US embassy cable - 04PRETORIA5555

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 
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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. 
 
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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