Monitoring Service Report: March 2018 #2

Draft Electronic Communications Amendment Bill

Public hearings on the Draft Bill held on 6 and 7 March 2018 were lively if a little predictable. Links to all written submissions and presentations are provided in the next column. The process remains highly contentious and difficult to predict. Telkom deserves special mention for its ability to bend fact and history to its self-interest. Our view on where things stand is as follows:

• The so-called agreement reached between the incumbent operators and the Minister is more of an “agreement-in-principle” or perhaps even a “non-agreement”. The mobile networks complained that the concessions made in respect of purchasing capacity on the WOAN were reflected in the Bill, but that government concessions were not. These concessions in the main relate to not pursuing a process to force incumbents to return existing assignments and making spectrum not required by the WOAN available to incumbents through an auction or other process
• The description by the Vodacom CEO of the Bill (i.e. the bits relating to spectrum) as “Vodacom’s Mining Charter moment” reflects the current gulf between (some) of the incumbents and the provisions in the Draft Bill.
• There seem to be three major points of contention. In our view none of these actually have any substance:
  • Existing assignments of high-demand spectrum: The Minister has made public statements that the mooted process to force incumbent operators to return assigned high-demand spectrum is off the table, at least until 2029 at which point the service licences issued to the incumbent operators (and most others) will fall due for renewal. The provision in the Bill to the contrary reflects the position in the White Paper, which will have to be deviated from with the approval of Cabinet. Bottom line: forcing the return of this spectrum is practically unimaginable (how would the transition work?) and legally unpalatable.
  • Future assignments of high-demand spectrum: there is simply no technical or engineering basis for arguing that the WOAN will require all currently unassigned high-demand spectrum together with spectrum freed up by the digital migration process. The CSIR process to determine the future spectrum requirements of the WOAN cannot – based on non-political considerations – conclude that this is the case. Furthermore, there will be substantial pressure from Treasury for an auction to be held which makes attractive packages of spectrum available to industry so as to maximise the windfall to the fiscus. We may end up coming back to a position which looks similar to that set out in the ICASA 2016 Invitation to Apply (but probably with more spectrum reserved for the WOAN and less available to industry).
  • Cost-based open access: industry has objected strenuously against the proposal to impose “cost-based” pricing in respect of access to incumbent (and other) wholesale services and facilities, which they argue robs them of any incentive to invest and, in effect, “expropriates” their network. This is a wilful misrepresentation of what cost-based regulation entails. Before there can be any cost-based regulation ICASA (or its replacement) will need to complete a market investigation process under Chapter 10 of the ECA, which will involve the building of cost models representing a hypothetical efficient operator. This model is then used to predict the costs of the operators while allowing for an internal rate of return. This is exactly what has happened in the process under Chapter 10 to reduce call termination rates. We think this is a non-issue at this stage.
• What is tricky to resolve is timing: the WOAN is unlikely to be operational in the next five years but the pressure to assign spectrum will intensify and may be difficult to resist. At the same time the Department remains intent on replacing ICASA with a new regulator which is likely to have all the same problems as the current one, but with less scope for disagreement with the Minister.

Submissions and presentations | Vodacom, MTN should be denied new spectrum: Telkom | ‘This is our mining charter’: Vodacom CEO slams telecoms bill | Trust the free market, MTN tells government | Don’t build another monopoly, Facebook urges SA gov’t | Telkom’s spectrum plan is a terrible idea

Ownership and control of service licences

ICASA has postponed until further notice public hearings in respect of its discussion document on ownership and control of licences (link to overview in next column) which were scheduled to take place on 22 March 2018.

Schedule of public hearings | Overview – Equity ownership by HDGs and application of ICT Sector Code

ICASA identification of priority markets

We have prepared an overview of the Discussion Document released for comment.

Ellipsis Overview of the Discussion Document on Priority Markets

Rights of licensees to deploy networks

The judgement of the High Court in the Western Cape in the matter of Dark Fibre Africa v The City of Cape Town has added to the judicial precedent on the interpretation of section 22 of the Electronic Communications Act 36 of 2005 with particular reference to the requirement that a licensee exercising its rights must have “due regard for applicable law”.

‘Entry upon and construction of lines across land and waterways. –
1. An electronic communications network service licensee may-
   1. enter upon any land, including any street, road, footpath or land reserved for public purposes, any railway and any waterway of the Republic;
   2. construct and maintain an electronic communications network or electronic communications facilities upon, under, over, along or across any land, including any street, road, footpath or land reserved for public purposes, any railway and any waterway of the Republic; and
   3. alter or remove its electronic communications network or electronic communications facilities, and may for that purpose attach wires, stays or any other kind of support to any building or other structure.
2. In taking any action in terms of subsection (1), due regard must be had to applicable law and the environmental policy of the Republic.’

In brief: DFA notified the City of its intention to construct a fibre optic route and that it disputed the City’s right to impose conditions which include a refundable and a non-refundable deposit as well as the right to apply a tariff in future. The City issued a wayleave; DFA crossed out the offensive conditions and the parties eventually met in court.

The four conditions were:

• payment of a refundable or non-refundable deposit prior to the issuing of any wayleave/permit;
• payment of a trench reinstatement deposit;
• a reservation by which the City reserves a right to impose a tariff charge in respect of the use of City land for the installation of telecommunications infrastructure; and
• a condition which provides that, should these services (or part thereof) have to be relocated for whatever reason as determined by the City then these service owners will immediately do so at no cost to the City.

DFA argued that these conditions did not constitute applicable law to which DFA has to have regard as envisaged by s22(2) of the ECA and have no bearing on the manner in which DFA would execute its works.

The High Court disagreed, noting the following:

• • • where there is national legislation (the ECA) plus the potential application of legislation passed by a local authority (the City), then a court must approach this interaction by reconciling the provisions on the basis that ‘each is concerned with a different subject matter’. The court must interpret each of the provisions so that they can both apply in a seamless manner, subject to the local authority legislation not thwarting the national legislation (in this case, not requiring the consent of the landowner).
    • DFA had not made out a case that its rights under section 22 had been thwarted: what is required is that, in the exercise of these rights, it must abide by municipal bylaws.
    • The City had provided a clear justification for the conditions imposed, through which it was trying to influence the behaviour of licensees in exercising their section 22 rights. A desirable outcome was to reduce the potential financial burden imposed on ratepayers through deployment of electronic communications networks.
    • The City had demonstrated that its bylaws served a legitimate purpose relating to its mandate as a local government entity and that they were of general application. The City of Tshwane in their dispute with Link Africa had not satisfactorily proved this element.

DFA’s application was accordingly dismissed with costs.

Note: it seems clear to us that DFA’s approach to this matter was ill-considered and lacking in their inability to substantiate their claims. This is an unfortunate precedent…

Dark Fibre Africa (Pty) Ltd v City of Cape Town (7748/2017) [2017] ZAWCHC 151 (14 December 2017)

Dynamic Spectrum Access / Television White Spaces

ICASA published final regulations on the use of television white spaces (TVWS) on 23 March 2018. The regulations will come into force on a future date to be proclaimed, so as to allow ICASA to implement the master white space geolocation database and accredit database providers.

Our understanding is that use of TVWS will be permitted on a licence-exempt basis subject to compliance with the regulations. Operating a network using this spectrum will require an electronic communications network service (ECNS) licence. ICASA has done extremely well to finalise this leg of the process efficiently.

Regulations on Use of TVWS 23 March 2018

Access spectrum

ICASA has finalised a number of radio frequency spectrum assignment plans, including an allocation in the 2285-2300 MHz band for Broadband Fixed Wireless Access (BFWA). This is an all-too-rare but welcome expansion of the bands available for the provision of fixed and mobile wireless access services.

Radio frequency spectrum assignment plan for frequency band 138MHz to 143.6 MHZ | Radio frequency spectrum assignment plan for frequency band 150.5 to 153 MHz | Radio frequency spectrum assignment plan for frequency band 380 to 400 MHz | Radio frequency spectrum assignment plan for frequency

Annual adjustment to fees for service licence applications

ICASA has given notice of the annual increase to be implemented in respect of applications and registrations made in respect of service licences (ECS/ECNS/BS). The new fees will be effective from 1 April 2018 and will increase by 5.3% based on the average Consumer Price Index (CPI).

New rates

Annual adjustment to radio frequency spectrum licence fees

ICASA has given notice of the annual increase to be implemented in respect of radio frequency spectrum licence fees. The new fees will effective from 1 April 2018 and will increase by 5.3% based on the average Consumer Price Index (CPI).

New rates

ICASA

ICASA is required under the ICASA Act to publish minutes of its decisions as taken at meetings of its Council. That is has chosen to once again start observing this obligation – even though the content is not particularly informative – is a positive sign that some internal issues are being addressed.

May 2017 | June 2017 | July 2017 | August 2017 | September 2017

ICASA Tariff Analysis

ICASA has published their analysis of tariff notifications submitted to it by network operators for the period 1 July 2017 to 31 December 2017.

• 160 tariff notifications received
  • Analysis: Standard prepaid voice / promotional prepaid voice / standard prepaid and post-paid promotional data / sim only and post-paid data
  • Benchmarks: 500MB / 1GB and 2GB within SADC/BRICS (Includes SA-based MNOs where they operate outside of SA)
  • Benchmarks: SA not the most expensive for prepaid data in SADC region, nor the cheapest; prices are below the average for the region
    • Highest – Botswana (500MB) / Zimbabwe (1GB / 2GB @ $30 / 60$)
  • Standard voice prepaid tariff unchanged from previous period
    • Cell C: increased rates on packages under 20GB & decreased price on 20GB
    • Vodacom: 250MB package price increase
    • Telkom Mobile relatively cheaper than Vodacom, Cell C and MTN (MTN charging the highest rates)
• Out-of-bundle data:
  • Cell C: reduced 66c to 0.15c (this does not appear correct as 66c is the rate for calls, not data)
  • Vodacom: prepaid/hybrid plans – reduction to R0.99 and R0.89 respectively

Tariff Report 2017 (July – December)

Number Portability

On 19 March ICASA’s Complaints and Compliance Committee heard – on an urgent basis – a complaint lodged by Transnet under the Number Portability Regulations against MTN for refusing to port numbers used by Transnet to an MTN competitor. According to MTN the basis for its refusal is the unlawful disqualification of its bid for a tender eventually awarded to Vodacom. MTN has approached the High Court for an urgent interdict prohibiting Transnet from proceeding with awarding the tender and argued before ICASA that the complaint should be pended until the litigation is completed.

Transnet, MTN to lock horns over number porting | Why MTN didn’t port Transnet numbers to Vodacom

E Band spectrum

The E Band is of particular interest because it is a testbed for a light-licensing spectrum management system that allows licensees to self-register and coordinate links. ICASA has published an updated register showing current usage.

E-Band self-coordinated-register-February 2018 (Need Link)

Cost to Communicate

The DTPS briefed its portfolio committee on progress in reducing the cost to communicate on 23 March 2018. The Minister and Department noted that:

The primary challenges to reducing the cost to communicate and transforming industry remain high levels of concentration and vertical integration of incumbents.

• ICASA is working on regulations relating to transparency of pricing information. According to DTPS this is pursuant to a September 2014 policy direction relating to price transparency, but we have no knowledge of such a policy direction…

 

Cost to Communicate – Data bundle validity periods

ICASA held hearings on draft amendments to its End-User and Subscriber Service Charter Regulations intended to protect consumers from predatory practices relating to data bundle validity periods and out-of-bundle (OOB) charges. The National Consumer Commission’s unequivocal position is that all prepaid vouchers should remain valid for a period of three years.

The Commission accepted, however, that it would need to seek clarity from the High Court before it could impose this requirement given the opposing legal interpretations of section 63 of the Consumer Protection Act proffered by some in industry.

All data bundles must be valid for at least 3 years – National Consumer Commission | Good Idea – Opt out of OOB data, Bad Idea – Data that lasts 3 years | People want out-of-bundle data – MTN | Blocking out-of-bundle data usage is unlawful – Vodacom

ICT SMME Development Strategy

On 23 March 2018 the DTPS briefed its portfolio committee on progress in implementing the ICT SMME Development Strategy, finalised in November 2017. Progress is slow and will continue to be slow given that there is a total budget of R500 000 allocated to implementation of the Strategy over the next three years. The following stood out from the waffle:

• Currently only 7% of 400 ISPs were black-owned and training for unemployed youth and entrepreneurial start-ups would be prioritised.
• The Department would seek to accelerate growth and entry of SMMEs into the sector through their participation in the WOAN. The Department was engaging with potential sponsors and in the process of drafting “effective regulations” in consultation with ICASA.

Government will help launch 96 ISPs in South Africa

Domain Names

The .za Domain Name Authority (.ZADNA) has published a discussion document on second level registrations (SLRs) in South Africa: Interested parties are invited to comment by 16 April 2018, 17h00 – Submissions and queries can be sent to submissions@zadna.org.za for the attention of Ms. Hendrina Williams (Policy and Regulation Manager).

Public Discussion Document on Second Level Registrations in .ZA | Public Discussion Document on Second Level Registrations in .ZA (.docx) Needs link | ZACR slams badly timed domain name discussion document.

Cybercrimes and Cybersecurity Bill

The Department of Justice presented on amendments to the Cybercrimes and Cybersecurity Bill to its portfolio committee on 28 February 2018. Portfolio committee members requested that they be provided with technical expertise to assist their evaluation of the Bill and a further meeting will be arranged to provide this. The current version of the Bill includes a provision to amend the Film and Publications Amendment Bill through, inter alia, the deletion of section 27A which governs the interactions between ISPs and the Film and Publications Board.