REGULATOR HOLDS HEARINGS FOR PROPOSED VANS

UNCLAS SECTION 01 OF 02 PRETORIA 000389

SIPDIS

DEPT FOR AF/EPS AND AF/S/TCRAIG AND KGAITHER
COMMERCE FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND
TREASURY FOR GCHRISTOPULOS, LSTURM, AND AJEWEL
DEPT PASS USTR FOR PCOLEMAN, WJACKSON AND CHAMILTON

E.O. 12958: N/A
TAGS: ECPS ETRD ECON EINT SF
SUBJECT: REGULATOR HOLDS HEARINGS FOR PROPOSED VANS
REGULATIONS

REFTEL: 04 PRETORIA 5555


1. SUMMARY. Telecommunications industry stakeholders
attended hearings at the Independent Communications
Authority of South Africa (ICASA) to comment on proposed
VANS regulations. Industry remarks addressed recurring
themes such as: what is a value-added network service
(VANS); should the VANS application fee be raised from
R5,000 to R30,000; can VANS self-provide their own
facilities; how would liberalization of the VANS industry
affect spectrum availability, numbering schemes and
interconnection agreements; and should ICASA stipulate a 30
percent black economic empowerment shareholding requirement.
END SUMMARY.


2. Telecommunications industry stakeholders attended
hearings January 19-21 at the Independent Communications
Authority of South Africa (ICASA) to comment on proposed
VANS regulations.


3. Industry associations representing small business argued
that the proposed six-fold increase of the application fee
for a VANS license from R5,000 to R30,000 is exorbitant and
the regulator should clarify who will be required to obtain
a VANS license. They argued that theoretically a school
offering email services to its students might be required to
apply for a license. More likely, small businesses such as
community internet service providers or internet hosting
services would be most egregiously affected by the costlier
fee. Telkom also questioned the need for higher application
fees, recalling that ICASA's rationale for the fees is to
cover administrative costs incurred with the adjudication of
the application. ICASA agreed to review the proposed
application fee.


4. Large incumbent operators such as Telkom, Vodacom, and
Cell C, told the regulator that existing legislation
prevents VANS from being able to provide their own
facilities. Telkom's Executive of Regulatory and Public
Policy Gabrielle Celli said, "The standing telecoms policy
of managed liberalization cannot be reconciled with the
enhancing of VANS licenses to the extent they resemble fixed-
line telephone network licenses." Similarly, Vodacom Head
of Market Regulations Margo Stoeder said, "It's not about
what is technically possible, but what is authorized by the
current act." ICASA Councilor Paris Mashile responded that
ICASA must act in the public interest by encouraging
competition, innovation, and affordability. He continued
that if technology breakthroughs were not allowed in the
marketplace then President Mbeki's mandate to reduce the
cost of doing business in South Africa would never be
realized. ICASA Senior Manager for Licensing Enforcement
and Numbering Administration Andries Matthysen reiterated
that ICASA is leaning towards a liberal interpretation of
the Ministerial Determinations which would free VANS from
any obligation to acquire their facilities from Telkom and
allow them to self-provide.


5. Transtel Manager for Government and Regulatory Affairs
Phatang Nkhereanye said that the Ministerial Determinations
allowed VANS to self-provide. He said this would create two
types of VANS: infrastructure-based VANS and services-based
VANS. Nkhereanye argued that ICASA should have two types of
licenses corresponding to these VANS categories. He
cautioned that the expected surge in VANS applications would
consume all available spectrum and called on ICASA to
conduct a spectrum audit and enforce a use-it-or-lose-it
policy on unused spectrum. He argued that in this context,
incumbent operators should receive "preferred treatment."
Nkhereanye said this was reasonable given that the SNO must
pay R300 million for its license and spectrum whereas a VAN
may acquire its license and the same amount of spectrum for
just R30,000 (under the proposed regulations). Matthysen
told Econoff that ICASA has received nearly 200 applications
for VANS licenses since September 2004 and that most of them
were from spectrum-consuming infrastructure VANS. He said
that the current available spectrum would support only a
small number of those applicants.


6. Several stakeholders called on ICASA to hold off on
implementing the Minister's Determinations until the
Convergence Bill is released in mid-February. They said
that the Bill will clarify licensing structures which could
render ICASA's proposed VANS regulations obsolete. They
said that this would also allow ICASA time to thoroughly
conduct a spectrum audit and evaluate current numbering
schemes and interconnection agreements. Internet Solutions
Senior Regulatory Manager Siyabonga Madyibi warned that in
the absence of proper interconnection guidelines either the
status quo will be maintained or VANS providers will develop
an alternative national network outside of the existing
operators' networks. ICASA councilors appeared reluctant to
delay the February 1 implementation of the Minister's
Determinations, saying that it would be akin to the
Telecommunications Act declaring an end to Telkom's monopoly
effective May 7, 2002.


7. There was almost universal objection to ICASA's attempt
to require a 30 percent black shareholding for VANS
applicants. Madyibi said it would be discriminatory for
ICASA to single out VANS providers for specific empowerment
targets that are not required of other license-holders. Ant
Brooks, Chairman of the Internet Service Providers
Association's (ISPA) regulatory committee, said that the
requirement is not in line with empowerment charter targets
agreed to by the information communication and technology
(ICT) industry stakeholders, which include VANS. According
to the draft ICT Charter, industry members have until 2010
to become 30 percent black-owned whereas ICASA's proposed
regulations require VANS to become 30 percent black-owned by
September 2005.

MILOVANOVIC