Neotel

1
Neotels Presentation to the Portfolio
Committee on Communications on the Draft
Electronic Communications Amendment Bill GG NO
3030701st November 2007
2
Structure of Presentation

• Introduction
• Policy Framework of ECA
• Infraco Bill
• Ministerial Directive
• ICASAs Licensing Powers
• Lack of Certainty
• Creation of parallel Licensing Regime
• Under-Sea Cables
• Conclusion
• QA Session

3
Introduction

• Notice issued on the 17th September 2007
• Objective of the proposed amendment
• Impact on Neotel
• - erodes business case
• - delay in roll-out
• - Impact on competition
• Purpose of Legislative Enactments- repeal of
  Telecommunications Act, Promulgation of ECA

4
Policy Framework of ECA

• Publication of White Paper
• Adopt a Process of Managed Liberalisation
• Telecoms Act - was the basis for reform
• - provided for Licensing of SNO
• ECA progressive liberalisation of the
  Communications sector
• Objective of the proposed amendment- reduce costs
  of telecommunications
• Universal Service and Access
• Improving Government Service Delivery

5
The Infraco Bill

• To facilitate the Licensing of Infraco
• Further state owned Telecommunications service
  provider- is this consistent within the context
  of Governments policy towards a liberalised
  competitive sector
• Concept of Public Entities- is it intended to
  facilitate the licensing of Municipalities
• Provisions of section 5(d) of ECA- state entity.
  ownership interest of greater than 25 of share
  capital
• Licensing is adequately dealt with by ECA

6
Policy Digression

• Creation of SNO Licensing Structure

SNO (NEOTEL)
SEPCo 51
SOECo 30 Eskom Transnet
BEE 19 Nexus Connection
7
Policy Digression

• SOEs contribution to shareholding
• Effect of the contribution
• Enabling Neotel to obtain time - to - market
• Introducing effective competition-ability to
  compete effectively
• New products and services
• Neotel not prepared to counter policy change
• Delay in roll-out- no long distance network

8
Ministerial Directive

• Current state participation in Licenced
  operators-Telkom, Vodacom, Neotel - has this had
  a positive impact on the licensees ability to
  perform in the market place
• Sec 3(2) of ECA permits Minister to issue
  policy directives consistent with ECA - relate
  only to enquiries, determination of priorities
  and consideration of matters within ICASAs
  jurisdiction, placed before the Minister
• Does not cover the ambit of granting, amending,
  transfer, renewal, suspension or revocation of
  Licence
• The amendment seeks to confer on the Minister
  this power to make such policy directions.

9
ICASAs Licensing Powers

• The licence sought is an individual licence
• Infraco requires such a licence to Operate and to
  sell ECN services on a RETAIL OR WHOLESALE basis
• Needs to await the issue of an ITA by ICASA
• ITA needs to concisely stipulate the qualifying
  criteria
• Infraco need to comply with each of the criteria
  before it can obtain a licence
• What if it does not satisfy this criteria - Can
  ICASA refuse to issue a licence?

10
Lack of Certainty

• Power to be conferred on the Minister is vague
• Could intervene or make any policy directions to
  ensure strategic ICT infrastructure development
• A delegated discretionary power- should not be so
  broad to the extent that it does not define the
  nature and scope of the power conferred
• This could lead to arbitrary exercise of the
  delegated power
• As drafted currently the power to the Minister is
  so broad that there is no limit to the steps
  which ICASA could be directed to take

11
Creating a Parallel licensing Regime

• Amendment creates a separate licensing regime for
  public entities to the disadvantage of private
  operators
• No basis in the ECA for licensing procedures to
  be different
• Objective of the ECA is to eliminate differences
  and preferential treatment
• Sentech, Telkom and SABC are also Public
  Entities- they can be licensed on a separate
  basis in terms of this policy directive
• What is the scope of the definition of a public
  Entity

12
Under-Sea Cables vs Infraco

• Infraco to be part of the Nepad broadband
  initiative to link Africa with Latin America
  Europe
• Ministerial intervention on private cable
  development initiatives
• Impact of such intervention - Foreign direct
  investment/investor confidence

13
Recommendations

• Infraco may not have a preferential licensing
  regime-has to follow process set out in sec 5 of
  ECA
• Will have to apply for an individual licence
  pursuant to an ITA
• ITA to stipulate criteria to be complied with
• Criteria to include technical, financial and
  empowerment criteria to be evaluated
• Publish draft terms and conditions that will be
  applicable to the licensee
• ICASA is required to give notice of the
  application (sec 9)
• Allow for public representations-in the interest
  of transparency and non-discrimination

14
Conclusions

• Further state-owned operator unlikely to achieve
  the desired objectives
• Establishment of Infraco militates against
  competition-undermines Neotels efforts t
  establish itself as a viable competitor
• The amendment is far to vague, broad and
  uncertain- impacts on investor confidence
• Blurs the distinct roles of executive and
  legislative branches of government
• Creation of a separate licensing regime for
  Public Entities

15

• THANK YOU

16
QUESTIONS AND ANSWERS SESSION