Convergence Bill

1. Convergence Bill Internet Service Providers’ Association Masedi Molosiwa Ant Brooks Joint Chairperson Regulatory Chair (masedi@ispa.org.za) (ant@ispa.org.za)

2. About ISPA • History • Commercial Internet access was first offered in South Africa in December 1993 • During 1994 and 1995, four informal industry workshops were held to discuss common ISP interests • Telecommunications Green Paper • Domain names; interconnection between ISPs • In June 1996, the Internet Service Providers’ Association (ISPA) was founded by nine ISPs • Two key motivations for ISPA’s formation: • 1. ISPs shared concerns about Telkom’s entry into the ISP market. • 2. To establish the Johannesburg Internet exchange

3. About ISPA • Membership • ISPA currently has 93 members • Currently an average of 2-3 new members join each month • Members are primarily Internet access providers (including resellers or “virtual” ISPs) • Resellers/VISPs do not operate networks but resell access to another ISP’s infrastructure • Since 2001, affiliate membership has been available for ISPs who do not sell access (e.g. content hosting services) • Most ISPA members are commercial enterprises, but members also include non-profit organisations, individuals and trusts

4. About ISPA • Membership by category • Large access providers: 13 • Medium access providers: 6 • Small access providers: 67 • The majority of ISPA’s small members (and also a majority of all members) are classified as SMMEs • Affiliate members: 4 • Honorary members: 4 • Honorary members • By invitation only • Enjoy all membership benefits but do not pay fees • e-Schools Network, NetDay, SchoolNet SA, TENET

5. About ISPA • Partnerships and events • International partners • EuroISPA: Umbrella body of EU ISP associations, MoU on co-operation on regulatory issues, including spam and interception • AfrISPA: Umbrella body of African ISP associations; ISPA was a founder member and remains an active participant • CABASE: South American umbrella body of ISPs; agreement to co-operate in the fight against spam • Local • UniForum SA: Registry for CO.ZA; several joint projects • ISOC-ZA: Collaboration with Internet Society of South Africa • Events • iWeek: Annual Internet industry conference; open to all • Workshops on key issues (eg. spam); some closed, some open

6. About ISPA • Johannesburg Internet exchange • History • Established in 1996; has now been operational for 8½ years • JINX was the first Internet exchange in Africa, and remains one of the largest, in terms of traffic • Function • Purpose of a national exchange is to keep local traffic inside the country, and save on expensive international link costs • Other important services are hosted at JINX, include mirrors of the global root name server, and the CO.ZA name server • Regulatory oversight • JINX is not regulated by ICASA, and it is a good indication that self-regulation in an industry sector can be successful

7. About ISPA • Code of Conduct • Chapter XI of the ECT Act limits the liability of ISPs for third-party content, provided that: • They are bound by an appropriate Code of Conduct • They are members of an industry body recognised by the Minister • ISPA launched a Code of Conduct in 2002 • Provisions of the Code include: • Consumer protection and privacy clauses • Prohibitions on spam • Protection of minors • ISPA applied for recognition as an industry body in 2002 • Unfortunately, the Minister has not yet recognised any industry representative bodies • Thus chapter XI of the ECT Act is currently ineffective

8. About ISPA • Social development program • In 2001, ISPA launched a Train the Teachers project • Research showed that often, after computers were installed at schools, they were not used because teachers were not familiar with the tech. • The objective of theproject is to bridgethis gap by providingbasic computer skillsto teachers in schoolswith new computercentres.

9. About ISPA • Train the Teachers program • Rural schools with new computer centres are targeted • Each course last for a week, and covers basic PC skills • To date, 633 weeks of training have been conducted • 526 teachers have completed the basic course • 107 teachers have gone on to complete an advanced course • Training has been undertaken in six provinces • Since 2003, all training has been approved by the SETA and gives the teachers National Qualification Framework credits • The project is entirely funded by ISPA’s members • Approximately R700k has been invested in the project so far • Key partners: UniForum SA, NetDay Association

10. Current policy framework • General overview • Most ISPs (particularly small ones) feel that the regulatory environment is hostile, rather than supportive • Prohibits them from using promising technology • Places significant and costly administrative burdens on ISPs • ISPs are governed by many different pieces of legislation • Telecommunications Act (as amended) • Electronic Communications and Transactions Act • Interception Act (RICPCI Act) • Film and Publications Amendment Act • Legislation generally does not take account of the size of the ISP -- one size fits all • e.g. VANS licence fee requires audited financials, even from Closed Corporations, that do not otherwise require an audit

11. Current policy framework • Licensing of Internet service providers • Before 2004 • Between 1997 and 2004, ICASA issued “interim” VANS licences to many ISPs • In July 2004, all existing licensees had to reapply for licences. • New licensing process has been extremely problematic. • At the time of writing no ISPA members have been awarded licences by ICASA, more than 12 months after applying. • The rights enjoyed by VANS have been subject to sudden change, for example “self-provision”: • September 2004: Ministerial determinations • October 2004: ICASA Colloquium • December 2004: ICASA states that VANS are entitled to obtain their own facilities from any registered equipment provider • January 2005: Minister states that VANS may not self-provide

12. Current policy framework • Licensing of Internet service providers • Problems with the existing licensing process • Despite making five separate written requests to ICASA, there is still no clarity on which Internet services ICASA considers to be VANS and which do not require a licence: • Internet Cafés? Virtual ISPs? Email services? Web hosting services? • ISPA understands that it is difficult for ICASA to resolve this issue (particularly in the evolving regulatory environment) • But, the lack of information means that ISPs: • Do not know if they need to have a licence • Cannot calculate their licence fees • Cannot calculate their Universal Service Fund contributions • Other supporting regulations not in place • Numbering, facilities leasing, interconnection...

13. Current policy framework • Wireless service providers • There are currently several dozens ISPs providing wireless services directly to end-users using Wi-Fi technology. • Customers include schools, hospitals and... Knysna • Very important bit: ISPA believes that this technology has enormous potential and should be actively supported by the policy framework. • But: According to ICASA, it is currently illegal to provide services in this way. • Yet these service providers are permitted to continue operating, and they continue to take business away from ISPs who are operating legally. • This form of de facto deregulation makes a mockery of the policy process.

14. Current policy framework • Anti-competitive practices difficult to deal with • For example: Telkom offers customers special deals on basic services if they also buy Internet services from Telkom • Complaints take months or years to be dealt with • Telkom has a well-funded legal and regulatory departments • Example: • SAVA/ISPA lodged a complaint with the Competition Commission in 2003 • In 2004, the Commission found in ISPA’s favour on four of the five issues and referred the matter to the Competition Tribunal • Telkom immediately took the CC on review to the High Court...

15. Current policy framework • Lessons to be learned from all this: • Definitions must be completely clear: Current VANS definition is not clear and this has greatly impeded ICASA’s ability to meaningfully licence VANS providers. • The framework for issuing licences must be as simple as possible, or ICASA will just not cope. • Alternatively, ICASA will need significantly more resources than it currently has, in order to manage the licensing process • The licensing framework must be implemented fairly and policed fairly, or there will be de facto deregulation of some services, such as wireless Internet access. • Strong protection is needed against anti-competitive practices, and the jurisdictional overlap between ICASA and the Competition Commission must be absolutely clear.

16. The Convergence Bill • Application services • Problems • Current definition of “application” includes web browsers, email clients, database, etc. • Therefore “application service” could include, for example, instant messaging software. • Even if application services are left in the Bill, ISPA does not believe that ICASA will be able to meaningfully licence these services • Recommendation: • Application services should be removed from the Bill

17. The Convergence Bill • Application services (cont.) • Section 7 is very problematic • “no person may provide any service […] except under an in accordance with the terms and conditions of an individual or class licence” • What this could mean… • A new Internet application is developed: “Touch over the Internet” • It is rapidly adopted elsewhere in the world • Nobody in South Africa may provide this service, because ICASA has not developed licence conditions for the service • i.e. Unless ICASA can develop licence conditions and regulations fast enough to keep up with every new application, South Africa will rapidly fall behind!

18. The Convergence Bill • Application services (cont.) • Alternative recommendation: • Renumber 7 to 7(1), and add 7(2) • 7(2) Notwithstanding (1), any person may provide an application service unless the Authority has published terms and conditions for obtaining a licence for that particular application service. • This means that application services are by default unlicensed, but gives ICASA the option of licensing certain application services, if necessary.

19. The Convergence Bill • Content • ISPA’s understanding is that “content” and “content services” are defined in the Bill only for the purposes of excluding those terms from other definitions. • We agree that content should not be regulated by the Bill • However, there is widespread concern on this issue. • Recommendation: • 6. (1) The Authority may prescribe the type of communications service that may be provided without a licence.(2) No licence shall be required to provide a content service.

20. The Convergence Bill • Resellers • Current approach: • 5(3) The Authority may […] grant class licences for the following: (a) Communications services, which must include resellers; • Problems • Internet Cafés and “Virtual” ISPs might be considered to be “resellers” on Internet access • ICASA would need to undertake a licensing process for all of these entities, possibly with different terms and conditions for each category. • ISPA believes that this will create a significant and unnecessary administrative burden for ICASA.

21. The Convergence Bill • Resellers (cont.) • Alternative approach: • Include resellers in the section on the terms and conditions applicable to other licences. • This would allow ICASA to effectively regulate the resale market through the licences of communications service providers. • Recommendation: • 8(1) The Authority may prescribe standard terms and conditions applicable to each category of individual and class licence.(2) Such standard terms and conditions may take into account[…](p) any conditions governing the appointment of resellers

22. The Convergence Bill • Class licence process • Section 19 requires that class licence holders must inform the Authority of “any material changes to the communications service to be provided” • What is a “material change”? Price increase? Improved speed? • This is unworkable -- Internet service providers make daily changes to their services, some trivial and some less trivial. • Provided that the service continues to fall within the scope of the relevant class licence, there should be no additional reporting requirement. • Cancellation of class licences • Already covered by section 14 (despite the heading) • Recommendation • Delete section 19 entirely

23. The Convergence Bill • Competition and dominant operators • ICASA should be able to include fair competition clauses in individual licences. • Recommendation: • 9(6) Whenever the Authority grants an individual licence, the Authority […](b) may impose such additional terms and conditions […] that the Authority considers […](iv) necessary in order to promote fair competition. • ICASA also needs to be able to apply these conditions to converted licences. • 85(9) As part of the conversion process, the Authority may apply any or all of the terms and conditions described in section 8 of this Act to a new licence.

24. The Convergence Bill • Competition and dominant operators (cont.) • Interconnect rights must also apply to communications service licensees. • Why? A simple example: • VoIP -- voice over the Internet • Operators do not have a network; they provide voice using software applications over other operators’ infrastructure. • Therefore, they will not be communications network service providers • If Telkom (for instance) is not required to interconnect with these operators, then voice traffic from a VoIP customer in Cape Town to a Telkom customer in Cape Town will travel via Europe, because that will be the only interconnection mechanism available to the VoIP operator • Obviously, this does not promote efficient use of infrastructure

25. The Convergence Bill • Competition and dominant operators (cont.) • Recommendation: • 37(1) A communications network service licensee must, on request, interconnect to any--(a) other communications network service licensee;(b) communications service licensee; or(c) other person authorised to provide services in terms of this Act or the related legislation,in accordance with the terms and conditions of an interconnect agreement entered into between the parties for the purposes of delivery of any service authorised in terms of this Act or the related legislation, unless the Authority considers such request to be unreasonable.

26. The Convergence Bill • Universal service fund contributions • Current wording • 81(2) The Authority must prescribe--(a) the basis and manner of determination of such contributions, which must not exceed 1 per cent of the licensee’s annual turnover […] • Should not be linked to turnover, but to turnover derived from provision of licensed services • Otherwise, ABSA might have to pay 1% of its total turnover to the fund just because it provides Internet access to some of its customers! • E-rate • Seems to have been dropped in the Convergence Bill

27. The Convergence Bill • Conversion of licenses • Sections 85(e) and (f) contain a list of services provided in terms of the current Telecommunications Act which will be considered to be CS and/or CNS under the new Act. • But, according to the definitions in the Convergence Bill, most of the services listed consist of both communications network services and communications services • Further, section 85(3)(a) clearly allows ICASA to convert current licences to: • (i) one or more licences relating to the communications services or application services; and • (ii) separate licences relating to the radio frequency spectrum and communications network services • Recommendation: Remove 85(3)(e) and (f)

28. Key conclusions • Two most critical issues? • Licensing must be as simple as possible • Categories (and definitions) need to be very clear • Process needs to be as simple as possible • Applications and content should not be licensed • Reseller conditions should form part of other licences and not be licensed separately • Interconnection rights are key for fair competition • It is critical that communications service licensees be given the right to interconnect, and not just network services licensees • Otherwise it isn’t really a convergence bill

29. Internet Service Providers’ Association+27 11 314 7751info@ispa.org.za http://www.ispa.org.zaMasedi Molosiwa Ant Brooks masedi@ispa.org.za ant@ispa.org.za Thank you!