|
|
| |
| |
| The telecommunications industry |
| |
| ICASA |
| Regulations |
Under the Electronic Communications Act, Independent
Communications Authority of South Africa (ICASA) may,
subject to public consultation, make regulations on any
matter as provided in the Electronic Communications Act,
and any such regulation may declare any contravention
thereof to be an offence. ICASA must, among other
things, make regulations relating to the granting of
licences, radio frequency spectrum management,
allocation of numbers, interconnection, facilities leasing,
the declaration of essential communications facilities and
the identification of relevant markets for the purpose of
determining the existence of significant market power.
ICASA may also make regulations to impose special
obligations on licensees found to have significant market
power in a relevant market.
Under South African law, it is possible for licensees
such as Vodacom and Telkom and for other interested
parties to have the regulations and rulings issued by
ICASA reviewed and tested in a court of law for compliance with the objectives and other provisions of
the Electronic Communications Act, and other relevant
laws such as the South African Constitution. |
| |
| Licence conversion |
| All existing licences are to remain valid until converted
by ICASA in line with the new licensing framework,
which is required to be done within 24 months
from the commencement date of the Electronic
Communications Act. As a result, Telkom's licences will
be converted to new licences in accordance with the
new licensing regime. Conversion is required to be on
no less favourable terms than the original licence.
However, as part of the conversion process, ICASA
may grant rights and impose obligations on the
licensee, in order to ensure that the existing licences
comply with the Electronic Communications Act. Public
pronouncements by ICASA indicate that they plan to
complete the process of converting all existing licences
by July 2008. The process of converting our licences
to the new licensing framework may be lengthy and
complex and could result in the imposition of
additional obligations and limitations in connection
with the converted licences. |
| |
| Licensing of Neotel |
| In September 2004, the South African Minister of
Communications granted an additional licence to
provide public switched telecommunications services
to a second national operator, Neotel, that is 30%
owned by Transtel and Esitel, which are beneficially
owned by the South African Government, and other
strategic equity investors, including 26% beneficially
owned by TATA Africa Holdings (Pty) Limited, a
member of the TATA Group, a large Indian
conglomerate with information and communications
operations. Neotel was licensed on December 9,
2005 and commercially launched on August 31,
2006 and commenced providing services in the
beginning of the 2007 calendar year to large
corporation and other licensees. Neotel has indicated
that it will begin providing services to residential
customers in the 2007 calendar year. |
| |
| Underserviced areas |
| A process to issue additional licences to small business
operators to provide telecommunications services in
underserviced areas with a teledensity of less than 5%
commenced in 2005 and is continuing. The Minister
of Communications has identified 27 of these under-serviced areas. ICASA has issued licences to successful
bidders in seven of them and the Minister has issued
invitations to apply for licences in 14 additional areas. In
August 2006 ICASA recommended to the Minister that licences be granted to successful applicants in 13 of
these areas. It is expected that further licences will be
issued in the 2007 calendar year. |
| |
| Competition matters |
The Electronic Communications Act replaces the concept
of Major Operator status, which was developed by
ICASA through regulations, with that of significant
market power in a market or market segment. Factors in
determining significant market power are, among others,
dominance or control of essential facilities. The Electronic
Communications Act empowers ICASA to impose procompetitive
conditions on operators found to have
significant market power in such markets or market
segments that have ineffective competition, which may
affect the manner in which interconnection is provided
and facilities are leased by such operators, and the
charges thereof.
If Telkom and Vodacom are found to have significant
market power in any of the markets in which we operate,
we may be required to provide interconnection and
facilities to our competitors at or near the long run
incremental cost, or LRIC, of those services or facilities,
and our operating revenue and net profit could decline.
On January 2007 ICASA published a consultation
document for public comment and on May 17, 2007 it
held a public enquiry on its intention to define relevant
call termination wholesale markets. In its consultation
document ICASA expressed the preliminary view that all
providers of telecommunications networks, including
Telkom and Vodacom, have significant market power in
their call termination markets and that the appropriate
price controls to be applied to the large operators, MTN,
Vodacom and Telkom, is the LRIC calculated on the basis
of relevant forward looking economic costs of an efficient
operator, including a reasonable cost of capital.
Regulations are expected to follow in due course.
ICASA has expressed the preliminary view that Telkom is
deemed to have significant market power and that the
appropriate price control to be applied is likely to be
the LRIC. |
| |
| Interconnection |
The Electronic Communications Act provides that any
licensee, other than broadcasting service licensees, must,
on request, interconnect with any other licensee, unless
such request is unreasonable, and must enter into an
interconnection agreement with the requesting party for
this purpose.
The interconnection agreements between Telkom
and Vodacom and MTN that preceded the
Telecommunications Act were renegotiated and
amended in 2001. An interconnection agreement, on
substantially the same terms, was negotiated and concluded with Cell C. An interconnection agreement
has also been concluded between Telkom and
Neotel and filed with ICASA on March 6, 2007.
Interconnection agreements have also been concluded
between Telkom, the USALs and those VANs licensees to
whom ICASA has granted access to subscriber
numbers. An interconnection agreement has also
recently been signed with Sentech, which is expected to
come into operation during the third quarter of the
2007 calendar year. |
| |
| Facilities leasing |
The Electronic Communications Act provides that an
electronic communications network licensee must, on
request, lease electronic communications facilities to any
other licensee, unless such request is unreasonable, and
must enter into a facilities leasing agreement with the
requesting party for this purpose.
ICASA may prescribe a framework of wholesale rates
applicable to specified electronic communications
facilities in circumstances where the existence of
significant market power has been determined.
Notwithstanding a finding of significant market power,
ICASA may exempt, under certain circumstances, an
electronic communications network licensee from the
obligation to lease fibre loops and sub-loops serving
residential premises. ICASA must prescribe a list of
essential facilities, including local loops and sub-loops
and associated electronic communications facilities,
and electronic communications facilities connected to
international electronic communications facilities such
as submarine cables and satellite earth stations.
ICASA may require that essential communications
facilities be supplied at a cost based price, likely to be
the LRIC of that facility.
The Minister of Communications has issued a policy
decision declaring November 1, 2007 as the date
from which the exclusivity provisions in our SAT-3
agreements shall be declared null and void. The
Minister of Communications also announced that she
intends to issue a policy direction to ICASA requiring
it to prioritise and urgently prescribe a list of essential
facilities, ensuring that the facilities connected to the
SAT-3/WASC/SAFE submarine cables can be
accessed soon.
On May 3, 2007, ICASA published a consultation
document for public comment on its intention to define
relevant end to end leased lines and other wholesale
markets. In its consultation document ICASA defined
the wholesale markets for fixed-line local loop access,
fixed-line narrowband exchange lines, call origination
and call conveyance, symmetric broadband originator
services, trunk services for transmission within South Africa and international leased lines. ICASA expressed
the preliminary view that Telkom is deemed to have
significant market power in all these markets and the
appropriate price controls to be applied is likely to be
the LRIC, calculated on the basis of relevant forward
looking economic costs on an efficient operator,
including a reasonable cost of capital.
In addition, the Telecommunications Act required Telkom
to allow Neotel to use all of our tele communications
facilities for the first two years of its licence, on a resale
basis, for the purpose of providing public switched
telecommunication services. As a result, Neotel will be
able to lease facilities from Telkom for a two year period
to provide its services, and is allowed to have shared
access to the local loop for a period of two years. A fixed
link facilities leasing agreement which provides for
leasing by Neotel of 2 Mbps leased lines has been
concluded between Telkom and Neotel and filed with
ICASA on September 12, 2006. Further agreements for
the leasing by Neotel of other facilities are expected to
be negotiated as required. If we are unable to negotiate
favourable terms and conditions for the provision of the
services and facilities covered by the guidelines or
ICASA otherwise imposes terms and conditions that are
unfavourable to us, our business operations could be
disrupted and our net profit could decline. As described
below, we may also be required to lease or otherwise
make our telecommunications facilities available to
Neotel beyond the first two years of its licence pursuant
to the Electronic Communications Act. |
| |
| Unbundling the local loop |
While the Telecommunications Act provided that we
were not to be required to unbundle our local loop for
a period of two years after the issue of a licence to
Neotel, The Electronic Communications Act provides
that ICASA may prescribe a framework for the
unbundling of Telkom's local loop.
On May 23, 2007, the Local Loop Unbundling
Committee set up by the Minister of Communications
to develop appropriate policies for the unbundling of
the local loop in South Africa submitted its report to the
Minister of Communications recommending, among
other things: |
| • |
three forms of local loop unbundling to be
considered, full unbundling of the metallic loop, line
sharing and wholesale bitstream access; and |
| • |
the regulatory process, with full industry partici -
pation should commence as soon as possible and
be completed in 2011. |
|
| |
| The Minister of Communications has published policy
decisions that the process of unbundling the local loop in South Africa should be urgently implemented and
completed by 2011. The Minister of Communications
further requested ICASA to make use of the report of
the Local Loop Unbundling Committee and its
recommendations. |
| |
| Page up |
| |
|
|
|
|
|
|
