed out that ICASA had stopped undertaking international studies, which had already lowered the travel expenses.

Mr Mashile said that being able to stand up to the industry as a regulator was difficult since they did not have the same resources as the industry. The operators were successful in making people slaves under their capital and also they often poached talent from the regulator. When monitoring the regulatory compliance and protecting the consumers, ICASA could not be everywhere but had to rely on complaints from consumers. They had a Complaints and Compliance Committee (CCC) that operators could be hauled in front of if they had failed to address their non-compliance. The Committee could impose sanctions, fines, warnings and so on.

In terms of the E-rate, it was created to address public schools but the Minister had to decide on whether independent schools would also be subject to this treatment.

On covering the elections, ICASA’s regulation had been worked out from the Act relating to election coverage. The Act provided the framework and the regulation was an elaboration consistent with the Act. The allocation of coverage was equitably allocated in terms of number of seats held in Parliament.

When it came to the interconnection, the problem was the cost of communication. The difficulty in ICASA imposing interconnection related to Chapter Ten of the ECA. That process was so elaborate that it was very difficult for ICASA to take a decision, to the point that it would take years to come to a solution. Perhaps the Act should be amended because the Act could not be implemented as intended. This was something that ICASA was currently working on and in a month or so a proposal for the amendment of the Act would be submitted. A question could be asked why this was being done when a new Telecom Act was about to come into play

Looking at ICASA’s working relationship with Sentech and the airtime reliability; ICASA’s obligation was to the broadcaster and not to Sentech. The broadcaster would have to then compile a report in terms of living up to its obligations and issues they did not have control over. Had the interruption been due to the radio presenter falling asleep or forgetting that he was on air, then the broadcaster was responsible.

Mr Motlana clarified that normally the broadcasters had to rely on Sentech to provide them with reasons as to why there had been a blackout and so on.

Mr Mashile continued that normally the relationship was between the broadcaster and Sentech and a first service level agreement established penalties for non-delivery of service commitments. It also had to be remembered that airwaves were not 100% reliable, and that weather conditions and so on could affect the transmission which meant sometimes interruptions were not due to culpability on anyone’s part.

About monitoring the 1kg postal regulation, the post office should have informed ICASA and they would have investigated the situation by, for example, sending out a mystery shopper.

Another ICASA delegate continued that in 2008 SAPO had complained about certain municipalities. ICASA had sent out letters ordering said municipalities to stop this practice and some had responded that they were not aware of it happening and others had said that they had to hand out their own bills since their constituents did not have addresses.

The Chair said that when SAPO presented to the Committee, they complained that very little had happened since they had notified ICASA. A year had gone by without any fines or other decisive actions being initiated by ICASA. How long was the response time? If ICASA could not adequately deal with regulatory compliance they could not charge SAPO the compliance fees.

Mr Mashile responded that in that case perhaps this particular instance had ‘fallen through the cracks’ and that was unfortunate. Ordinarily when entities responded to the CCC, the Council needed to follow through in its own capacity. The ICASA Council did not want to interfere in CCC’s operational matters. This was a difficult terrain for the Council because at the end of the day they were accountable although the responsibility laid somewhere else. He therefore referred to the CEO to speedily deal with this matter since it had come to the fore. 

He said that the Council was working on the hand-set subsidy policy and they would publish the regulations in the fourth quarter. What normally happened was that they needed outside legal representation to scrutinise the legislation ensuring that it could withhold in court.

About monitoring Councillors’ work attendance, they had an access card that was swiped when coming to and leaving work. If they wanted to have a day off or if they were sick they needed to fill in forms which were given to Mr Mashile in his capacity as a chairperson.

The CEO responded to Mr Radebe’s question on the budget and said that the budgeting for engineering capabilities arose from interest on income and this could be seen on the income statement.

Mr Kholwane asked if any records were kept on the swiping of the access cards.

Mr Mashile answered that there was no active monitoring but that if there was a situation where a member’s presence was questioned they could access the records.

The Chair pointed out that it seemed that a systematic problem with the Council was that there were nine Councillors and one chair but it seemed that no greater power was resting on the chair. Was there a line of reporting? Why else would there be a permanent chair? Surely the chair was compensated for having a greater responsibility. Why should the Committee endorse this if he did not in fact have a greater responsibility?

Mr Radebe reminded ICASA about his question on Eskom.

Mr Mashile responded that Eskom had a private electronic communications network which was for their use only and not for commercial purposes. In that way it differed from any other entity such as Telkom and Vodacom. It therefore was exempt from having a licence unless they had enough capacity to sell extra capacity such as fibre. In that case ICASA would provide conditions for such a sale.

Mr Sibanda replied to the question on the ICASA chairperson and said that the chairperson managed the activities of the Council. The chairperson was not only responsible for ensuring that the Councillors reported for duty but also had to monitor particular projects and Councillors’ performance. 

Mr Nkuna added that Section 6A of the ICASA Act set out the procedures that should be followed on monitoring Councillors’ performance. It said that the chairperson, together with the Portfolio Committee were responsible for the performance management. No Councillor could be absent from work without the Chairperson’s knowledge.

The Chairperson then closed the meeting to the public.