ISPA Calls on ICASA to Bring Certainty to ECNS Licensees

27 February 2009

South Africa’s newly licensed electronic communications network service (ECNS) and electronic communications service (ECS) providers will need to face up to a wide range of legislative and regulatory challenges before they will be able to bring true competition to the telecom market.

That’s the word from Mike Silber, regulatory advisor at The Internet Service Providers’ Association of South Africa (ISPA). He said that in their present form, many of the regulations governing these licences could result in higher costs for service providers that will inevitably be passed onto consumers and businesses.

In addition, they could prevent many service providers from rolling out their own networks by restricting their access to rare resources such as frequency spectrum.

“We are delighted that ICASA has now converted value-added network services (VANS) licences into ECNS and ECS licences. Now, however, the regulator needs to turn its attention to issues such as licensing fees, allocation of frequency spectrum, and interconnect fees if it is serious about bringing choice, lower prices and competition to the market,” said Silber.

Silber said that ICASA must move ahead quickly with the publication of its licence fee regulations for the new permits. The draft regulations set the fees at 3% of the licensee’s gross revenue, which is 30 times more than service providers paid for their VANS licences.

“We hope that ICASA will rethink this number and set it at a more realistic level. Service providers will otherwise end up passing substantial price hikes onto their customers,” said Silber. “Service providers need certainty around this issue as soon as possible so that they can set their business plans and begin planning their network rollouts.”

The next issue that ICASA needs to urgently review is the way that frequency spectrum is allocated to network operators. Service providers need access to well-managed spectrum if they are to roll out their own high-quality wireless network services, rather than just leasing access on the existing networks owned by the incumbents.

“Lite Licensing” is a novel and progressive frequency allocation model where ECNS licensees would pay a relatively small fee for a nationwide, non-exclusive license. The licencees then pay an additional nominal fee for each base station they deploy. All base stations must be clearly identifiable and in the event that these stations cause interference which cannot be mediated by technical means, licensees are required to resolve the dispute between themselves. This is one model that ICASA could consider, said Silber.

Silber also noted that under ICASA’s present regulations, service providers wanting to receive WiMAX spectrum must match a 51% black economic empowerment requirement. There are few licensees with the technical expertise and financial backing to build countrywide networks who can meet this requirement.

Another obstacle to true competition lies in the high wholesale interconnect fees that the incumbents pass onto service providers that interconnect with their market. These fees often bear no relation to the costs of terminating calls.

“There is a case for closely monitoring and regulating interconnect fees to ensure that the costs are both fair and realistic,” said Silber. “This will enable smaller service providers with little market power to compete more effectively in the market.”

Silber said that another challenge for service providers lies in the final regulations that ICASA has published relating to section 69 of the Electronic Communications Act (ECA). Under these regulations, ISPs must have an End-User and Subscriber Service Charter in place to facilitate the protection of the rights of their customers.

“As laudable as the intentions of these regulations are, the ISPA has some doubts about whether smaller service providers in particular can live up to their demands,” he added. “Many of the demands around turnaround times for fault repairs, fault clearance rates, service activation and 24X7 Electronic Communications Network Monitoring Centres are especially onerous.” ISPA members must comply with the organisation’s Code of Conduct, which provides a great deal of protection to telecom users, so the charters are to a large extent redundant in addition to being unworkable, Silber said.

“ISPA is pleased with the progress that the South African telecoms regulatory and legislative landscape has made in the past few months, and our members are all ready to compete as soon as these last few issues are addressed,” concluded Silber. “We can expect prices to fall, access to telecom services to improve and new services to reach the market as soon as real competition starts to happen.”