M-NET'S AND MULTICHOICE'S REPRESENTATIONS ON THE CONVERGENCE BILL

DOCUMENT 1:
CONCERNS AND PROPOSALS AT A POLICY LEVEL
11 APRIL 2005

INTRODUCTION

1. Electronic Media Network Ltd ("M-Net") and MultiChoice Africa (Pty) Ltd ("MultiChoice") welcome the intention to enact a convergence statute and to reduce the number of statutes regulating the communications sector in South Africa. What the drafters of the Convergence Bill ("the Bill") seem to envisage is that –

1. there will be an ICASA Act which establishes and sets out the general powers, functions and duties of the Independent Communications Authority of South Africa ("the Authority");
2. the Convergence Bill will deal with the licensing and regulation of services within the communications sector;
3. the Broadcasting Act will govern the SABC;
4. the Sentech Act will govern Sentech.
1. In principle, M-Net and MultiChoice support this approach.
2. Nevertheless, we are concerned about numerous aspects of the Bill. In this document we will outline these concerns according to themes, and our proposed solutions at a policy level. (We will refer to this document as "Document 1".)
3. In a second document we will deal with detailed drafting issues. We will motivate our drafting proposals by way of footnotes. (We will refer to this second document as "Document 2".)
4. M-Net and MultiChoice would like an opportunity to elaborate on these representations by way of oral representations to the Committee.
5. Given the importance of this Bill, we hope to attend most of the Committee's hearings and deliberations concerning the Bill, and will be available to make further contributions to and to assist the Committee in the finalisation of the Bill.
6. We have found it difficult to fully assess the impact of the complete repeal of the IBA Act and the Telecommunications Act, and aspects of the Bill, without having had sight of the ICASA Amendment Bill. Later on in these representations we will elaborate on these difficulties and concerns. We would urge the Committee to try and ensure that the ICASA Amendment Bill is made available to the public as soon as possible. Once we have had an opportunity to consider that Bill, we will supplement our representations.
7. We make these representations from the perspective of persons who provide broadcasting services. We will not focus on the following Chapters and sections, which deal primarily with issues relevant to telecommunication services –
1. Chapter 4, which only applies to communications network services;
2. Chapter 7, which deals with the interconnection obligations imposed on communications network service licensees;
3. Chapter 8, which deals with the obligations imposed on a communications network service licensee to lease communications facilities;
4. s65 to s71 in Chapter 11, which sections deal with numbering plans and number portability, directory services, carrier pre-selection, and Emergency Centres; and
5. most of Chapter 12, which deals with the Universal Service Agency and the Universal Service Fund.

MACRO-STRUCTURE OF BILL AND INCLUSION OF BROADCASTING SERVICES

1. The macro-structure of the Bill is as follows:
1. The Bill begins with a number of general Chapters applicable to all services within the communications sector which fall to be regulated, namely –

• Chapter 1: Introductory provisions;
• Chapter 2: Policy and regulations; and
• Chapter 3: Licensing framework.

1. The Bill then has Chapters dealing with specific issues, namely –

• Chapter 4, which applies only to communications network service licensees;
• Chapter 5, which deals with the radio frequency spectrum;
• Chapter 6, which deals with technical equipment and standards;
• Chapter 7, which deals with interconnection between communications network service licensees;
• Chapter 8, which deals with the obligation of a communications network service licensee to lease communications facilities; and
• Chapter 9, which only applies to broadcasting service licensees.

1. The remaining Chapters of the Bill are again general Chapters:

• Chapter 10 deals with consumer issues.
• Chapter 11 is entitled "General".
• Chapter 12 deals with the Universal Service Agency and the Universal Service Fund.
• Chapter 13 deals with transitional provisions.

1. The Schedule to the Bill sets out the proposed repeal of and amendments to related legislation.

1. In principle, we support this macro-structure. However, the Committee will constantly need to assess whether, in the general sections and Chapters, it is appropriate and indeed constitutionally permissible to treat broadcasting services in the same way as the other services within the communications sector which fall to be regulated. We make this point for two reasons:
1. First, the objectives of the legislature in regulating what are traditionally telecommunication services, and the legislative means used to achieve these objectives, may be different from the objectives of the legislature in regulating broadcasting services, and the means used to achieve these latter objectives. As a consequence, there may be instances where it is inappropriate to seek to regulate broadcasting services in the same manner as all the other services within the communications sector which fall to be regulated. The need to create conditions for effective competition in the telecommunications sector during the transition from a statutory monopoly to full competition (i.e. the liberalization of the telecommunications sector) is an important example of why the regulation and licensing of telecommunications services may need to differ in a number of respects from that of broadcasting services. Other policy issues specific to the telecommunications sector include interconnection and facilities leasing, universal service and access, and numbering, naming and addressing issues.
2. The need to distinguish, where appropriate, between the regulation and licensing of telecommunication services, on the one hand, and broadcasting services, on the other, has been recognised in a number of other jurisdictions. For example, the European Community ("the EC"), in its new regulatory framework (consisting of the Framework Directive and four specific Directives) applies to all transmission networks and services. However, the framework does not apply to broadcasting and certain other services. In this regard, the Framework Directive states:

"It is necessary to separate the regulation of transmission from the regulation of content. This framework does not therefore cover the content of services delivered over electronic communications networks using electronic communications services, such as broadcasting content, financial services and certain information society services …". (our emphasis)

1. In relation to "information society services", the Framework Directive states that these span "a wide range of economic activities which take place on-line. Most of these activities are not covered by the scope of this Directive because they do not consist wholly or mainly in the conveyance of signals on electronic communications networks". Citing various examples, the Directive stated that "Voice telephony and electronic mail conveyance services are covered by this Directive". Thus, the "same undertaking, for example an Internet service provider, can offer both an electronic communications service, such as access to the Internet, and services not covered under this Directive, such as the provision of web-based content".
2. Similarly, the United Kingdom ("the UK") recognises that in certain respects telecommunication services may need to be regulated differently from broadcasting services. However, the means whereby the UK has dealt with these issues is different to the means adopted by the EC. The UK's Communications Act of 2003 deals with both the regulation of electronic communications networks and services, and broadcasting services. However, the provisions of that Act distinguish between the regulation and licensing of electronic communications networks and services, and the radio spectrum, on the one hand, and broadcasting services on the other. Broadcasting services are dealt with in a dedicated Part of the Communications Act, namely Part 3, which consists of six Chapters (constituting over 160 sections). Furthermore, much of the broadcasting legislation remains, parallel to the Communications Act.
3. We are not suggesting that South Africa adopt either the macro-structure of the EC's legislation or that of the UK. As we have already indicated, we support in principle the macro-structure of the Bill, and we appreciate that there is in the Bill a distinct Chapter which deals with certain issues concerning broadcasting services. However, most of the general Chapters also apply to broadcasting services. The Committee will therefore have to constantly assess whether, in the general sections and Chapters, it is appropriate to treat broadcasting services in the same way as all the other services within the communications sector which fall to be regulated. If this is not appropriate, broadcasting services ought to specifically excluded from these general provisions, and if necessary, ought to be dealt with separately.
1. The second reason why the Committee will constantly need to assess whether broadcasting services are being dealt with appropriately, is by virtue of s192 of the Constitution of the Republic of South Africa, No 108 of 1996 ("the Constitution"). This section provides that

"National legislation must establish an independent authority to regulate broadcasting in the public interest".

We will elaborate on this constitutional requirement later in these representations. To the extent that general sections and Chapters are to apply to broadcasting services, these sections and Chapters will need to comply with this constitutional requirement. In other words, each general section and Chapter of the Bill will have to meet the s192 test, namely that the Minister may not be involved in or in any way interfere with or influence the exercise and performance by the Authority of its powers, functions and duties to the extent that these relate to broadcasting. If this test cannot be met, broadcasting services will need to be specifically excluded from these sections/Chapters, and if necessary, ought to be dealt with separately.

DEFINITIONS: s1 OF BILL

1. The most important definitions in the Bill are not clearly and precisely drafted. This results in confusion, which is exacerbated when one tries to read these definitions in the context of key sections, such as s5 and s85. It is thus difficult to assess which services/business activities require a licence, and the nature of the regulation of these services/business activities. As a consequence, it is difficult to comment meaningfully on many of the provisions of the Bill.
2. A particular problem is that the Bill seems to create sub-sets within the key definitions. For example, the Bill seems to suggest that "communications network services" is a sub-set of "communications services". This cannot be: a "communications network service" is a service whereby a communications network is made available. This service is different from a "communications service", which essentially involves the conveyance of communications over communications networks.
3. This difficulty is also illustrated in the Bill itself: in s85(3)(f) examples of "communications network services" include mobile cellular telecommunication networks and public switched telecommunication networks. In contrast, in s85(3)(e) examples of "communications services" include international telecommunication services and mobile cellular telecommunication services. These two types of services are different from one another, and the former cannot be a sub-set of the latter.
4. Another example of the confusion created by this notion of sub-sets within these services is s5. s5(2) provides that the Authority may grant individual licences to, for example, "communications network services" (see s5(2)(a)). s5(3) provides that the Authority may grant class licences to "communications services". If "communications network services" were to be a sub-set of "communications services", as the Bill presently suggests, it is impossible to give meaning to these provisions of s5.
5. It is also not clear in the Bill whether "broadcasting services" are a sub-set of or are distinct from "communications services". Nor is it clear as to whether "broadcasting services", if they are to be treated as distinct from "communications services", are a sub-set of "content services". We submit that "broadcasting services" must be treated as a distinct category of service. Support for this view is to be found in s85(3)(g) of the Bill, where "broadcasting services" are distinguished from "communications services" (see s85(3)(e)) and "communications network services" (see s85(3)(f)).
6. The second particular problem that we have is that the licensing framework ought to be streamlined. In other words, the services which require to be licensed are "communications network services", "communications services" and "broadcasting services". In addition, the use of radio frequency spectrum needs to be licensed. Whilst "application services" would fall within the definition of "communications services", there is no justification for singling out "application services" as a distinct category of service requiring a distinct licence: this is not done in relation to other types of communications services such as mobile cellular telecommunication services, public switched telecommunication services, etc. We would accordingly propose that the definition of "application services" and the associated definitions of "application" and "application service licensee" be deleted from the definitions section of the Bill.
7. Our third concern is that whilst in many instances it would appear that the intention of the drafters of the Bill is to ensure that the Bill does not require the licensing and regulation of content services, by virtue of a number of the definitions in s1 of the Bill, and a limited number of other provisions in the Bill, this is not clear. In this regard, the definitions which concern us are those of "application", "application service" (and therefore "application service licensee"), "communications", "communications network", "communications network service", "communications service", "content", "content service" and "subscriber". Assuming these definitions could be amended so as to address our concerns, the only remaining provisions of the Bill which concern us as regards this particular issue are s8(2)(a) and, to a far lesser extent, s(2)(x) and (y). (Whilst the term "content" is used on its own in a number of other contexts, the use of this term in those contexts does not pose any problems.)
8. We propose that the solution to these concerns is to remove any reference to "content", as currently defined in the Bill, and "content service". We have already proposed the deletion of the definitions of "application", "application service" and "application service licensee". As regards the definitions of "communications", "communications network service" and "communications service", in our proposed definitions which are set out hereunder, we avoid the use of these terms and thereby address our concerns. As regards the definition of "communications network" we propose that the references to "content services" towards the end of that definition be deleted. We also propose that the definitions themselves are "content" and "content service" be deleted. Finally as regards to the definition of "subscriber" we put forward drafting proposals in this regard in Document 2. As regards the two provisions which concern us, namely s8(2)(a) and s2(x) and (y), our drafting proposals in Document 2 deal with our concerns.
9. In the subparagraphs hereunder we propose revised definitions to the following key services, which services are to be treated as being distinct from one another - 

• "communications network services";
• "communications services"; and
• "broadcasting services".

1. A "communications network service" is "a service whereby a person makes available a communications network, whether by sale, lease or otherwise –

(a) for that person's own use for the provision of a communications service or a broadcasting service; or

(b) to another person for that other person's use in the provision of a communications service or a broadcasting service; or

(c) for resale to a communications service or a broadcasting service"

1. A "communications service" is "a service provided for remuneration to the public, sections of the public, or the subscribers to such service, which consists wholly or mainly of the conveyance of communications over communications networks, but excludes broadcasting services". Thus, a "communications service" would include the conventional "telecommunication services" such as international telecommunication services, national long-distance telecommunication services, local access telecommunication services and mobile cellular telecommunication services, and application services.
2. A "broadcasting service" means "a service which consists of the broadcasting of visual material and/or of sound material to the public, sections of the public, or subscribers to such service, but does not include –

• a service which provides no more than data or text, whether with or without associated still images; or
• a service or components of a service which makes programmes available on demand on a point-to-point basis, including a dial-up service";

"Broadcasting" means "any form of unidirectional communications intended for the public, sections of the public, or subscribers to any broadcasting service, having appropriate receiving facilities, whether conveyed by means of radio frequency spectrum or any communications network or any combination thereof";

1. Throughout the Bill, these defined terms must be used appropriately and consistently.
2. As regards the rest of the definitions:
1. Certain definitions are unnecessary, and ought to be deleted.
2. A number of definitions need to be more precisely drafted.
3. Certain definitions need to be inserted into the Bill.
4. The use of all the defined terms throughout the Bill must be appropriate and consistent.
3. Poorly formulated definitions will result in confusion, and will lead to disputes and litigation within the communications sector. This will involve the Authority, stakeholders and the public in unnecessary time-consuming and expensive proceedings.
4. In Document 2 we will make detailed proposals on amendments which we believe ought to be made to the Bill to address the various concerns as regards the definitions.

INDEPENDENT REGULATION OF BROADCASTING

Introductory comments

1. As we have already indicated, the Constitution requires that "National legislation must establish an independent authority to regulate broadcasting in the public interest …". s192 appears in Chapter 9 of the Constitution, which deals with state institutions supporting constitutional democracy. s181, to the extent relevant, provides:

"(2) These institutions are independent, and subject only to the Constitution and the law, and they must be impartial and must exercise their powers and perform their functions without fear, favour or prejudice.

(3) …

(4) No person or organ of state may interfere with the functioning of these institutions."

1. The independence of the Authority is emphasised in the ICASA Act. s3, to the extent relevant, provides:

"(3) The Authority is independent, and subject only to the Constitution and the law, and must be impartial and must perform its functions without fear, favour or prejudice.

(4) The Authority must function without any political or commercial interference."

Additional sections, such as s5 (Constitution of and appointment of councillors to Council), s6 (Disqualification of councillors), s8 (Removal of councillors from office), and s12 (Conflicting interests of councillors) are all intended to contribute to the independence of the Authority.

1. The following provisions in the Bill undermine the independence of the Authority by virtue of the powers sought to be given to the Minister –
1. s3, which empowers the Minister to make policies and issue directions to the Authority;
2. s5 and s9, which involve the Minister in the licensing of services;
3. s34, which gives certain powers to the Minister in relation to the radio frequency plan and frequency allocations; and
4. s81(2)(a), which empowers the Minister to determine the percentage of a licensee's contribution to the Universal Service Fund.
2. These provisions extend to the regulation of broadcasting services and broadcasting signal distribution. Given s192 of the Constitution, these provisions are unconstitutional.
3. We address each of these provisions in turn.

Powers of Minister to make policies and issue policy directions: s3 of Bill

1.  
1. We recognise the Minister's power to make policies. However, due to the requirement in the current s3(3) of the Bill, namely that the Authority must consider policies made by the Minister, there ought to be a public consultative process as regards the making of these policies.
2. s3(2) of the Bill compels the Minister to issue directions to the Authority. Whilst s13A of the IBA Act provides that the Minister must consult the Authority prior to issuing a policy direction, this is no longer a requirement in the Bill – the Minister, in s3(4)(a), may elect whether to consult the Authority.
3. Whilst the IBA Act requires any inquiry to be conducted by the Authority at the instance of the Minister to be financed by money appropriated to the Authority for that purpose, the Bill contains no equivalent provision. Thus, the possibility exists that the Authority may have to conduct numerous inquiries at the instance of the Minister, without being properly resourced. Such inquiries may detract, both time-wise and resource-wise, from other important functions to be performed by the Authority.
4. Finally, the safeguards contained in the IBA Act are absent from the Bill. We refer, for example, to s13A(5) of the IBA Act, which provides:

"(c) No such direction may be issued regarding the granting of a licence or regarding the amendment, suspension of revocation of a licence.

(d) No such direction may be issued which interferes with the independence of the Authority or which affects the powers and functions of the Authority."

Minister's involvement in licensing: s5 and s9 of Bill

1. s5(4) and (5) of the Bill provide:

"(4) The Authority may only accept and consider applications for communications network services licences as from a date to be fixed by the Minister by notice in the Gazette.

(5) The Minister may determine the date when and the geographical area within which communications network services licences may be granted."

1. Given the definition of "communications network services", which would include broadcasting signal distribution services, the involvement of the Minister in the licensing of communications network services will be unconstitutional.
2. s9 of the Bill deals with the application for and granting of individual licences. s9(2)(e) provides that "In the case of an application for an individual licence the Authority must … submit to the Minister the proposed licence conditions for approval." Whilst the Bill is not entirely clear as to which services require an individual licence, s5(2) seems to suggest that at the very least, this will include communications network services (which will include broadcasting signal distributions services), broadcasting services, and the use of radio frequency spectrum. The Bill therefore requires that the Minister approve the proposed licence conditions, amongst others, for all broadcasting services, broadcasting signal distribution services, and for the use of radio frequency spectrum required for the provision of these services. This is in stark contrast with the current provisions of the broadcasting legislation in which the Minister has no involvement in the licensing of broadcasting services and broadcasting signal distribution services, nor in relation to the use of related spectrum. These provisions are unlikely to survive constitutional scrutiny.

Minister's involvement in radio frequency plan and frequency allocations: s34 of Bill

1. s34 deals with the radio frequency plan. It grants extensive powers to the Minister. For example –
1. s34(4)(c) compels the Authority to consult with the Minister as regards the government's current and planned use of the radio frequency spectrum – this is sufficiently wide to include not only the use of the spectrum by the security services, but by any form of government, and could extend to the use of the spectrum by operators owned by the State;
2. s34(7) to (9) provides that the Minister must approve the radio frequency plan;
3. s34(13) provides that where spectrum migration involves government entities or organisations, the Authority is compelled to refer the matter to the Minister for resolution; and
4. s34(14) provides that the Minister is empowered to allocate radio frequency spectrum for the exclusive use of the security services, and retains control over such spectrum.
2. The powers given to the Minister in relation to the radio frequency plan and radio frequency spectrum undermine the independence of the Authority. These provisions are again in stark contrast with the current provisions of the broadcasting legislation and the Telecommunications Act, where neither in relation to the broadcasting services frequency bands, nor in relation to the remaining part of the radio frequency spectrum, does the Minister have any powers. The radio frequency plan and use of the radio frequency spectrum are relevant to broadcasting services and to broadcasting signal distribution services. These provisions are unlikely to survive constitutional scrutiny.

Minister's determination of licensees' contribution to Universal Service Fund: s81(2) of Bill

1. s81(2)(a) of the Bill provides that the Minister may determine the percentage of a licensee's annual turnover as regards the licensee's contribution to the Universal Service Fund.
2. This provision is in contrast to the current provision in the Telecommunications Act (s67 of that Act), where it is the Authority, as opposed to the Minister, who determines these contributions. Currently s81 of the Bill applies to all licensees, and would include broadcasting service licensees and broadcasting signal distribution licensees. Again, this provision is unlikely to survive constitutional scrutiny.

Concluding comments concerning independence of Authority

1. In order to ensure that the provisions identified above are constitutional, we propose that most, although not all, of these references to the Minister ought to be removed and replaced with a reference to the Authority. In Document 2 we will make drafting proposals in this regard.

EXTENSIVE POWERS GIVEN TO AUTHORITY

1. The current communications legislation which is in force, and particularly the broadcasting legislation, sets out in a fair degree of detail the procedures which the Authority is required to follow in various processes. Public consultation is in many instances required, and procedural safeguards have been put in place in relation to important issues. All of this contributes to certainty and security within the communications sector.
2. In contrast, in relation to numerous issues the Bill is silent on detailed procedures, and it is left to the Authority to determine these by way of regulation. Examples include the powers given to the Authority –
1. to determine licence procedures (s5(6));
2. to determine procedures for the application and granting of individual licences (s9);
3. to determine procedures for the renewal of individual licences (s11(1) and (2));
4. to determine procedures for the transfer of a licence (s13(2));
5. to determine procedures for the suspension and/or cancellation of an individual licence (s14);
6. to determine procedures for applications for class licences (s16 and s17);
7. to amend radio frequency spectrum licences (s31(3)), to ensure compliance with the provisions of the Chapter dealing with radio frequency spectrum (s31(6)), and to withdraw any radio frequency spectrum licence (s31(7));
8. to order a licensee to cease or refrain from taking any action which the Authority considers as having the effect of giving an undue preference to or causing undue discrimination against any person or category of persons (s63(3)); and
9. to convert existing licences (s84 and s85).
3. We are concerned, for the following reasons, about these extensive powers given to the Authority:
1. No certainty is provided to the communications sector about procedures which are crucial to vested rights and investments in this sector. This is likely to undermine investor confidence and stability.
2. Although the Authority will be obliged to follow procedurally fair administrative action in terms of the Promotion of Administrative Justice Act, 3 of 2000 ("PAJA"), failure to do so may lead to drawn-out legal challenges.
3. The Authority is currently under-resourced to perform its functions in terms of the existing legislation. The Convergence Bill, including the provisions cited in the preceding main paragraph, impose on the Authority a far greater number of functions, many of which will need to be performed immediately upon the coming into operation of the Bill. For example, if the Authority is to continue to perform its regular functions of considering licence applications and granting licences, and of dealing with applications for the renewal or transfer of licences, it will first have to publish draft regulations concerning the relevant procedures and submit these regulations to the public consultative process identified in s4(4) of the Bill. We are uncertain as to whether the Authority will be adequately resourced to perform all these additional functions appropriately and timeously.
4. The quality of these regulations may be compromised, particularly if the Authority is inadequately resourced. For example, we are uncertain as to whether these procedures will allow interested parties a reasonable opportunity to comment, to participate in public hearings, etc. If the regulations concerning these procedures are defective, this will be to the detriment of the communications sector, and will be a further factor undermining investor confidence and stability in the sector.
4. In Document 2 we will put forward proposals which seek to address these concerns.

REDUCTION IN PUBLIC CONSULTATIVE PROCESSES AND INADEQUATE PROCEDURAL SAFEGUARDS

1. Allied to the concern about the extensive powers given to the Authority is the concern that compared to the current legislation there are fewer instances where the Authority is required to conduct a public consultative process concerning matters of importance to the sector. There is also less acknowledgement of the right to be heard, whether as the affected party or as interested third parties, and to public hearings. This only serves to accentuate the powers given to the Authority. Examples of where there are inadequate procedural safeguards include the following –
1. the making of regulations (s4);
2. licensing (s5);
3. the application for and granting of individual licences (s9);
4. the amendment of individual licences (s10);
5. the renewal of individual licences (s11);
6. the suspension and/or cancellation of individual licences (s14);
7. procedures relating to radio frequency spectrum licences (s31);
8. the determination of the radio frequency plan (s34);
9. competition-type orders which the Authority may make (s63); and
10. the conversion of licences (s84 and s85).
2. To demonstrate this point in greater detail, we will take the amendment of an individual licence as an example. s52 of the IBA Act currently deals with the amendment of broadcasting licences. Given the fact that amendments to a broadcasting licence may result in substantial positive or negative consequences for the broadcasting licensee and/or other persons within the communications sector, s52 contains a number of substantive and procedural safeguards. At a substantive level, s52 provides that a broadcasting licence may be amended by the Authority in only four circumstances, which are specified in that subsection. At a procedural level, s52, and the other sections of the IBA Act referred to in that section, provide the following:
1. Notice of the proposed amendments must be widely given (i.e. in the Gazette) so as to ensure that the licensee and any person who may be interested in the proceedings are given notice of the proposed amendments.
2. The licensee and interested persons are given sufficient time to make their written representations.
3. All written representations are open for inspection at the offices of the Authority, and copies may be made of these.
4. Subsequent to receipt of the written representations, the Authority must conduct a hearing at which oral representations of the licensee and interested persons must be made in public.
5. Persons participating in the oral hearings may be represented by any person of their choice, which may include a legal representative.
6. After having decided to amend a broadcasting licence, the Authority must publish the amendments in the Gazette.

In circumstances where an amendment is in terms s52(1)(d) (this is an amendment to make the conditions of the licence consistent with conditions being imposed generally in licences granted in the same category for the purpose of ensuring fair competition between these licensees), there is a second stage to the proceedings (dealt with in s52(5) and (6)). What is clearly envisaged is a public process in which the licensee hears everything that is said by the Authority and interested persons concerning the proposed licence amendments, and that interested persons hear everything that is said by the Authority and the licensee concerning the proposed amendments.

1. This approach is consistent with the constitutional requirements that broadcasting be regulated independently and that just administrative action be followed (s33 of the Constitution), and with the more detailed provisions of PAJA. In s3 of PAJA an indication is given of what would constitute a procedurally fair administrative procedure in relation administrative action affecting any person. s4 is fairly similar, although it relates to administrative action affecting the public. s5 deals with the giving of reasons for an administrative action.
2. In contrast, s10 of the Bill, which deals with the amendment of an individual licence, has neither these substantive nor procedural safeguards. First, the grounds upon which an individual licence may be amended by the Authority are more numerous and far wider. Second, the section contains no procedural safeguards at all, particularly from the perspective of interested parties and the public. The section merely provides that the Authority "may amend an individual licence in consultation with the licensee".
3. The absence of substantive, and particularly procedural, safeguards in s10 of the Bill is problematic for a number of reasons:
1. It militates against the independent regulation of broadcasting.
2. It may well lead to an infringement of the constitutional right to just administrative action.
3. The protections and procedural safeguards which the current legislation provides to licensees and other interested persons in the communications sector are lost.
4. The section does not provide the requisite certainty to the communications sector, and will undermine investor confidence and stability within the sector.
4. In Document 2 we will make proposals to introduce substantive and procedural safeguards and public consultative processes where we believe this to be necessary.
5. We will turn now to consider a number of further substantive concerns which we have about the Bill.

LIMITATIONS ON OWNERSHIP AND CONTROL: s13(3) AND (4) OF BILL

1. s48 to s50 of the IBA Act impose limitations on foreign, horizontal, and cross-media ownership and control. s31 of the Broadcasting Act provides that the horizontal and cross-media limitations do not apply to a broadcasting service carrying more than one channel unless the Authority has recommended the application of these sections to these services, and these recommendations have been adopted by the National Assembly.
2. The Bill proposes the repeal of the entire IBA Act, and therefore of s48 to s50, and the repeal, inter alia, of s31 of the Broadcasting Act. These limitations therefore fall away.
3. Whilst M-Net and MultiChoice welcome this development, we are concerned about certain of the provisions of s13. s13 is headed "Transfer of individual licence or change of ownership". Despite this heading, certain subsections then proceed to deal with the possibility of limitations on ownership and control being introduced by way of regulation. s13 provides:

"(3) The Authority may by regulation set a limit on, or restrict, the ownership or control of a licence or communications service in order to –

(a) promote a diversity of views and opinions;

(b) promote the ownership and control of communications services by historically disadvantaged groups;

(b) promote competition in the communications sector.

(4) Regulations contemplated in subsection (3) must be made –

(a) with due regard to the objectives of this Act, the related legislation and, where applicable, any other relevant legislation; and

(b) after the Authority has conducted an inquiry in terms of section 17F of the ICASA Act, which may include a market study."

1. For present purposes, we will focus on the imposition of limitations on ownership and control to "promote a diversity of views and opinions" and to "promote competition in the communications sector". (Later in these representations we will deal with the question of empowerment.)
2. To the extent that there are to be limitations on ownership and control this should not be imposed by way of regulation:
1. The imposition of ownership and control limitations on licensees is a major issue which impacts on South Africa's economic policies, particularly in relation to the attraction of national and international investment, and competition policies. Any limitations ought to be determined by Parliament in terms of national legislation, and not by the Authority by way of regulation.
2. s13(3) suggests that the Authority may make one or more regulations limiting ownership and control in relation to a specific licence or a specific communications service. We oppose this approach. If there are to be any limitations imposed on ownership and control, these must be imposed by way of a law of general application.
3. Regulations could be made by the Authority and take effect without much notice being given thereof to persons who are directly or indirectly likely to be affected. Furthermore, regulations may often and fairly easily be amended by the Authority. Provisions imposing limitations on ownership and control could therefore be changed on little notice and frequently. Investors in the communications sector, whose interests may involve many millions of rands, would be provided with very little certainty and security as regards their current and future investments. This will significantly undermine investor confidence and stability in the sector.
3. In most jurisdictions where limitations on ownership and control are provided for, these are set out in the primary legislation, namely in a statute passed by Parliament. In contrast, the Bill substitutes the decision-making powers of Parliament for that of the Authority concerning limitations on ownership and control.

COMPETITION MATTERS

Summary of sections in Bill which cause concern

1. Whilst we agree that it is appropriate that competition matters concerning interconnection and facilities leasing are dealt with in the Bill (see Chapters 7 and 8), there are a number of sections in the Bill which raise concerns from a competition law perspective. We identify these sections in the paragraphs below.

Licence terms and conditions: s8(3) to (7) of Bill

1. s8(1) and (2) of the Bill empower the Authority to prescribe standard terms and conditions applicable to each category of individual and class licence.
2. s8(3) is problematic, as it seeks to empower the Authority to impose, by way of regulation, specific licence terms and conditions upon a licensee whom the Authority has determined has significant market power, or has control of essential facilities, or should have a universal access and service obligation, or is vertically integrated in such a way that the Authority determines that this integration could harm competition in the relevant market.
3. s8(4) and (5) set out the basis upon which a licensee is considered to have significant market power.
4. s8(6) sets out the types of additional terms and conditions which may be imposed on licensees hit by s8(3). These terms and conditions are extensive, and range from requiring accounting separation and the methods to be used in this regard, through to price controls.
5. s8(7) requires the Authority, when it prescribes the terms and conditions of each type of individual or class licence, to have regard "to the need to create and maintain a competitive environment in the communications sector".

Retail and wholesale tariffs: s61 of Bill

1. s61(1) of the Bill empowers the Authority to prescribe the manner in which retail and wholesale tariffs may be levied by a licensee in the provision of its services, either in respect of those markets or market segments where the Authority determines that no or ineffective competition exists, or in order to protect consumer interests. s61(2) provides that "Ineffective competition exists where a licensee in any market or market segment has significant market power or control of essential facilities."

Competition matters generally: s63 of Bill

1. s63(3) empowers the Authority to intervene to direct a licensee to cease or refrain from taking any action which the Authority determines has or is likely to have the effect of giving an undue preference to, or to cause undue discrimination against, any person or category of persons. s63(4) empowers the Authority in this regard to prescribe regulations to ensure efficient and effective monitoring and investigation of anti-competitive actions, ensuring protection of consumer interests, and the speedy resolution of complaints with regard thereto. Finally, s63(5) provides that it is "considered an anti-competitive practice for any licensee to prohibit, lock, block or otherwise prevent any end user equipment from being used with any licensed communications service".

General comments concerning these provisions

1. In relation to each of these three sections (i.e. s8, s61 and s63(3) to (5)) the Authority is by and large empowered to act unilaterally. There are no procedural safeguards, and in particular, the prospective or actual licensees are given no opportunity to be heard. Reliance on the constitutional protection in s33 of the Constitution and the provisions of PAJA will have to take place in a void.

Competition authorities ought to deal with competition matters

1. Whilst the Authority's Council and staff have expertise and experience in relation to the licensing and regulation of broadcasting services, broadcasting signal distribution services, and telecommunication services, they lack the necessary expertise and experience in competition law matters, which expertise and experience lies with the competition authorities.
2. Furthermore, unlike the competition authorities, there is no hierarchy of an investigative body (such as the Competition Commission), an adjudicative body (such as the Competition Tribunal), and a body to whom appeals and reviews may be made (such as the Competition Appeal Court).
3. The competition authorities are pre-eminently the appropriate bodies to deal with competition matters.
4. In prior statements, the Authority has accepted this:

"As a sector-specific regulator, the IBA has primary expertise when it comes to licensing, legal, technology, policy and public interest matters that directly affect the broadcasting industry. …

However, the Competition Commission may be more expert in dealing with issues relating to essential facilities, mergers, exclusionary acts, market power and restrictive practices."

1. The Competition Act, which applies to all economic activity within the Republic, is concerned with prohibited practices and merger control. It deals with competition concepts in detail. As we have already indicated, in administering the Act there is a hierarchy of structures. In terms of the Competition Act, and other than merger control, the competition authorities deal with competition concerns on a case by case basis when these concerns arise. Thus, whether or not a practice is a prohibited practice will be determined by identifying the relevant market and considering all the relevant facts at that point in time. This is commonly referred to as "ex post regulation".
2. Competition concerns within the communications sector would be best dealt with by the competition authorities. We propose that s8(3) to (7), s61 and s63(3) to (5) of the Bill ought to be deleted. An additional advantage to this approach is that it will avoid forum shopping and jurisdictional disputes.
3. Our proposed approach accords with the approach adopted in many other jurisdictions. We will elaborate on this point below.

Approach in other jurisdictions

1. In numerous jurisdictions, such as Canada, the USA and Australia, competition concerns within the communications sector are generally dealt with in terms of competition law, and usually by the competition authorities, on a case by case basis.
2. In the EC and the UK, a similar approach is adopted. It is only in relation to isolated issues that a slightly different approach has been adopted, although it is noteworthy that this was done only after a detailed, rigorous and lengthy process lasting a number of years.

European Community

1. As we have already indicated, the EC recently established a new regulatory framework for electronic communications networks and services. However, this framework does not extend to broadcasting/content services, nor to information society services. In this regard we wish to reiterate the following statement made in the opening to the Framework Directive:

"It is necessary to separate the regulation of transmission from the regulation of content. This framework does not therefore cover the content of services delivered over electronic communications networks using electronic communications services, such as broadcasting content, financial services and certain information society services …". (our emphasis)

1. The Framework Directive, together with the four associated Directives, establishes a harmonised framework for the regulation of electronic communications networks and services. It lays down the tasks of national regulatory authorities ("NRAs") and establishes a set of procedures to ensure the harmonised application of the regulatory framework throughout the EC.
2. The approach of the EC is that by and large, general competition law ought to apply to electronic communications networks and services, and that competition concerns be dealt with on a case by case basis.
3. The general rule is that ex post regulation ought to apply. However, in certain circumstances, provision is made for the imposition of ex ante obligations to ensure the development of a competitive market. Nevertheless, the view of the EC is that "It is essential that ex ante regulatory obligations should only be imposed where there is not effective competition i.e. in markets where there are one or more undertakings with significant market power, and where national and Community competition law remedies are not sufficient to address the problem". (our emphasis) Articles 14 to 18 of the Framework Directive set out the procedure to be followed by Member States in order to determine whether ex ante regulation is necessary in particular markets.
4. In July 2002 the European Commission published Guidelines which the NRAs were to use in determining whether or not competition was effective in certain markets, and if a product or service market was not effectively competitive, to determine which firms enjoyed significant market power within that market. A firm will be deemed to have significant market power "if, either individually or jointly with others, it enjoys a position equivalent to dominance, that is to say a position of economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers". It is noteworthy that the Framework Directive specifically states:

"An analysis of effective competition should include an analysis as to whether the market is prospectively competitive, and thus whether any lack of effective competition is durable. Those guidelines will also address the issue of newly emerging markets, where de facto the market leader is likely to have a substantial market share but should not be subjected to inappropriate obligations. The Commission should review the Guidelines regularly to ensure that they remain appropriate in a rapidly developing market." (our emphasis)

It is further noteworthy that the Guidelines are detailed and are based entirely on competition law principles.

1. Article 15 of the Framework Directive required the European Commission, after public consultation, and consultation with the NRAs, to adopt a Recommendation on Relevant Product and Service Markets ("the Recommendation"). The Recommendation was to identify those product and service markets within the electronic communications sector, the characteristics of which may be such as to justify the imposition of ex ante regulation. The Article emphasises that the markets were to be defined in accordance with the principles of competition law.
2. In February 2003 the Commission adopted the Recommendation. Of the 18 markets identified in the Recommendation, only one related to television broadcasting services, and that was the 18^th market, namely "broadcasting transmission services, to deliver broadcast content to end users" (i.e. broadcasting signal distribution).
3. The NRAs, in collaboration with their national competition authorities, were required to carry out an analysis of these 18 markets, taking into account the Guidelines, the Recommendation, and the Explanatory Memorandum accompanying the memorandum, which was published by the Competition Directorate General of the European Commission. Where an NRA concludes that a particular market is effectively competitive, it must not maintain or impose any form of ex ante regulation. In cases where sector specific regulatory obligations exist, the NRA must in fact withdraw those obligations. Where an NRA determines that a relevant market is not effectively competitive, it must identify undertakings with significant market power within that market and impose appropriate specific regulatory obligations, or maintain or amend such obligations where they already exist.
4. The new regulatory framework within the EU has resulted in the establishment of the European Regulators Group ("ERG") as an interface between the European Commission and the NRAs. In June 2003 the ERG published, and called for public comment on, the appropriate approach to remedies in the new regulatory framework.
5. The document refers to the three stage process, namely –
1. the requirement that NRAs define markets susceptible to ex ante regulation;
2. once a market is defined as requiring ex ante regulation, it must be analysed to determine those operators exercising significant market power; and
3. the NRAs must then determine the appropriate remedies to be applied in relation to those operators.
6. What is noteworthy about the EU's approach is the following:
1. In relation to broadcasting and content services, competition concerns are dealt with in terms of general competition law by the competition authorities.
2. In relation to electronic communications networks and services, competition concerns are by and large dealt with in terms of general competition law by the competition authorities.
3. To the extent that, in exceptional circumstances, ex ante obligations are necessary, this is dealt with in accordance with the principles of competition law. Furthermore, prior to imposing any ex ante obligations, a detailed, rigorous and lengthy process, involving extensive public consultation, and the right of persons likely to be subject to such obligations to be heard, is embarked upon.

EMPOWERMENT

1. The approach in the Bill to empowerment does not accord with current developments within the wider economy.
2. First, the Bill refers to "historically disadvantaged persons"/"persons from historically disadvantaged groups", whereas the current emphasis is on empowering "black people", defined in the Broad-Based Black Economic Empowerment Act ("the BBBEE Act") as "Africans, Coloureds and Indians".
3. Second, the Bill persists in emphasising equity ownership at the expense of other criteria. We refer, for example, to s9(2)(b) and s13(3)(b) of the Bill. In this regard, reference must be made to s1 of the BBBEE Act, in which "broad-based black economic empowerment" is defined as –

"the economic empowerment of all black people including women, workers, youth, people with disabilities and people living in rural areas through diverse but integrated socio-economic strategies that include, but are not limited to –

(a) increasing the number of black people that manage, own and control enterprises and productive assets;

(b) facilitating ownership and management of enterprises and productive assets by communities, workers, cooperatives and other collective enterprises;

(c) human resource and skills development;

(d) achieving equitable representation in all occupational categories and levels in the workforce;

(e) preferential procurement; and

1. investment in enterprises that are owned or managed by black people."

1. More generally, the Bill will need to empower the Authority to make regulations to determine empowerment criteria for the issuing of licences in the communications sector, and in relation to existing licensees.
2. In Document 2 we will set out drafting proposals as to how to deal with these issues.

CONTRIBUTIONS TO UNIVERSAL SERVICE FUND: s81 OF BILL

1. As we indicated in the introduction to these representations, we do not intend commenting on most of Chapter 12, which deals with the Universal Service Agency and the Universal Service Fund.
2. We are, however, concerned with various aspects of s81, which deals with contributions to the Fund. The first concern relates to the role of the Minister in determining these contributions, which issue we have already dealt with in these representations.
3.  
1. The second concern is that s81 proposes that all licensees are to contribute to the Fund. M-Net and MultiChoice submit that this is an instance where the objectives of the legislature in regulating what are traditionally telecommunication services, and the means used to achieve these objectives, ought to be different from the objectives sought to be realised through the regulation of broadcasting services, and the means used to achieve these latter objectives.
2. The objectives of advancing universal service and universal access in relation to telecommunication services are common in many jurisdictions.
3. Telecommunication service licensees are required to contribute to a "Universal Service Fund", which money is used to fund the provision of telecommunication/communications services to needy persons, or the use of these services by such persons; to fund communications network service licensees in relation to the construction or extension of communications networks in under-serviced areas; to fund educational institutions as regards the procurement of telecommunication/ communications services and access to networks; etc.
4. In relation to broadcasting services, the emphasis is instead on ensuring that a range of broadcasting services providing a mix of programming are available, on ensuring the broadcasting of local content, etc. The nature of the financial contribution made by broadcasting services differs, as does the purpose of those contributions. For example, broadcasting services are required to devote part of their budgets to producing certain types of programming (e.g. news and current affairs programming, children's programming, etc.). They are also required to spend a percentage of their budget on the broadcasting of local content, or to broadcast a certain amount of local content – the associated costs are substantial. Broadcasting service licensees are also required to make significant financial contributions towards the Media Development and Diversity Agency, which Agency is to advance media plurality and diversity.
5. It accordingly makes no sense to require broadcasting services to contribute to a fund, the monies of which fund are to be spent on services other than broadcasting services. Nor should broadcasting services be required to make a contribution to such a fund, when they are already having to make a range of other financial contributions to achieve the objectives of broadcasting policies. We accordingly propose that s81 should indicate clearly that it does not apply to broadcasting service licensees.
4. We propose that s81 be amended to make it clear that the section does not apply to broadcasting services and broadcasting signal distribution services, and to exclude the Minister's involvement in the determination of licensees' contributions. In Document 2 we will put forward drafting proposals in this regard.

TRANSITIONAL ARRANGEMENTS

1. M-Net and MultiChoice have a number of concerns as regards the transitional arrangements, which arrangements are dealt with in s5(10), s72, s84 to s85, and s87 of the Bill.
2. Our first concern is that the Bill must deal fully and properly with all the issues which require to be dealt with in terms of the transitional provisions.
3. Our second concern is that persons within the communications sector who are lawfully providing a service when the Bill commences ought to be properly protected.
4. Whilst the Bill attempts to address these concerns, it does not do so adequately.
5. More particularly, greater clarity as to how the licence conversion process is to work is required, both from a procedural perspective, and in relation to substantive rights.
6. The following issues, which ought to be dealt with under the transitional arrangements, are currently not dealt with in the Bill:
1. existing policy directions issued by the Minister in terms of the IBA Act (s13A) and the Telecommunications Act (s5);
2. any existing guidelines issued by the Authority;
3. existing station licences and permits (see s30 and s31 of the Telecommunications Act);
4. any existing agreements (for example interconnection and facility leasing agreements);
5. existing approvals granted for telecommunication equipment (see s54 of the Telecommunications Act);
6. technical standards (see s55 of the Telecommunications Act);
7. the frequency plan made in terms of s31 of the IBA Act in relation to the broadcasting services frequency bands, and made in terms of s29 of the Telecommunications Act in relation to the rest of the spectrum;
8. existing registers of licences (see s70 of the IBA Act and s92 of the Telecommunications Act);
9. pending inquiries in terms of s28 of the IBA Act and s27 of the Telecommunications Act;
10. pending applications (e.g. for the granting, amendment, renewal or transfer of licences) (pending applications for a licence are dealt with to a limited extent in s84(7) and (8));
11. other pending proceedings, for example proceedings concerning the frequency plan in terms of s31 of the IBA Act or s29 of the Telecommunications Act, or as regards the fees and charges of Telkom (in terms of s45 of the Telecommunications Act);
12. existing disputes in terms of the current legislation (for example, interconnection or facilities leasing disputes);
13. pending enforcement proceedings in terms of Chapter VIII of the IBA Act or Chapter XII of the Telecommunications Act;
14. pending litigation in the courts;
15. pending activities in terms of Chapter IX of the Telecommunications Act;
16. the position of designated agents, inspectors and authorised persons who were appointed in terms of the broadcasting legislation or the Telecommunications Act;
17. the position of existing bodies such as the Broadcasting Monitoring and Complaints Committee; and
18. delegations made in terms of s69 of the IBA Act and s91 of the Telecommunications Act.

If these issues are not dealt with in this process, we fear that the transition from the present dispensation to a new dispensation in terms of the Convergence Act is likely to be chaotic, and that this in turn will create instability and discourage investment in the sector.

ISSUES WHICH OUGHT TO BE DEALT WITH IN THE LEGISLATION, BUT WHICH ARE NOT

1. The Bill repeals the whole of the IBA Act, the Telecommunications Act, and numerous sections of the Broadcasting Act. There are a number of important issues which are dealt with in these statutes which are not dealt with in the Bill. The intention of the Department may be to deal with these issues in the ICASA Amendment Bill. However, we have not had sight of that Bill, so we do not know whether the issues will be dealt with there, nor whether they will be dealt with adequately. These issues include the following –
1. the general powers and functions of the Authority (s13 of the IBA Act);
2. the appointment of experts by the Authority (s27 of the IBA Act and s26 of the Telecommunications Act);
3. general inquiries by the Authority (s28 of the IBA Act and s27 of the Telecommunications Act), and powers and procedures in relation to inquiries or hearings conducted by the Authority (s28A of the IBA Act);
4. the delegation powers of the Authority (s69 of the IBA Act and s91 of the Telecommunications Act);
5. the power of the Authority to demand the production of licensees' books of account, records, etc. (s72 of the IBA Act and s97 of the Telecommunications Act);
6. the appointment and powers of authorised persons/inspectors (s73 of the IBA Act and s98 and s99 of the Telecommunications Act);
7. the entire question of enforcement – in other words, ensuring compliance with the legislation, regulations, and licence conditions by licensees (Chapter VIII of the IBA Act and Chapter XII of the Telecommunications Act);
8. the Authority's banking account (s17 of the IBA Act);
9. the minutes of the Council of the Authority and its committees (s68 of the IBA Act);
10. confidentiality on the part of the Authority (s77 of the IBA Act and s93 of the Telecommunications Act); and
11. the limitation of liability in relation to the Authority (s76 of the IBA Act).
2. In the hope that these issues will be dealt with in the ICASA Amendment Bill, we will not at this stage put forward detailed drafting proposals. If these issues are not dealt with in that Bill, and once we have had an opportunity to properly consider that Bill, we will make the necessary representations and proposals.