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Cablegate: Regulator Proposes Telecom Regulations for Vans

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 PRETORIA 005555

SIPDIS

DEPT FOR AF/EPS AND AF/S/TCRAIG AND KGAITHER
COMMERCE FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND
TREASURY FOR GCHRISTOPULOS, LSTURM, AND AJEWEL
DEPT PASS USTR FOR PCOLEMAN, WJACKSON AND CHAMILTON

SENSITIVE

E.O. 12958: N/A
TAGS: ECPS ETRD ECON EINT SF
SUBJECT: REGULATOR PROPOSES TELECOM REGULATIONS FOR VANS

REFTEL: A) PRETORIA 04028

(U) Sensitive but unclassified. Not for Internet
distribution.

1. (U) SUMMARY. A series of Ministerial decisions to
liberalize South Africa's telecommunications sector by
February 2005 led to an industry-wide colloquium to discuss
the intent behind the determinations. The Independent
Communications Authority of South Africa (ICASA) considered
feedback from the colloquium in releasing proposed
regulations for value-added network service (VANS)
providers. The proposed VANS regulations would allow self-
provisioning, the resale of spare capacity, voice over
Internet Protocol, and access to standard telecommunications
numbering. The regulations also propose that VANS sell 30
percent of their firms to historically disadvantaged
individuals (HDIs). Public comments on the proposed
regulations may be submitted until January 7, 2005. END
SUMMARY.

----------
BACKGROUND
----------

2. (U) In September 2004, Minister of Communications Ivy
Matsepe-Casaburri announced a series of policy decisions to
liberalize South Africa's telecommunications sector by
February 2005. In addition to removing a number of
legislative restrictions and requirements placed on various
operators and service providers, the measures ("Ministerial
Determinations") are intended to facilitate growth and
competition in the communications sector; create greater
choice for operators and service providers in acquiring
facilities and managing spare capacity on their networks;
liberalise the public payphone market segment and enhance
Internet connectivity in schools and tertiary educations
across South Africa by mandating a discounted fee for
service and connectivity.

3. (U) In October 2004, the Independent Communications
Authority of South Africa (ICASA) hosted a two-day public
colloquium to solicit industry feedback on the Minister's
determinations. Entrenched industry players such as Sentech
and Telkom argued that it was a misinterpretation of the
Ministerial Determinations to say that VANS would be allowed
to self-provide their own infrastructure. Others from the
industry said that the Minister made the announcement in the
context of promoting greater competition and liberalization
within the telecommunication sector. Consequently, they
said, the determinations should be interpreted in the most
liberal way possible.

4. (SBU) Following the colloquium, a senior ICASA official
told Econoff that the regulator intended to interpret the
Ministerial Determinations in the most liberal way possible
within the framework of the Telecommunications Act. He also
said that the Determinations highlighted the need for well-
developed interconnection agreements and numbering plans and
that ICASA would be working on those as well.

--------------------------------------------- ----------
PROPOSED VANS REGULATIONS - SELF PROVISION, EMPOWERMENT
--------------------------------------------- ----------

5. (SBU) In somewhat ambiguous language, the regulations
propose to allow VANS to self-provide their own facilities.
A senior ICASA official told Econoff that the regulations'
definition for "self-provision" means: a) VANS can purchase
approved telecommunications equipment from a registered
equipment supplier to build their own infrastructure; OR b)
VANS can procure their facilities from a telecommunications
service licensee including mobile operators, private
telecommunications network providers (e.g., Transnet,
Eskom), other VANS with spare capacity, Telkom, the Second
National Operator (SNO), and potentially Sentech.

6. (SBU) Econoff also questioned the official about
proposed empowerment targets in the regulations. The
official responded that ICASA's mandate includes evaluating
potential licensees on their inclusion of historically
disadvantaged individuals (HDIs). Econoff suggested that
the regulator defer to industry empowerment targets and
Department of Trade & Industry (DTI) Codes of Good Practice
to prevent potential conflicts. For example, it's
conceivable that a VAN is awarded an exemption from the
equity ownership requirement by its industry Charter council
only to find that the regulator requires it to have 30
percent in the hands of HDIs. It's reasonable that in such
a case, DTI-approved industry charters would prevail given
DTI's legislative mandate over all things pertaining to
black economic empowerment (BEE).

7. (U) Another point of concern is a proposed increase in
the application fee from R6000 ($1000) to R30,000 ($5000).
Critics say the proposed hike in the application fee creates
an added barrier to entry for smaller players, limiting
competition. Andries Matthysen, ICASA's senior manager for
licensing enforcement, numbering and administration, says,
however, that the recommended increase in the application
fee is justified because of the proposed new license rights
for VANS such as carrying voice over Internet Protocol, self-
provisioning, reselling spare capacity, and access to
standard telecommunications numbering (allowing VANS to
interconnect with the Telkom network).

8. (U) A copy of the proposed regulations will be emailed
to AF/S.

FRAZER

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