ELECTRONIC COMMUNICATIONS Bill

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• ELECTRONIC COMMUNICATIONS Bill
• Presentation to the
• Select Committee on Labour Public Enterprises
• NCOP

29 November 2005
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Background an improved ECB

• MTN raised concerns with PPCC that the
  competitive mobile market was treated like the
  fixed-line monopoly market simply because both
  were infrastructures.
• We submitted that regulating infrastructure, per
  se, leads to
• Onerous access obligations on the competitive
  mobile investment.
• Disincentive to investment in network coverage
  and density by infrastructure licensees.
• Encouragement of free-riding.
• Less scope for differentiation and so less
  competition!
• We suggested this be addressed by linking
  regulatory intervention to the degree of
  competition in a given market through a
  competitive analysis process and so
  differentiates fixed from mobile.

MTN is pleased that revisions in ECB, especially
Chapter 10, have cleared much of the confusion
between regulating the fixed-line monopoly and
the competitive mobile market.
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Current complexity of intervention process in
Chapter 10
THE PROCESS CAN BE SIMPLIFIED TO PROVIDE
INVESTMENT CERTAINTY AND ENSURING THAT
INTERVENTION IS DRIVEN BY ROBUST ANALYSIS
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A few critical issues can easily be addressed

• MTN believe that the ECB can be made a very
  effective piece of legislation by addressing 5
  specific issues
• Providing ICASA with guidance on how to select
  and define markets. eligible for intervention so
  the scope of ex-ante regulation is clear to all
  and sundry.
• Providing unequivocal definition of the SMP
  threshold so intervention can be applied quickly
  to the right players.
• Linking a number of obligations to competitive
  analysis (Chapter 10) so regulation is always
  driven by the finding of market failure.
• Ensuring proportionality of remedies so we avoid
  under or over-regulating the sector.
• Proper definition of interconnection to minimise
  scope for disputes.

A SMALL NUMBER OF EDITORIAL AMENDMENTS CAN BE
USED TO ADDRESS THESE ISSUES AND ENSURING THAT
THE ECB DELIVERS ITS OBJECTIVES.
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• ISSUE 1 Proper definition of interconnection to
  minimise scope for disputes

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Interconnection
CHAPTER 1 DEFINITIONS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad Interconnection Interconnection means the physical or logical linking of two or more communications networks, communications services, broadcasting services, services provided pursuant to a licence exemption or any combination thereof. "interconnection" means the physical or logical linking of two or more electronic communications network services. MTN believes interconnection is a matter of networks, not services (for the latter, interoperability is a more appropriate concept). While MTN supports the policy objective of any-to-any communications, MTN does not believe it appropriate or proportionate for, say, SMS services to be able to inter-operate with every other voice, data or video services offered in the country. Service innovation may be seriously hampered if any new service launched by an SMP operator needs to have all the interfaces with all other existing communications services built-in.
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Interconnection
CHAPTER 7 INTERCONNECTION CHAPTER 7 INTERCONNECTION CHAPTER 7 INTERCONNECTION
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad s37(1) Obligation to interconnect Subject to section 38, any person licensed in terms of Chapter 3 must, on request, interconnect with any other person licensed in terms of this Act and persons providing services pursuant to a license exemption in accordance with the terms and conditions of an interconnection agreement entered between the parties, unless such request is unreasonable. Subject to Section 38, any network service licensee must, on request, interconnect with any other network service licensee in accordance with the terms and conditions of an interconnection agreement entered between the parties, unless such request is unreasonable. This change flows through from the new recommended definition.
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• ISSUE 2 Providing ICASA with guidance on how to
  select and define markets eligible for regulation
  so the scope of ex-ante regulation is clear to
  all

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Market definition
CHAPTER 10 COMPETITION MATTERS CHAPTER 10 COMPETITION MATTERS CHAPTER 10 COMPETITION MATTERS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad s67(4(a) Competition Matters The Authority must prescribe regulations defining the relevant market and market segments as applicable, that pro-competitive conditions may be imposed upon licensees having significant market power where the Authority determines such markets or market segments have ineffective competition. The regulations must, among other things (a) define and identify the retail and/or wholesale markets or market segments in which it intends to impose pro-competitive measures where such markets are found to have ineffective competition. 4) The Authority must prescribe regulations defining the relevant market and market segments as applicable, where pro-competitive conditions may be imposed upon licensees having significant market power if the Authority determines such markets or market segments have ineffective competition. The regulations must, among other things (a) using established market definition methodologies in competition law and subject to subsection 6 (a), define and identify the retail and/or wholesale markets or market segments in which it intends to impose pro-competitive measures where such markets are found to have ineffective competition. MTN believes it is critical to apply economic methods to the definition of relevant markets such that the analysis effective competition and SMP is carried out in economically meaningful markets and not, for example, regulatory taxonomy. MTNs concern is that unless market definition is guided by established principles of demand/supply substitutability, regulations under this Act may be driven by inappropriately wide or narrow market definition and therefore, erroneous or ineffective.
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Market definition
CHAPTER 10 COMPETITION MATTERS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad s67(6)(a) Competition Matters The methodology contemplated in subsection 4 (b) must include but is not limited to an assessment of the following. (a) when defining the relevant market or market segment, the Authority must consider the non-transitory (structural, legal, or regulatory) entry barriers to the applicable markets or market segments and the dynamic character and functioning of the subject market or market segment. 6) The methodology contemplated in subsection 4 (b) must include but is not limited to an assessment of the following. (a) when electing the relevant market or market segment, the Authority must consider the non-transitory (structural, legal, or regulatory) entry barriers to the applicable markets or market segments the presence of vertical relationships that could harm competition in the market the presence of essential facilities and the dynamic character and functioning of the subject market or market segment. MTN believes the criteria described in (6) a) have to do with the eligibility of certain markets for pro-competitive conditions (ex-ante regulation) rather than the definition of such markets. MTN fully supports the application of criteria for eligibility of markets for ex-ante regulation so the scope and role or ex-ante V ex-post intervention is clear to all licensees and regulatory Authorities. However, it believes vertical relationships or essential facilities are relevant criteria to select markets eligible for regulation, NOT define SMP (see next issue).
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• ISSUE 3 Providing unequivocal definition of the
  SMP threshold so intervention can be applied
  quickly to the right players

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SMP definition
CHAPTER 10 COMPETITION MATTERS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad s67(5)(c) Competition Matters A licensee has SMP with regard to the relevant market or market segment where the Authority finds that the particular individual licensee or class licensee is dominant has control of essential facilities or has a vertical relationship in the market or market segments that the Authority determines could harm competition in the market or market segment applicable to the particular category of licence. A licensee has SMP with regard to the relevant market or market segment where the Authority finds that the particular individual licensee or class licensee is dominant or has control of essential facilities or Has a vertical relationship in the market or market segments that the Authority determines could harm competition in the market or market segment applicable to the particular category of licence. MTN believes the (undefined) notion of harmful vertical relationship is likely to be problematic and challengeable when declaring operators with SMP and so cause ambiguity and delays when deploying intervention. Similar issues are likely to arise with essential facilities. MTN therefore proposes to reduce the definition of SMP to equate dominance and therefore better align the Sector Regulatory Framework with generic Competition Law. It suggests using the concept of vertical integration and essential facilities to chose markets eligible for regulation (see previous issue relating to S.67 (6) a))
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• ISSUE 4 Linking a number of obligations to
  competitive analysis ( Chapter 10) so regulation
  is always driven by a market failure

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Linking intervention to market analysis (I)
CHAPTER 3 LICENSING FRAMEWORK CHAPTER 3 LICENSING FRAMEWORK CHAPTER 3 LICENSING FRAMEWORK
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad s8(2)(e) on Terms and Conditions for Licenses S(8)(2)(e).the public interest in ensuring service inter-operability, non-discrimination and open access, interconnection and facilities leasing. Subject to Chapter 10, the public interest in ensuring service inter-operability, non-discrimination and open access, interconnection and facilities leasing. MTN believes obligations to provide interoperability, non-discrimination and access, interconnection and facilities leasing ought to be considered special conditions to remedy competitive failures and should therefore be subjected to the competition analysis described in Chapter 10.
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Linking intervention to market analysis (II)
CHAPTER 7 INTERCONNECTION CHAPTER 7 INTERCONNECTION CHAPTER 7 INTERCONNECTION
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad s42(1) Carrier pre-selection (1) The Authority must make regulations a) defining the communications services subject to carrier pre-selection and (1) Subject to Chapter 10, the Authority must make regulations a) defining the communications services subject to carrier pre-selection and MTN believes carrier pre-selection is a remedy that may be deployed to correct a serious market failure in the origination of voice calls, as may be the case in the current fixed monopoly. A market analysis establishing lack of effective competition in the origination of voice calls, identifying firms with SMP in this markets and stipulating that CPS is a proportionate remedy to the market failure thus identified is required for the Authority to be able to stipulate the communications services that should be subject to CPS.
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Linking intervention to market analysis (III)
CHAPTER 8 ELECTRONIC COMMUNICATION FACILITIES LEASING CHAPTER 8 ELECTRONIC COMMUNICATION FACILITIES LEASING CHAPTER 8 ELECTRONIC COMMUNICATION FACILITIES LEASING
Relevant Bill Section Proposed Amendments (in red) MTN Rationale
Ad ss43(8) and 43(8)(a) Obligations to lease communications facilities (8) The Authority must prescribe the list of an essential facilities including but not limited to electronic communications facilities, including, without limitation local loops, sub-loops and associated communications facilities for accessing subscribers and provisioning services and electronic communications facilities connected to international communications facilities such as submarine cables and satellite earth stations. (8) Subject to Chapter 10, the Authority must prescribe the list of essential facilities including but not limited to a) electronic communications facilities, including, without limitation fixed local loops, sub-loops and associated communications facilities for accessing subscribers and provisioning services and b) electronic communications facilities connected to international communications facilities such as submarine cables and satellite earth stations. MTN believes communications facilities leasing is a remedy that may be deployed to correct a serious market failure in the fixed access or leased lines markets, as may be the case in the current fixed monopoly. A market analysis establishing lack of effective competition in the provision of fixed access or leased lines, identifying firms with SMP in these markets and stipulating that facilities leasing is a proportionate remedy to the market failure thus identified is required for the Authority to be able to stipulate the communications services that should be subject to facilities leasing obligations.
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• ISSUE 5 Ensuring proportionality of remedies so
  we avoid under or over-regulating the sector

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Proportionality
CHAPTER 10 COMPETITION MATTERS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
New paragraph 6 in s67 Competition Matters (6) Where the Authority imposes pro-competitive conditions under this section, such pro-competitive conditions must be proportional to address the level of ineffective competition which the Authority has determined exists in the relevant markets or market segments. MTN believes it is essential that regulatory proportionality be introduced in the ECB so the Sector does not risk under- or over-regulation. It believes proper regulation must be proportionate to the seriousness of the market failure being addressed through intervention.
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• CONCLUDING REMARKS

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South Africa is close to embracing a world class
regulatory framework

• The ECB is a few amendments away from being a
  highly effective and robust piece of legislation.
• MTNs proposed amendments are driven by a desire
  to ensure regulation is deployed quickly and
  fairly when market failure is established not
  by self-interest.
• This is because MTN believes in competition,
  rather than regulation to deliver government
  objectives, but also acknowledge the role of
  regulation when markets alone fail to deliver.

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• ADDITIONAL IMPROVEMENTS

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PROPOSED AMENDMENT
CHAPTER 1 DEFINITIONS CHAPTER 1 DEFINITIONS CHAPTER 1 DEFINITIONS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad New Addition "indirect access" means the ability of a subscriber of a voice communications service to access the communications services of another voice communications service licensee MTN believes carrier pre-selection is very specific wholesale switched voice service whereby a user is automatically routed to the network of a different provider of voice services (eg. for long distance calls) without having to dial a prefix. MTN believes CPS is therefore a subset of methodologies available to enable a firm to offer voice services to customers linked to another firms infrastructure, known as indirect access. Indirect access methodologies include Call by call carrier selection Carrier pre-selection.
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PROPOSED AMENDMENTS
CHAPTER 1 DEFINITIONS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad Carrier Pre-Selection Carrier pre-selection means the ability of a subscriber of a communications service to access the communications services of another communications service licensee "carrier pre-selection" is a special form of indirect access whereby the subscriber of a voice communication service is automatically routed to the network of a different voice provider without having to dial a prefix. See rationale under indirect access.
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PROPOSED AMENDMENTS
CHAPTER 1 DEFINITIONS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad Electronic Communications Network Service Electronic Communications Network Service a service whereby a person ,makes available a communications network whether by sale, lease or otherwise a) for that persons own use for the provision of an electronic communications service or broadcasting service. Electronic Communications Network Service a service whereby a person ,makes available an electronic communications network whether by sale, lease or otherwise a) for that persons own use for the provision of an electronic communications service or broadcasting service. MTN believes the current definition is repetitive.
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PROPOSED AMENDMENTS
CHAPTER 1 DEFINITIONS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
b) to another person for that persons use in the provision of a communications service or broadcasting service c) for resale to an electronic communications service licensee, broadcasting service licensee or any other service contemplated in this Act. b) to another person for that persons use in the provision of an electronic communications service or broadcasting service or any other service contemplated in this Act. c) for resale to a communications service licensee, broadcasting service licensee or any other service contemplated in this Act.
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PROPOSED AMENDMENTS
CHAPTER 1 DEFINITIONS
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad Electronic Communications Service Electronic Communications Service means any service provided for remuneration to the public, sections of the public, the State, or the subscriber to such service, which consists wholly or mainly of the conveyance by any means of communications over communications networks but excludes broadcasting services. Electronic Communications Service means any service provided for remuneration to the public, sections of the public, the State, or the subscriber to such service, which consists wholly or mainly of the processing or conveyance by any means of communications over communications networks but excludes broadcasting services. MTN believes the current defining is too narrowly focused on transport (whereas access provision, switching, protocol conversion, data processing are also communications services in their own right).
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PROPOSED AMENDMENTS
CHAPTER 12 CONSUMER ISSUES CHAPTER 12 CONSUMER ISSUES CHAPTER 12 CONSUMER ISSUES
Relevant Bill Section Proposed Amendment (in red) MTN Rationale
Ad s69 Code of Conduct and Subscriber Service Charter New addition New subsection (7) the regulations mentioned in subsection (1) and (3) must ensure the required code of conduct and subscriber service charter do not place undue burden on the licensees (or persons exempt from holding a license as provided for in section 6) and are the minimum necessary to address the object of this Act. MTN fully support the recourse to codes of practice and subscriber charters to ensure quality of service and treatment to South African communications subscribers. Ideally, these should emerge from self-regulation rather than intervention. However, MTN believes that if such regulations are introduced, they should be reasonable and proportionate to the objectives of the Act.