Irene Charnley Commercial Director 28 September 2001

1. Comments on the Telecommunications Amendment Bill Irene CharnleyCommercial Director28 September 2001

2. 1. Prevention of potential anti-competitive behavior Policy should enshrine the principle of preventing abuse of market dominance, hence ensure a truly competitive market 2. Lowering of input costs Efficient utilisation of existing infrastructure will reduce input costs, incentivise investors and lower costs to consumers 3. Promotion of customer choice Competition enablers must be implemented quickly and in a sustainable manner to facilitate customer choice Objectives of the Bill To ensure sustainable competition, the following should be considered:

3. Ensure reasonable market entry costs Create an environment that enables new entrants to compete with Telkom Liberalise sector in a phased manner to allow investors to recoup some costs Objectives of the Bill Provide incentive for infrastructure investment:

4. One additional operator with further licences to be considered after 2005 Social development objectives eg E-rate & EDU NET Broader economic participation via provisions for SMME and BEE ownership M-Cell welcomes…

5. Infrastructure sharing provisions inappropriate Delay in carrier pre-selection is anti-competitive Universal Service Fund should fund USO roll-out targets Only minimal amendments really necessary Key comments

6. Inadequate provision for infrastructure sharing will: Infrastructure sharing • Limit customer choice and competition in some areas • Increase the cost of services to the consumer • Lead to over-supply of facilities which is not matched by market demand • Result in inefficient and wasteful duplication of infrastructure AND Undermine SNO’s ability to expand into new areas not already connected to Telkom’s network

7. Proposed two-year infrastructure sharing period: Infrastructure sharing • Undermines role of ICASA to regulate interconnection and facilities leasing • Inconsistent with internationally accepted principles of infrastructure sharing • Conflict with Competition Act in relation to access to ‘essential facilities’ • Temporary – hence not a policy issue

8. Vital for SNO to gain access to Telkom local loop on non-discriminatory terms Residential customers and SMMEs not able to use SNO as a local operator International move towards LLU – critical catalyst for wider and cheaper internet access Additional lines to existing customers will not increase real penetration Infrastructure sharing Local Loop Unbundling (LLU) Policy should mandate ICASA to implement LLU over an appropriate timeframe

9. Infrastructure sharing Proposed amendments • S 32A (2), (3) and (4) dealing with two year sharing period should be deleted • S 44 should be amended to provide for ongoing sharing of facilities between PSTS and other operators • S 44 (7)(b) should be replaced with a mandate for ICASA to implement Local Loop Unbundling • Conditions of access (ie interconnection, infrastructure sharing and facilities leasing) to remain ICASA’s responsibility as per amended S 43 and 44

10. Carrier Pre-selection (CPS) and Carrier Selection (CS) WHAT DO THEY DO? • CPS enables customers to select their carrier of choice without having to dial a prefix • CS enables customers to select carriers on a call by call basis by dialing a prefix

11. WHY ARE THEY SO IMPORTANT? Carrier Pre-selection (CPS) and Carrier Selection (CS) Several years needed for SNO network to provide comparable levels of local access to that of Telkom… THEREFORE … without CPS and CS, customers not directly on SNO network will have no alternative to Telkom, even for national or international calls

12. Carrier Pre-selection (CPS) and Carrier Selection (CS) IF IMPLEMENTED? • Allows consumers to benefit from competition from day 1 on national and international calls • Greatly facilitates customer choice by allowing customers simple access to multiple carriers BUT • CS alone is not effective in promoting competition - dialing prefixes is a deterrent for customers

13. International experience suggests a direct correlation between CPS and increased competition Carrier Pre-selection (CPS) and Carrier Selection (CS) • Where CPS implemented, competitors’ market share higher • With CPS: Sweden (24%), Austria (37%) compared to • No CPS: Spain (8%), Portugal (2%) • Early CPS:Switzerland - 45% in ILD traffic, 31% in NLD • Swedish regulator confirmed positive impact of CPS • 89% of population aware of CPS, 1.1m households chose alternative operator to Telia

14. Carrier Pre-selection (CPS) and Carrier Selection (CS) Recommendations: • S 1(a) needs to be expanded to differentiate CPS from CS • S 31 should provide for phased implementation of CPS and CS from 7 May 2002 • S 31 should also mandate ICASA to commission a study (over a fixed period) to determine the most cost-effective implementation plan

15. Universal Service Fund • Money contributed to be used for two purposes: • co-ordinating skills training and development, for support promotion of SMMEs • service roll-out in under-serviced areas, creating sustainable employment • Implementation coordinated by USA - roll-out proportionate to investment by each operator • USO roll-out targets should be funded from USF • Implementation should be carried out by industry

16. Telecommunications Act of 1996 well drafted and largely capable of giving effect to: Only minimal amendments necessary • Government’s national economic objectives • 1996 White Paper on Telecommunications • New telecommunications policy directions M-Cell recommends that amendments are affected only where necessary

17. Interconnection and facilities leasing – existing sections 43 and 44 Under-serviced area licences – existing section 39 Sentech licence – existing section 38 Multimedia licence and definition – existing section 40 and the Broadcasting Act Only minimal amendments necessary …For example

18. M-Cell supports the broad vision of the policy Bill’s main objective should be to promote sustainable competition, and attract new investment through: Implementation of competition enablers - CPS/CS (immediately), and LLU over time Ongoing infrastructure sharing regulated by ICASA Upholding ICASA’s role and power in regulating the industry Telecoms Act of 1996 is well drafted and requires minimal amendments Conclusion

19. THANK YOU