World Dialogue on Regulation

ICASA has given a liberal interpretation of the Ministerial determinations by the Minister of Communications. The pathway for mobile operators and VANS to bypass the de facto Telkom monopoly has been created. The stimulus of competition should contribute significantly to lower bandwidth costs. Similarly, lower Voice over IP costs (through the provision of voice by VANS) should encourage lower call charges.

South Africa’s regulator gives VANS operators a boost

The South African telecommunications and broadcasting regulator, the Independent Communications Authority of South Africa (ICASA), recently released its interpretation of the policy determinations made on the 3rd of September 2004 by the Minister of Communications intended to further liberalise the market. Though provision for this announcement had been made in the 1996 Telecommunications Act, the Minister had been resisting calls to liberalise the market since the official end of Telkom’s monopoly in May 2002. Speculation is that the Minister had been protecting the state’s assets (namely Telkom), but that the cost to the economy of this protection had become prohibitive. The President, Thabo Mbeki, recently highlighted the negative impact of telecommunications costs on economic growth.

Though provision for this announcement had been made in the 1996 Telecommunications Act, the Minister had been resisting calls to liberalise the market since the official end of Telkom’s monopoly in May 2002. Speculation is that the Minister had been protecting the state’s assets (namely Telkom), but that the cost to the economy of this protection had become prohibitive. The President, Thabo Mbeki, recently highlighted the negative impact of telecommunications costs on economic growth.

The Ministerial determinations by their nature were broad and open to interpretation and as a result highly contested. The most ambiguous area was whether VANS and mobile operators should be able to provide their own infrastructure (be it wireless or fixed line). This raised several questions which ICASA sought to clarify in its public consultation process held in November and subsequent interpretation:
Could VANS self provide or must they lease facilities from a licensed operator?

Could mobile providers self provide their own fixed lines or must they lease facilities from a licensed operator?

How would the regulator deal with Voice over any Protocol (VOAP) in terms of interconnection and quality of service?

Would new licences need to be issued to take the Ministerial determinations into account?

The incumbent operators in the different market segments had sought to have the Ministerial determinations on self provisioning for mobile operators and self provisioning for VANS operators interpreted in a way that protected their market positions. Telkom, the incumbent fixed line operator, argued that the Ministerial determinations allowed for any network operator, provided it was licensed, to self provide. Since Telkom is the only fixed line provider it was, in effect, contending that VANS and mobile operators must lease facilities from Telkom.

The incumbent mobile operators argued that, while they could self-provide their fixed links which they had historically been required to get from Telkom or its phantom competitor, VANS were not allowed to self provide (supporting Telkom’s argument). VANS and ISPs opposed both the Telkom and mobile operators’ arguments by saying that they, too, should be able to self-provide, if service based competition was to be meaningful.

The interpretation issued by ICASA on the 22nd of November broadly supported the VANS’ interpretations of the Ministerial determinations. The principle informing ICASA’s interpretation is that any operator (VANS or mobile) may self provide, as long the equipment they purchase is from a registered ICASA equipment supplier (a legalistic requirement to comply with international type approval standards). This does not mean that the equipment supplier must be incorporated in South Africa. Rather, the equipment supplier (for example, Nokia, Siemens etc.) must simply be registered on the ICASA database as an equipment supplier (as stipulated by the 1996 Telecommunications Act). Ensuring that all equipment is type approved means that there is a consistent standard of equipment in South Africa and some level of international reciprocity with regard to agreed standards.

The 1996 Telecommunications Act states that only fixed line operators have rights of way in terms of laying down telecommunications infrastructure in South Africa. Mobile operators can lay down fixed line infrastructure for their own use, but may not provide their own point to point connections (microwave or fixed) and therefore not permitted to sell to retail customers. ICASA recognized that the Act would need to be amended to resolve the intention of the directives and the current legislation, but this could not happen by the 1st of February 2005 deadline and was thus left unresolved. Reading between the lines, ICASA seems to be waiting for the forthcoming Convergence Bill to address this issue.

The ability for VANS operators to self provide will mean that they will need new licensing agreements. ICASA’s stated intention is that the new licensing framework for VANS will be finished prior to the 1st of February 2005 deadline. There will be no impact on the current licensing framework for mobile operators before then.

VOAP providers (such as VANS) will be subject to several conditions, all still to be made public at a later date. Specifically, VOAP providers will be required to link to the emergency services system and provide quality of service information to consumers. ICASA will be issuing new interconnection guidelines (note that the entire interconnection framework is being reviewed) as well as new numbering guidelines to take the new regulations into account. ICASA expects the new interconnection framework to be complete by the 28th of February 2005 after the public consultation process in January.

ICASA has given a liberal interpretation of the Ministerial determinations by the Minister of Communications. The pathway for mobile operators and VANS to bypass the de facto Telkom monopoly has been created. The stimulus of competition should contribute significantly to lower bandwidth costs. Similarly, lower Voice over IP costs (through the provision of voice by VANS) should encourage lower call charges. The impact of this has already been seen through Telkom’s proposed 28% reduction in international calls. Of course, in the area where Telkom does not have the stimulus of competition, namely local call charges, Telkom is proposing a 5.5% hike(1) . The SNO was to have played a major role in stimulating competition to Telkom in the local loop but the delays in the licensing of the SNO has marginalized their business case and the opportunity for creating a major alternative to Telkom has been lost. The SNO is likely to focus on the corporate market, at least initially.

Other network operators also appear to be absent from the directives and ICASA’s ruling. Sentech, currently the only other operators with an international gateway, admittedly only for third party traffic, has not specifically been granted voice rights. This is case too for the switched data network operators Wireless Business Solutions which, together with Sentech, have the capacity to provide some competition to the incumbent, Telkom, under its de facto monopoly.

(1) Telkom has handed across its tariff increases to ICASA, even though this is in advance of the ICASA ruling on tariff increases expected by the middle of December