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Publication: Telecommunications News, 2001 (Insert to ComputerWeek)
Theme: Feature article – Policy Framework

Title: Chartering challenging waters

South Africans from all walks of life have been lamenting the lack of an efficient telecoms service. Disapproving comments are usually accompanied by knowing nods and the words, “I can’t wait until there is competition for Telkom”. But wait we will, because even if Telkom has done the honourable thing by turning down its final year of exclusivity, a truly competitive environment is still a long way off.
A delegation of 300-odd stakeholder representatives spent a weekend thrashing out the major telecoms themes at a colloquium earlier this year, with the aim of establishing a framework for a new telecommunications policy and looking at ways to enable the smooth and speedy introduction of a single competitor for Telkom now, and additional competitors in the future. This Act promises to be an improvement on the last, which has governed the different aspects of the sector with varying degrees of success over the past five years
“The Act of 1996”, said Communications Minister Dr Ivy Matsepe Casaburri in her introductory speech, “focused mainly on Telkom and the need for universal service. The approach of our government then was based on the need for access, participation of and ownership by the previously disadvantaged majority of our people in the infrastructure and services in this sector.
Casaburri stressed that, this time around, the objectives were to facilitate debate among stakeholders, provide a transparent process of policy-making, and solicit the views of stakeholders, especially around areas where there had not been consensus in the 61 written submissions from the broad range of interested parties. At the same time, she emphasised the need to strike a balance between timing and transparency, especially considering the importance of the Information and Communications Technology sector to the overall economy.
Over the three days, the broad objectives were met as, under the chairmanship of Emmanuel OleKambainei and Mavis Sintim Misah-Ampah of the DBSA, delegates addressed each of the issues and made recommendations for inclusion into a policy document. But the process was not without its hitches. At one point near the end of the discussions, COSATU threatened to upset the apple-cart when Charley Lewis indicated that the organization was not only against multiple licenses, but against the assumption that competition is required.
Nevertheless, each topic was sufficiently covered, ad nauseam in some cases – but this ensured that, if nothing else, everybody left the colloquium that Sunday evening with a broader understanding and new appreciation of the complexities of the deregulation process, and just what the industry and any would-be contenders are up against.

Easy does it
As expected, a significant amount of discussion took place around the nature of competition. Early in the proceedings, a delegate from Jasco suggested a simple show of hands to determine who was in favour of a big bang approach - where licenses are granted to as many competitors as the market can handle. The suggestion was quickly averted, as the audience went on to carefully analyse the most effective scenario. Many of the written submissions were clearly in favour of a gradual liberalisation, ensuring that consumers get the best and most affordable telecommunications service but some, like Eskom Enterprises, called for a minimum of three licenses in any sector (fixed and mobile) for 5 to 7 years before introducing full liberalisation.

Build it or piggy-back?
The nature of competition accounted for much of the debate, where an understanding was required regarding the difference between facilities and services-based competition. Facilities-based competition means that the suppliers compete with each other by providing services to customers by means of their own telecommunication infrastructure. Services-based competition, on the other hand refers to a scenario where service providers do not provide their own telecommunications facilities, but provide services by means of facilities that they have unbundled from network operators (i.e. Telkom). Telkom, naturally, supports facilities-based competition, which requires that the new network operator would have to invest in its own networks.
Given the time constraints for the SNO to be up and running, many believed that the only rational starting point was services-based competition, where infrastructure sharing and leasing takes place. At the same time, the opinion was expressed that facilities-based competition is the best way to achieve increased teledensity, the stable introduction of competition and promotion of foreign direct investment.

Who’ll own what?
When the discussion turned to Black Economic Empowerment (BEE), a number of percentages were bandied about. A submission reflected the belief that foreign ownership of licences should not exceed more than 60% to allow domestic and black penetration on all licences – but that it should be substantial to attract foreign investment. A further submission suggested that BEE groups should have at least 30% of the SNO and TNO and that non-operating consortiums should be discouraged from the first phase of the process to not disadvantage current ICT practitioners. One has to question how a balance will be struck between foreign direct investment and the imperative to develop indigenous capabilities in infrastructure development.
It was Ronnie Seeber of Motorola who suggested that BEE principles should be about incentives rather than prohibitions, and that a tax rebate may be a suitable reward for compliance. Acknowledging that BEE and universal access is an industry-wide responsibility, he also suggested that monies be retained from the ICT industry to provide universal service or BEE.
The ATF responded that the national objectives (which made up the crux of Director General Andile Ncaba’s presentation) be underpinned by BEE, and although the previous Act provided for this there was too little emphasis on its implementation, causing the ICT sector to lag behind on this score.

Parade or auction?
An item that received much consensus was the beauty contest versus auction approach to licensing. The auction approach, in which the highest bidder wins, did not receive much support, with references made to the European cellular licence auctions as a lesson that SA should learn from The beauty parade or tender process was a lot more popular as it would help the regulator ensure that infrastructure development goals are met and encourage BEE.

Much obliged
Telkom, having set itself ahead of its roll-out and service targets, will soon be sharing its universal service responsibilities as universal service requirements remain an important part of the telecoms obligations of the future. One submission, on addressing rural telecoms, suggested that the USA (Universal Service Agency) facilitate and encourage the establishment of community-owned networks, impose US obligations on operators and award contracts for the provision of telecoms services in underserviced rural areas.
It was also suggested that Government should promote cheap, high bandwidth Internet access, and that the Internet and e-commerce should be fully deregulated. Most commentators said Voice over IP and Voice over Internet should be unregulated because they are more cost effective than current technologies in providing universal access.

The role of the regulator
Delegates made it quite clear what was expected of the regulator. Icasa should be strong, independent, and properly staffed and resourced. Mike van den Bergh expressed SAVA’s disappointment in the lack of regulatory support resulting from “grey” areas in the previous Act. He stressed that the roles, responsibilities and jurisdiction should be well established to avoid the anti-competitive-type issues of the past few years.

Skills strategy
Although it wasn’t listed as an item for discussion, more than one stakeholder group raised concerns about the effects of the “brain-drain” and other factors on the skills supply in the ICT sector. Fortunately, some education-minded representatives were among the audience and at least one, the University of Natal to be specific, emerged as an institution with a plan. After watching student numbers drop in the engineering faculty, while the computer science departments couldn’t keep up with the applications, the university decided to offer a degree in computer engineering to entice future telecoms professionals.

What next?
By the end of Sunday, 4 February, the colloquium had wrapped up the debate, having tackled everything from addressing previously disadvantaged groups, to spectrum and HR issues. Six commissions put their recommendations forward, and a final recommendation document was compiled for the Minister to present to cabinet early in March. Cabinet’s policy decisions included the introduction of a single competitor to Telkom to provide local, national and international services with one or more competitors being introduced after five years. The Cabinet also decided that Telkom’s infrastructure should be available to the new player to benefit the consumer, and, in keeping with the proposal’s call for technology-neutrality, decided that both companies would be licensed for fixed-mobile services. Fixed and mobile providers will be offered third-generation licences in the future. These policy directions will be gazetted, made open to the public for comment, after which the regulator, Icasa, will publish regulations and begin the licensing process. Alongside this process, the Cabinet would discuss amendments to the Telecommunications Act of 1996, which would be submitted to Parliament later this year.
Let’s hope the fast-tracked process promised by the Department maintains its momentum. ENDS