Set-Top Box Subsidy Programme State of Readiness

1. Set-Top Box Subsidy ProgrammeState of Readiness Portfolio Committee on Communications Wednesday, 21 September 2011

2. Discussion • Background • Subsidy Model • Implementation • Progress to Date • Considerations and Dependencies

3. Background

4. Policy and Legislative Background • The Broadcasting Digital Migration Policy of South Africa (August 2008): • This policy recognized the need for Government to support Needy TV-Owning Households to migrate to Digital Television • This support was said to be through subsidies from the Universal Service and Access Fund (“USAF”) towards the purchase of a Set-Top Box (“STB”) • Electronic Communications Act 36 of 2005: • Section 82(5) mandates the Agency to manage the USAF • The Agency is therefore required to manage the disbursement of subsidies to needy TV-owning households

5. STB Subsidy Approvals • Cabinet approved a subsidy level of R490 or 70% per TV-owning household towards the retail cost of a STB • 5 Million TV-owning households were approved as households that will require a STB Subsidy • A total STB Subsidy budget of R2.45 Billion from the USAF was approved

6. Objective of the STB Subsidy Programme • The key objective of the programme is to ensure the migration of the needy TV-owning households to Digital TV, by December 2013 • This will be achieved by ensuring that: • There is a criteria for ensuring that only deserving households are subsidised; • There are relevant systems and processes for the effective disbursement of subsidies to deserving households; and • Deserving households are well informed of the programme and its benefits

7. Subsidy Model

8. Models for Subsidy Disbursement • In a number of industry forums, three models have been discussed for the disbursement of subsidies: • Manufacturing, where subsidies are disbursed at Manufacturer level; • Distribution, where subsidies are disbursed at Distributor level; and • Retail, where subsidies are disbursed at Retailer level • The Retail Model was proposed by the DOC’s “SOS Implementation Strategy” document • This model will require the Agency to work in partnership with retailers throughout the country

9. The Retail Model • In the retail model, the following will apply: • The approved retailer orders STBs from manufacturers • The manufacturer delivers STBs to the retailer’s warehouse, where they will be distributed to retail outlets throughout the country • A household applies for a subsidy from USAASA • USAASA verifies information and if approved, the household receives a subsidy coupon • The household uses the subsidy coupon to purchase a STB from any approved retailer, at a discounted price • Following the transaction, USAASA reimburses the retailer with the appropriate amount

10. Implementation

11. Phased Implementation Approach • USAASA will implement the STB Subsidy Programme in two phases • Phase 1 is to build internal capacity, which involves developing all required systems and processes, ensuring that USAASA is fully geared to disburse subsidies post Digital TV launch • Phase 2 will be the actual disbursement of subsidies to the approved 5 Million needy TV-owning households

12. Phase 1 Outcomes A “Qualifying Criteria” as a means of determining needy TV-owning households Systems and processes for application of subsidies by needy TV-owning households (incl. Subsidy Coupon) Communication Strategy and Plan for communicating the programme to deserving households Agreements with key stakeholders A pilot of the application and verification systems and processes Phase 2 Outcomes Subsidies disbursed to all needy TV-owning households, in time for the analogue switch-off These households must all have STBs by the time of the analogue switch-off Outcomes

13. Progress To Date

14. Capacity Building • Due to internal capacity, USAASA appointed a service provider to assist in its plan of implementation and capacity building • Deliverables were as follows: • Development of a Qualifying Criteria • Identification of Needy TV-owning Households • Designing and Prototyping a Subsidy Disbursement Model • Investigating Application and Verification Infrastructure • Application Form and System • Development and Implementation of Stakeholder Engagement Plan and Communication Plan • Identifying and Partnering with Key Stakeholders • Piloting of the Subsidy Disbursement Model

15. Progress Thus Far • Qualifying Criteria awaiting final EXCO approval • Application and Verification System completed, awaiting Qualifying Criteria • Key stakeholders identified and engaged • 8 Provinces have been engaged with regards to gaining support on the programme • Achieved full support from Mpumalanga Province, which will be used as a pilot site for: • Piloting of Application and Verification Process; • Piloting of Application and Verification System; and • Compile lessons learnt for review of systems and processes

16. Progress Thus Far – Stakeholder Engagements • These key stakeholders were engaged and working relations have been established: • SABC for verification of TV Licenses • Sentech for rollout of Digital TV network and alignment of activities to network availability • SA Post Office for subsidy application processing and possible STB distribution • Retailers for retail of STBs

17. Progress Thus Far – Provincial Engagements • Provinces that have been engaged and their respective offices are: • Eastern Cape: Office of the Premier • Mpumalanga: Office of the Premier and COGTA (most advanced) • North West: Office of the MEC of Local Government • Kwazulu-Natal: Office of the Premier and GCIS • Limpopo: Office of the Premier • Free State: Councillors from FS Local Municipalities • Northern Cape: CHOGSTA and GCIS • Western Cape and Gauteng: No engagements as yet

18. Progress Thus Far – Mpumalanga • USAASA engaged the Traditional Leaders Forum and the Premier’s Council Forum to seek support for the programme, which was fully supported • Provincial COGTA pledged their Community Development Workers (CDWs) to assist in building a database of needy TV-owning households throughout the province • A workshop with CDWs (from all local municipalities) was held and was a great success • Over 90% turnout of CDWs • Week of 19 Sept. to 25 Sept. dedicated to communication • Data gathering to commence from 26 Sept. to end Oct. (CDWs will be going house to house to collect data) • This database will assist in determining the retail need in Mpumalanga

19. Progress Thus Far – SA Post Office and Retailers • SA Post Office: • Post Office was engaged is keen to work with USAASA and the DOC in the programme • The proposal outlines involvement in: • Subsidy application and verification • STB Distribution to approved households • Reverse logistics, as part of ongoing support and warrantees • SMME empowerment and job creation • Week of 26 Sep. 2011 to engage with Post Office team on technical work • Retailers: • Shoprite, PEP Stores, Boxer Superstores, Edcon, Ellerine Holdings and JD Group were engaged on their possible involvement in BDM • All are keen to be involved and want to work in partnership with USAASA

20. Next Steps • USAASA and SA Post Office to enter into an agreement • Qualifying Criteria to be finalised and submitted to Minister for Gazetting • USAASA and SA Post Office technical teams to commence work on all processes proposed • Continue with the work in Mpumalanga • Finalise working relations with other provinces

21. Considerations and Dependencies

22. Key Considerations • Proposed Qualifying Criteria • A South African Citizen (a valid South African ID as proof) • TV Owning (a valid TV License as proof) • Household income in the LSM 1 – 5 bands, on a sliding scale between 70% and 100%

23. Key Considerations • Subsidy Coupon • Electronic based coupon (as opposed to paper based) linked to ID Number and TV License Number • Application by qualifying households • Compiling needy TV-owning households database before commercial launch • This will assist in allocation of subsidies pre commercial launch • Post Office to be used for on-going applications post commercial launch

24. Key Dependencies • Availability of DVB-T2 STBs for full piloting of subsidy disbursement model • Commercial DTT Launch to disburse STB subsidies to needy TV-owning households • The full rollout of public awareness campaigns by all stakeholders involved