The Road to Convergence in South Africa

1. The Road to Convergence in South Africa Councillor Lumko Mtimde 2-4 February 2006 Panos Institute West Africa (PIWA) Workshop Benin, Cotonou

2. Disclaimer Any views expressed in this presentation are those of the individual presenter, except where the presenter specifically states them to be the views ofICASA. This presentation may not be reproduced without the prior written consent of the author and ICASA.

3. Introduction Ten years of regulation What is Convergence? New Regulatory Framework Impacts of Change on the Regulator Conclusion Overview

4. 1. INTRODUCTION • The theme of this workshop is “Dialogue between Telecoms and Media Regulation Stakeholders in times of Convergence: Challenges and prospects for Africa”. • This theme is relevant to me because, in the famous words of our esteemed President Thabo Mbeki, “I am an African” and I live in South Africa. • It is in this spirit that I would like to share with you our experiences as an African state in dealing with the forces of convergence and the impact that it has had on our regulatory environment in South Africa.

5. INTRODUCTION (2) • The focus of this presentation is to provide you with understanding of what is ICASA, what is convergence and the new regulatory framework and future developments that will impact on the communications sector in South Africa. • The Independent Communications Authority of South Africa ( “the Authority”) being a creature of statute operates within a regulatory space wherein statutory instruments set standards that govern the behaviour of all of those involved in broadcasting and telecommunications. • These are framed around, the Constitution, Acts of Parliament, and the National Government Policy Directives. It is within this framework, that Position Papers (Policy) and Regulations are drafted by the Authority and license conditions are imposed on licensed operators.

6. INTRODUCTION (3) • Policy and regulatory development by ICASA in the sector is informed by, amongst others,: • The Constitution, Act 108 of 1996 (as amended) • Independent Broadcasting Authority Act, No. 153 of 1993 (as amended) • IBA’s Triple Inquiry Report, 1995 • White Paper on Broadcasting Policy, 1998 • Broadcasting Act, No. 4 of 1999 (as amended) • Independent Communications Authority of South Africa Act, No. 13 of 2000 (as amended) • Broad-Based Black Economic Empowerment Act, No. 53 of 2003 • Telecommunications Act, No. 103 of 1996 (as amended) • Films and Publications Act, No 65 of 1996 (as amended) • Draft ICT BBEE Charter, 2005 • Competition Act, No. 89 of 1998 (as amended) • Promotion of Administrative Justice Act (as amended)

7. 2. Ten years of regulation

8. 2.1 Timeline • Brief timeline of communications legislative environment: • Pre 1993 – Regulated via the Apartheid’s Government Dept. of Posts and Telecommunications, and the Dept. of Home Affairs. • 1993 –Independent Broadcasting Authority (IBA) Act established a functionally independent and impartial regulator, the IBA, for regulating broadcasting and signal distribution, in the public interest. • The Interim Constitution No. 200 of 1993 guaranteed this independency. • 1996 – Telecommunications Act established the South African Telecommunications Regulatory Authority (SATRA) to regulate telecommunications in the public interest. Minister retained various policy-making powers, more importantly certain licensing functions and a veto power on all regulations. • Constitution Act No. 108 of 1996 re-enforced the IBA. • 1999, enactment of the Broadcasting Act proving a new broadcasting policy, after the White Paper (1998). • 2000 – Anticipating convergence of technologies the two regulators were merged into a single regulator in terms of the Independent Communications Authority of South Africa [ICASA] Act

9. Timeline (1) • Prior to the merger / establishment of ICASA : • IBA and SATRA were mandated to form a Joint Technical Committee, as a standing committee to deal with matters relating to overlapping responsibilities. • Cabinet decided to merge IBA and SATRA • Convergence of technologies • Draft Bill was discussed and presented to Parliament • Merger process • IBA and SATRA, together, formed established a process to merge the two institutions. • ICASA Act was enacted in 2000.

10. Timeline (2) • The ICASA Act dealt only with the merger of the organisational structure of the previous regulators. • The result was that although merged, ICASA was not converged and managed two separate licensing regimes one in terms of the IBA Act and Broadcasting Act and the other in terms of the Telecommunications Act. • In respect of broadcasting matters, ICASA remained functionally independent, in respect of its licensing and regulatory powers, whereas in telecommunications matters the Minister retained some licensing powers and veto powers on regulations developed by the Authority.

11. 2.2 ICASA Licensing Achievements • Telecommunications Division • 36 Private Telecommunication Network [PTN] licences (Duration - 10 years) • 283 Value Added Network Service [VANS] licences (Duration - 10 years) • 7 Universal Service Area Licences [USALS] (Duration - 25 years) • 3 Mobile Cellular Telecommunication Service [MCTS] licences (Vodacom, MTN and Cell C) (Duration - 15 years) • 1 International Gateway and Multimedia licence (Sentech) (Duration - 15 years) • 1 National Wireless Data Telecommunication Service licence (Swiftnet) (Duration - 10 years) • 1 National Mobile Data Telecommunication Service licence (WBS) (Duration - 10 years) • 2 National Public Switched Telecommunication Service [PSTS] licenses (Telkom and SNO) (Duration 25 years)

12. ICASA Licensing Achievements (2) • Broadcasting Division (Licensees) • Television • 3 Public National Free-to-air Broadcasting Services (SABC) • 1 Commercial National Free-to-air Broadcasting Service (e-tv) • 1 Terrestrial Subscription Broadcasting Service (M-net) • 1 Community Television Broadcasting Service (TBN, which was grand-fathered) and (a few others from time to time on special events licenses, Soweto, Grahamstown, Cape Town, Durban) • 2 Public Regional Television Broadcasting Services (SABC – not operational yet) • In addition to these licenced services there are 2 satellite based television broadcasting services (Vivid and DsTV) which are not licensed yet, but which do have permission to continue broadcasting until their applications have been dealt with by the Authority.

13. ICASA Licensing Achievements (3) • Broadcasting Division (Licensees) • Sound Broadcasting (Radio) • 18 Public Sound Broadcasting Services • 13 Commercial Free-to-air Sound Broadcasting Services • 100 (82 are currently on air) Community Sound Broadcasting Services • In addition there is 1 satellite based commercial sound broadcasting service (WorldSpace) which has permission to continue broadcasting until its application has been dealt with by the Authority. • Broadcasting Signal Distribution • 1 Category One Licence – Common Carrier (Sentech) • 1 Category Two Licence – Commercial (Orbicom) • Some Community Sound Broadcasters are licensed to self provide their own signal distribution as Category Three Broadcasting Signal Distribution licences.

14. ICASA Licensing Achievements (4) • Engineering and Technology Division • 5,507 Aeronautical Station Licences • 6,359 Amateur station Licences • 19,847 Examinations and certificates • 68 Fixed Station Licences • 45,195 Land Mobile station Licences • 4,268 Maritime Licences • 5,667 Radio Dealer Registration Certificates • 24 Satellite Licences

15. 2.3 Changing Regulatory Framework • In 2005, the Minister of Communications tabled two Bills in the National Assembly aimed at changing the regulatory framework to meet the needs of convergence. • The Convergence Bill [B09-2005] set out a converged licensing framework and proposed the repeal of the existing broadcasting and telecommunications legislation. This Bill was later renamed the Electronic Communications Bill. • The ICASA Amendment Bill [B32-2005] deals with amending the functions and organisation of the regulator, as well as introducing enforcement and compliance structures to reflect convergence between networks.

16. 3. What is Convergence?

17. 3.1 Convergence Defined • Convergence means different things to different people and there is no one accepted definition. • One of the main drivers for convergence appears to be digital technology which is being utilised for the reproduction, storage, and transmission of information in all media • Essentially this means that any form of content, whether it be still or moving pictures, sound, text or data, can potentially be made available over any communications platform. For example, currently it is possible to receive radio and television over the Internet, while digital television that is currently being developed will have some of the capabilities normally associated with personal computers.

18. Convergence Defined (2) • Of course there are other drivers, amongst others, the increased storage capacity of variety of consumer access devices, increased usage of internet protocol (IP) to facilitate seamless interaction across a number of different networks, new applications and the evolution of broadband technologies. • Although there is no one universally accepted definition, the International Telecommunications Union (ITU) indicates that convergence can be described as “the provision of new services over existing infrastructure, development of new types of infrastructure, and the enhancement of existing services and technologies to provide new capabilities” (ITU:1996).

19. Convergence Defined (3) • The ITU also mention that it can also be defined as “technological, market or legal/regulatory capability to integrate across previously separated technologies, markets or politically defined industry structures” (ITU:1996). • It was also raised by the ITU that convergence involves a critical international component, “as many services and information sources that were traditionally controlled on a domestic level are being provided on a global basis” (ITU:1996).

20. Convergence Defined (4) • Mr. Leong Keng Thai, of the Infocomm Development Authority (IDA) of Singapore, has suggested that it is perhaps best to describe convergence as a paradigm shift in the way we think about products and services. • The traditional boundaries between industry sectors such as film, music, publishing, broadcast television and radio, telecommunications, computing and service industries such as education and health are being redefined or reorganised and new industry boundaries are emerging. This means that products are no longer distinct as belonging to a specific industry or platform alone.

21. Convergence Defined (5) • It is better then in terms of convergence to view products and services as part of a single value chain that consists of • content • delivery mechanisms or conduits such as Asymmetric Digital Subscriber Line (ADSL), satellite, cable; and • end user appliances or platforms such as television sets, cellular phones, personal digital assistants, home computers, etc. Content Delivery Consumer Access Device End User

22. 3.2 Convergence in practice • It is critical to note that change is not uniform across the information, communication and technology sector (ICT), there are some areas that have hardly been affected by convergence and others which are in the process of rapid evolution to converged media. • This has prompted some to describe convergence as a “collection of separate trends which have the ongoing effect of integrating technologies, networks, content, gateways and markets both individually and collectively” (Henderson & Wijewardena).

23. Convergence in practice (2) • In practice, the following trends have been identified: • Network level technology convergence – changes in underlying networks used to deliver services, e.g. Internet Protocol (IP) networks providing services which previously were delivered by circuit switched networks; • Bundled convergence – collection of separate services into a single retail bundle, e.g. bundling local, long distance and internet services at cheaper rates; • Gateway convergence – evolution of new gateway or access devices allowing consumers to access different services through a single device, e.g. new mobile phones that allow internet and voice services; • Service convergence – delivery of diverse services through the same delivery medium or conduit, e.g. single “pipe’ for voice, data, text and pictures;

24. Convergence in practice (3) • Substitutable service convergence – demand side substitution between services, e.g. substitution of fixed telephony services by mobile telephony; • New converged services – application of new technology to invent completely new services capable of being accessed by any access technology; and • Regulatory convergence – merging of industry regulators into a single regulator and the liberalisation, harmonisation or merging of communications legislation. • In South Africa, these trends are being observed, but they are at different levels of evolution towards convergence.

25. Convergence in practice (4) • These global trends would appear to justify new regulatory systems being formulated in order to reduce obstacles to competitiveness. • In the context of South Africa a number of questions were asked before proceeding to change the regulatory system. For example, have markets converged sufficiently to justify regulatory change? • There is also the fact to consider that even though technologies are converging, this does not mean that the markets that utilise these technologies have become indistinguishable. Practically all broadcast entertainment and information services still fall into the realm of television and radio in South Africa. It will also take some time before computers or personal mobile devices will be capable of receiving high quality audio-visual material via the Internet.

26. Convergence in practice (5) • However, it is also clear that convergence is blurring distinctions and raising questions as to what is the best regulatory framework to address the new environment that is coming into being. • When services were distinct (telephony, broadcasting and online computing) and they operated on different networks with different platforms (telephones, TV sets and computers) each was regulated by a different regulatory framework (Illustrative diagram on next slide). • Convergence places pressure on existing regulatory regimes by highlighting the differences in regulatory requirements between converging sectors.

27. Traditional Structure now Converging Source: Lotus Development (an IBM Company)

28. Convergence in practice (6) • Recent developments in Broadband (e.g. WiMax with speeds of up to 25 Mbps) which has the ability to provide a multiplicity of services, whether data, voice or video, at any speed, which is likely to be a major determinant of cost is an example of converged services, or what the communications industry calls Triple Play, or the delivery of voice, video and data to residences over a single line. • The illustrative diagram on the next page demonstrates why converged services do not fit within the traditional distinct structures indicated in the previous diagram.

29. Example of a Triple Play ADSL or Fibre Broadband Network delivering voice, data and video to the home

30. 4. NEW REGULATORY FRAMEWORK

31. 4.1 Electronic Communications Bill • The most fundamental impacts of the Electronic Communications Act (ECA) once it commences will be the: • repeal of the Telecommunications Act and the Independent Broadcasting Authority Act and the substantial amendment of the Broadcasting Act; • Convergence of Telecommunication and Broadcasting regulation making processes into one process, in terms of the ECA • Replacement of the existing telecommunications and broadcasting licensing frameworks with a single licensing regime; • Enhancement of the Authority's competition powers in terms of dispute settlement and significant market power determinations; and • Setting of specific timelines for transition which the Authority must comply with.

32. 4.2 ICASA Amendment Bill • The most fundamental impacts of the ICASA Amendment Act once it commences will be that the: • Functions and staff of the postal regulator are incorporated into ICASA; • The structure and functioning of the ICASA Council is reviewed, for example, • the number of Councillors to be increases from 7 to 9; • Inquiry processes for telecommunications and broadcasting are converged into one process; • Council appointment and performance management process now are the responsibility of the Minister; • Telecommunications and broadcasting complaints hearing and enforcement functions and processes now reside within a single body, namely the Complaints and Compliance Committee (CCC); and • Powers and functions of inspectors are increased and functions clarified. • ICASA has objected to some possible unconstitutional provisions of this Bill but Parliament approved it, we await the President’s guidance.

33. 4.3 What guidance is provided? • The new and amended legislation provided guidance in relation to: • Strategic Policy • Market Analysis • Competition • Content (Triple-Play) • Technology • Operational Policy • Regulations • Licensing • Numbering • Compliance and Enforcement • Frequency • Type Approval and Standards

34. 4.4 New Approach to licensing • All licences are now divided into Individual, Class or Exempt. • An Individual licence is a licence which is customised in terms of its licence conditions to be specific to the applicant being licensed. • A Class licence can be described as an “out of the box” licence, it involves no more than a registration process of 60 days. • Exempt means exempt from having to apply for a licence or register, but does not necessarily exclude such an operator from the general provisions of the Act once it commences.

35. Authority may grant individual & class licences Generic provisions of the Bill apply to all relevant activities Standard licence conditions common to Individual and Class licenses Standard Licence Conditions common to Individual Licenses Special conditions Undertakings Exempt Individual Class

36. New Approach to licensing (2) • The Act, once it commences, creates four markets or licensable activities within the ambit of Individual and Class licenses. • The licensable activities are: • Electronic Communication Network Services • Electronic Communication Services • Broadcasting Services • Radio Frequency Spectrum. • The diagrams which follow illustrate the four licences and their relationship to Individual, Class and Exempt, as well as providing some examples of their operation, as provided by the Act once it commences.

37. Communication Network Services Communication Services Broadcasting Services Radio Frequency Spectrum Authority may grant individual & class licences (2) 4 licensable activities or markets Individual Class Exempt Licensed Unlicensed

39. New Approach to licensing (3) Terms and conditions • The ECA provides that the Authority shall prescribe standard terms and conditions to be applied to individual and class licences • A list is provided of standard terms and conditions which the Authority may take into account in Chapter 3, e.g. licence area, duration, public interest… • The Authority may impose additional obligations on any individual or class licence in accordance with Chapter 10 (Competition Matters) and universal service and universal access.

40. New Approach to Licensing (4) Licence periods • Individual licences may be issued for a period of 20 years, unless a shorter period is requested by the applicant or designated by the Authority • Class licences may be issued for a period of 10 years unless the Authority indicates to the contrary

41. New Approach to Licensing (5) Licensing Regulations • The Bill provides that the Authority shall prescribe regulations for licences and may precribe different regulations for different types of individual and class licences.

42. 5. Impacts of Change on the Regulator

43. 5.1 Structural Impacts • The commencement of the Electronic Communications Act and the ICASA Amendment Act will result in an increase in functions of the Authority, in the areas of investigation, inspection, complaints handling, dispute resolution, adjudication, regulation, and conduct of market review studies. • This will require the Authority to restructure itself internally, to deliver on the new requirements, as well as introduce new regulations to support the ECA and ICASA Amendment Act’s provisions. • Restructuring will have a number of budgetary implications.

44. 5.2 Transitional Provisions • All current issued licences remain valid until converted and all services that did not previously require a licence have a deemed licence exemption until notified by the Authority that a licence is required. • Existing licences must be converted within 24 months of the ECA commencing, and any extension period to this may not exceed 6 months. • Any current applications, process, recommendations pending before the ECA came into force will be considered as if submitted in accordance with the ECA.

45. Transitional Provisions (2) • Within 30 days of the ECA commencing, the Authority must gazette a schedule in terms of which it intends undertaking the licence conversion process. • The notice must: • Identify the holders of existing licences and nature of existing licence • Set out a time frame for conversion including time frame for granting new licences • Set out the form and content and information that must be provided to the Authority by existing licensees to assist the conversion process

46. Transitional Provisions (3) • Set out the process the Authority plans to undertake in converting existing licences, and • Confirm the rights of applicants to participate in such process. • Separate licences will be issued where the existing licence spans categories set out in chapter 3 of ECA. • The Authority may not grant or include in any licence converted any monopoly or exclusionary rights in any network or service and any such rights that exist by virtue of IBA Act, Sentech Act or Telecommunications Act are null and void. Radio Frequency spectrum assigned to licence holder is not viewed as being monopoly or exclusionary rights.

47. Transitional Provisions (4) • Within 24 months of ECA coming into force current regulations must be repealed or amended, however they will remain in force until repealed or amended.

48. Concluding Remarks • ICASA will now oversee a new market structure under a converged environment. • The organisational set up will change. I thank you Lumko Mtimde Councillor, ICASA www.icasa.org.za 03 February 2006