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Cablegate: Industry and Regulator Reservations On Resurrected

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 001441

SIPDIS

DEPT FOR AF/EPS/DKRZYWDA 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

E.O. 12958: N/A
TAGS: ECPS ETRD ECON EINT SF
SUBJECT: INDUSTRY AND REGULATOR RESERVATIONS ON RESURRECTED
CONVERGENCE BILL

REFTEL: 04 PRETORIA 927

1. (U) SUMMARY. For the second time in thirteen months, South
Africa's Convergence Bill has been released for public comment.
The Bill, originally released in February 2004, repeals the
Independent Broadcasting Authority Act of 1993 and the
Telecommunications Act of 1996 and grants increased powers to the
regulator. The Minister, however, retains control over the
conditions and invitation to apply for key licenses. At an April
4 joint panel, officials from the Independent Communications
Authority of South Africa (ICASA) and the telecommunications
industry argued that the Bill suffers from the lack of a green
paper/white paper policy process and falls short of creating
legislative framework promoting convergence. An unreleased ICASA
Amendment Act will also increase the authority of the regulator
in some areas. END COMMENT.

--------
THE BILL
--------

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2. (U) The Convergence Bill is significant in that it
consolidates existing legislation by completely repealing the
Independent Broadcasting Authority Act of 1993 and the
Telecommunications Act of 1996. The Bill increases the authority
of the Independent Communications Authority of South Africa
(ICASA), although the Minister still controls the date and
conditions of certain licenses. The regulator will be allowed to
issue regulations without requiring Ministerial approval and will
have new powers to combat anti-competitive behavior. The Bill
proposes two types of licenses: Individual and Class. The
Individual category includes licenses for communications network
services, radio frequency spectrum, and broadcasting services.
The Class category includes licenses for communications services
and applications services. There is general dissatisfaction both
within the regulator and the industry with the Bill's definitions
of these various types of licenses. The Bill also allows ICASA
to issue license exemptions for communications services. The
Bill calls for the regulator to issue a radio frequency plan
within 12 months of the Bill coming into force and a numbering
plan by the end of 2005. In addition, the Bill calls for the
regulator to manage interconnection, facilities leasing, license
conversion, and consumer issues. The chronically understaffed
regulator is unlikely to have the capacity to carry out these
mandates in a timely and effective manner. Missing from this
draft of the Bill is the funding formula that is to increase the
financial independence of ICASA. Officials at the regulator told
Econoff that this language has been transferred to the unreleased
ICASA Amendment Act, but could not say when that Bill would be
made available to the public.

--------------
THE BACKGROUND
--------------

3. (U) In early 2003, Andile Ngcaba, then Director-General of
the Department of Communications (DOC), announced his intention
to create a policy and legislative framework to address the
convergence of technologies in the broadcasting,
telecommunications and information industries. In July 2003, the
DOC hosted a National Colloquium on Convergence Policy that
brought together stakeholders from the public and private sectors
to identify the issues that should be embodied in a convergence
policy and subsequent legislation. At the conclusion of the
Colloquium, a committee was established to draft the Bill, which
was completed in December 2003. In January 2004, Ngcaba announced
his resignation to pursue a high-paying career in the private
sector. The Convergence Bill was released for public comment the
following month and was widely criticized despite some
improvements in regulatory independence. Over the next twelve
months, the DOC significantly rewrote the Bill before sending it
to Parliament in mid-February 2005. The Parliamentary Portfolio
Committee on Communications released the revised version March 2
for public comment through April 8.

-----------------
INDUSTRY RESPONSE
-----------------

4. (U) School and local holidays from March 18 - April 1
diverted industry attention from the release of the Bill.
However, the South African Institute of Electrical Engineers and
the LINK Centre at the Graduate School of Public and Development
Management of the University of the Witwatersrand convened a
joint panel discussion April 4 to address the Convergence Bill.
The event was well-attended by the academic, regulatory, and
business sectors.

5. (U) Michael Markovitz, Advisor to the Chairperson of the
Independent Communications Authority of South Africa (ICASA),
said that the regulator supports the Bill's direction, but sees
several areas of weakness. On the positive side, he noted that
the Convergence Bill consolidates existing legislation, but
worries that ICASA's authority may be diluted if the powers
granted to the regulator in the repealed legislation are not
thoroughly transferred either to the Convergence Bill or to the
unreleased ICASA Amendment Act. Markovitz said greater
clarification on the powers of the Minister and the regulator is
required to prevent regulatory overlap. He also expressed
concern that the proposed 12-month transitional timeframe for the
conversion of licenses was unrealistic and would divert
regulatory attention from the business of opening new markets.
Markovitz suggested that the ICASA Amendment Act, which is being
drafted in parallel with the Convergence Bill, should be released
simultaneously with the Convergence Bill because they both affect
the regulator in significant ways.

6. (U) Carla Raffinetti, a telecommunications attorney, lamented
the absence of a green paper/white paper process prior to the
Bill. She said the Bill seems to lack purpose throughout.
Raffinetti said that the proposals for the licensing of
infrastructure were heavily influenced by the Malaysian telecom
model, which was based on a green paper/white paper process
relevant to Malaysia's circumstances not South Africa's. She
also noted that while ICASA gains greater authority in the final
approval of some licenses, the Minister still retains control
over the entry date and the conditions of individual licenses,
perpetuating the existing co-regulatory environment.

7. (U) Gerhard Petrick, a former ICASA Counselor now working as
a consultant to the National Research Foundation, looked at how
the Bill affects the broadcasting sector. He criticized the
Bill's separation of broadcasting and communications services,
suggesting that technology is already quickly blurring the line
between the two industries. He noted that the Bill does not deal
with digital broadcasting where convergence is already a reality.
Petrick also said the Bill's handling of spectrum management is
inadequate and requires greater attention. Finally, Petrick
concurred with Markovitz that the transition timelines of the
Bill were too ambitious.

8. (U) Dobek Pather, a telecommunications consultant with Africa
Analysis, said that while the Bill lays the groundwork for
convergence, the clear separation of licenses and the respective
services that each can deliver minimizes the impact of the Bill.
He also said that the Bill calls for a Numbering Plan to be
completed in 2005, without anticipating that the Bill itself may
not be finalized this year.

-----------------
WHAT HAPPENS NOW?
-----------------

9. (U) The Parliamentary Portfolio Committee on Communications
denied industry requests to extend the period for public comment.
The Committee will review comments submitted through April 8 and
decide whether to refer the Bill back to the DOC for
consideration. DOC officials told Econoff, however, that there
is ministerial pressure to finalize this Bill by mid-2005.

FRAZER

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