US embassy cable - 05PRETORIA389

UNCLAS SECTION 01 OF 02 PRETORIA 000389 
 
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 
 
E.O. 12958: N/A 
TAGS: ECPS, ETRD, ECON, EINT, SF 
SUBJECT:  REGULATOR HOLDS HEARINGS FOR PROPOSED VANS 
REGULATIONS 
 
REFTEL:   04 PRETORIA 5555 
 
1. SUMMARY.  Telecommunications industry stakeholders 
attended hearings at the Independent Communications 
Authority of South Africa (ICASA) to comment on proposed 
VANS regulations.  Industry remarks addressed recurring 
themes such as: what is a value-added network service 
(VANS); should the VANS application fee be raised from 
R5,000 to R30,000; can VANS self-provide their own 
facilities; how would liberalization of the VANS industry 
affect spectrum availability, numbering schemes and 
interconnection agreements; and should ICASA stipulate a 30 
percent black economic empowerment shareholding requirement. 
END SUMMARY. 
 
2.  Telecommunications industry stakeholders attended 
hearings January 19-21 at the Independent Communications 
Authority of South Africa (ICASA) to comment on proposed 
VANS regulations. 
 
3.  Industry associations representing small business argued 
that the proposed six-fold increase of the application fee 
for a VANS license from R5,000 to R30,000 is exorbitant and 
the regulator should clarify who will be required to obtain 
a VANS license.  They argued that theoretically a school 
offering email services to its students might be required to 
apply for a license.  More likely, small businesses such as 
community internet service providers or internet hosting 
services would be most egregiously affected by the costlier 
fee.  Telkom also questioned the need for higher application 
fees, recalling that ICASA's rationale for the fees is to 
cover administrative costs incurred with the adjudication of 
the application.  ICASA agreed to review the proposed 
application fee. 
 
4.  Large incumbent operators such as Telkom, Vodacom, and 
Cell C, told the regulator that existing legislation 
prevents VANS from being able to provide their own 
facilities.  Telkom's Executive of Regulatory and Public 
Policy Gabrielle Celli said, "The standing telecoms policy 
of managed liberalization cannot be reconciled with the 
enhancing of VANS licenses to the extent they resemble fixed- 
line telephone network licenses."  Similarly, Vodacom Head 
of Market Regulations Margo Stoeder said, "It's not about 
what is technically possible, but what is authorized by the 
current act."  ICASA Councilor Paris Mashile responded that 
ICASA must act in the public interest by encouraging 
competition, innovation, and affordability.  He continued 
that if technology breakthroughs were not allowed in the 
marketplace then President Mbeki's mandate to reduce the 
cost of doing business in South Africa would never be 
realized.  ICASA Senior Manager for Licensing Enforcement 
and Numbering Administration Andries Matthysen reiterated 
that ICASA is leaning towards a liberal interpretation of 
the Ministerial Determinations which would free VANS from 
any obligation to acquire their facilities from Telkom and 
allow them to self-provide. 
 
5.  Transtel Manager for Government and Regulatory Affairs 
Phatang Nkhereanye said that the Ministerial Determinations 
allowed VANS to self-provide.  He said this would create two 
types of VANS:  infrastructure-based VANS and services-based 
VANS.  Nkhereanye argued that ICASA should have two types of 
licenses corresponding to these VANS categories.  He 
cautioned that the expected surge in VANS applications would 
consume all available spectrum and called on ICASA to 
conduct a spectrum audit and enforce a use-it-or-lose-it 
policy on unused spectrum.  He argued that in this context, 
incumbent operators should receive "preferred treatment." 
Nkhereanye said this was reasonable given that the SNO must 
pay R300 million for its license and spectrum whereas a VAN 
may acquire its license and the same amount of spectrum for 
just R30,000 (under the proposed regulations). Matthysen 
told Econoff that ICASA has received nearly 200 applications 
for VANS licenses since September 2004 and that most of them 
were from spectrum-consuming infrastructure VANS.  He said 
that the current available spectrum would support only a 
small number of those applicants. 
 
6.  Several stakeholders called on ICASA to hold off on 
implementing the Minister's Determinations until the 
Convergence Bill is released in mid-February.  They said 
that the Bill will clarify licensing structures which could 
render ICASA's proposed VANS regulations obsolete.  They 
said that this would also allow ICASA time to thoroughly 
conduct a spectrum audit and evaluate current numbering 
schemes and interconnection agreements.  Internet Solutions 
Senior Regulatory Manager Siyabonga Madyibi warned that in 
the absence of proper interconnection guidelines either the 
status quo will be maintained or VANS providers will develop 
an alternative national network outside of the existing 
operators' networks.  ICASA councilors appeared reluctant to 
delay the February 1 implementation of the Minister's 
Determinations, saying that it would be akin to the 
Telecommunications Act declaring an end to Telkom's monopoly 
effective May 7, 2002. 
 
7.  There was almost universal objection to ICASA's attempt 
to require a 30 percent black shareholding for VANS 
applicants.  Madyibi said it would be discriminatory for 
ICASA to single out VANS providers for specific empowerment 
targets that are not required of other license-holders.  Ant 
Brooks, Chairman of the Internet Service Providers 
Association's (ISPA) regulatory committee, said that the 
requirement is not in line with empowerment charter targets 
agreed to by the information communication and technology 
(ICT) industry stakeholders, which include VANS.  According 
to the draft ICT Charter, industry members have until 2010 
to become 30 percent black-owned whereas ICASA's proposed 
regulations require VANS to become 30 percent black-owned by 
September 2005. 
 
MILOVANOVIC