1 / 26

PUBLIC HEARINGS ON THE BROADBAND INFRACO BILL, 2007 Portfolio Committee on Public Enterprises, Cape Town 22 August 200

PUBLIC HEARINGS ON THE BROADBAND INFRACO BILL, 2007 Portfolio Committee on Public Enterprises, Cape Town 22 August 2007. Table of Contents. Public Comments Review: Basis for InfraCo Intervention Infraco Licensing Neotel Relationship Sentech v Infraco Conclusion. Public Comments.

king
Télécharger la présentation

PUBLIC HEARINGS ON THE BROADBAND INFRACO BILL, 2007 Portfolio Committee on Public Enterprises, Cape Town 22 August 200

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. PUBLIC HEARINGS ON THE BROADBAND INFRACO BILL, 2007 Portfolio Committee on Public Enterprises, Cape Town 22 August 2007

  2. Table of Contents • Public Comments • Review: Basis for InfraCo Intervention • Infraco Licensing • Neotel Relationship • Sentech v Infraco • Conclusion

  3. Public Comments Comments were received from: • City of Cape Town; • Major Operators (Vodacom, Cell C, MTN, Telkom, Sentech and Neotel); • Public Entities (Universal Service and Access Agency of South Africa (“USAASA”), Eskom Holdings); • Value Added Network Services Providers (Internet Solutions, iburst); and • Regulatory Agencies (ICASA and Competition Commission). • The comments largely express support for the concept of Infraco

  4. Public Comments Parliament requested the Department to respond to the following comments from the public:

  5. Public Comments Continued…

  6. Public Comments • Specific Comments on the content of the Bill

  7. Review:Basis for InfraCo Intervention

  8. DPE Study • South Africa significantly lags behind its international counterparts in terms of ICT penetration and the rate of new technology adoption. • Broadband penetration relative to international benchmarks is virtually non-existent and significantly more expensive, which is critical for an advanced manufacturing economy (eg projects of national importance). • Broadband costs in South Africa are prohibitively high, making it a luxury, and not a public good (basic infrastructure). • Investigations into the high broadband costs revealed that the largest connectivity costs are attributable to national backbone connectivity and international connectivity. • The logical conclusion was to intervene to address these national backbone and international connectivity cost structures.

  9. National Long Distance = Telkom Monopoly, unlikely to change for a number of years to come even with the ECA 1 Metro & Access Networks = Increased Competition likely here under the ECA because lots of players will make local investments. NO NEED FOR GOVERNMENT TO INTERVENE, so NO INFRACO here 2 2 International Marine Cable Connectivity = SAT-3 monopoly, nothing likely to change here soon. 3 Current Status Government needs to intervene here and here what InfraCo proposes to do 3 And NOT here, what Sentech has been trying to do for a number of years 1 3

  10. Monopolistic Duopolistic* Oligopolistic Price, Cost 0 Output Level (Q) Licensing the SNO won’t help History in numerous other countries have proven The Kinked Demand Curve Model of Oligopoly With Telkom as the ONLY other infrastructure competitor there is NO incentive for a second commercial operator to set prices significantly below Telkom’s Source: Douglas [Harvard], Accenture

  11. Infraco Long Distance Pricing InfraCo intends to deliver a 95% discount off current NLD rates within 5 years InfraCo intends to price access to infrastructure by maintaining a utility level IRR of 16%. The MORE bandwidth the industry uses, the CHEAPER it will get.

  12. Licensing

  13. Support for expedited licensing process • Competition Commission: • acknowledged the Infraco rationale • acknowledged the Telkom monopoly • presented evidence of market power abuse as a result of the monopoly • confirmed that it would not accept a merger filing application • tabled no obstacles for the creation and empowering of Infraco to operate its infrastructure • Internet Solutions • “License Infraco and embrace early opportunity to create competition in the market”, Public Hearings, 2 August 2007 • USAASA • Deemed licence • Urgent intervention required to ensure universal rollout of national fibre backbone • Neotel • Deemed licence may be justified under the Constitution, • Deemed licence will enable ICASA to retain higher degree of regulatory control overInfraco through the licence conditions • DOC • ICASA has delegated authority and no power to intervene, only Legislature has authority and discretion to intervene • Precedent of deemed licences (Sentech, Eskom, Transnet, grandfathered/converted licences) • ECA amendment, but not specific to Infraco Therefore, parties acknowledged that Infraco increases competition in the sector and introduces investment efficiency

  14. Everyone wants InfraCo Licensed • Telkom, Sentech & Mobile Operators want InfraCo licensed through the normal ICASA licensing process – the challenge is that this could be a long process. • Short Answer: • All these entities are both in infrastructure and services and InfraCo forces a change in their business model and reduces the competitive value of their investments; • Guaranteed to tie InfraCo up in a licensing process for an indeterminate period; • With InfraCo tied up, the status quo is maintained and thus the competitiveness of this sector is not enhanced. • Entrenches the status quo and the exclusive commercial relationship with Neotel.

  15. Everyone wants Infraco Licensed • ICASA also wants Infraco licensed through the standard ICASA licensing process. • Short Answer: • ICASA has delegated authority and can only function within the express and prescribed authority, otherwise subject to review; • As administrator, ICASA favours staying within ECA framework; • However, ICASA cannot legislate and determine whether or not legislation should be amended. Only the Legislature (Parliament) can do that; • Proposal by DOC is to amend the ECA to allow the granting of deemed licenses for majority state entities when the intervention is strategic • This would then enable ICASA to grant the deemed license under this condition

  16. Everyone wants Infraco Licensed • A deemed authority to own and operate its infrastructure is the only logical way to ensure an expedited licensing of Infraco: • Infraco is a strategic Government intervention; • A deemed authority allows Infraco to contribute immediately to furthering national priorities while allowing ICASA to exercise its delegated authority; • Statutory precedents of deemed licences (eg Sentech, Eskom and Transnet) • From that point onwards ICASA can issue the licence terms and conditions; • The Legislature has the constitutional power to legislate on any matter that does not violate the Bill of Rights; • By creating the ECA regulatory framework, the Legislature has not delegated its legislative power to ICASA. • However, it has delegated the administration of the ECA regulatory processes to ICASA.

  17. Sentech

  18. Sentech • History of Sentech – spun out of SABC and broadcasting signal distributor; • Sentech “arguably the most comprehensively licensed telecommunications entity in South Africa” – ICASA, Infraco Public Hearings, 2 August 2007 • DPE process was rigorous in that it investigated the causes of high broadband pricing in SA - Strong evidence for this cause points to Long Distance and International Connectivity as the major issues, NOT Tier 2! • In broadband Sentech focusses on wireless access networks, the Tier 2 application services • Areas currently covered for MyWireless Broadband Service are in Metropolitan areas

  19. GAUTENGJohannesburg:Current:Bedfordview, Brixton, Carlton City Centre, Cresta, Fourways, Halfway Gardens (Allandale Road), Helderkruin, Honeydew, Hurleyvale, Hyde Park, Horizon View, Johannesburg Airport Killarney, Linksfield, Marlboro, Northcliff, Randburg, Rosebank, Sandton, Strydompark ,Woodmead, Midrand, Aasvoelkop, Morningside, Wendywood, Honey Hills, Kempton Park Pretoria:Current:Centurion Techno Park, Elardus Park, Hennopspark, Kilnerpark, La Montagne, Lukasrand, Menlopark , Pretoria Central, Rooihuiskraal, Clubview, Sunnyside, Brooklyn, Waterkloof Ridge MPUMALANGANelspruit KWAZULU NATALDurban:Current:Durban North, La Lucia, Umgeni, Umgeni Mouth, The Bluff, Sunningdale, Umhlanga, Bay of Plenty, Inverness, Rockford, Umhlanga rocks, Umhlanga Ridge, Durban Central WESTERN CAPECape Town:Current :Blouberg, Cape Town Central, Durbanville, Goodwood, Loevenstein, Milnerton, Newlands, Panorama, Parow North, Salt River, Tygerberg, Wynberg. Sentech

  20. Sentech • The Sentech programme in its shareholder department’s budget expressly states that the programme transfers funds to Sentech to support provision of broadcasting signal distribution • Additional allocations to Sentech in 2007/08, 2008/09 and 2009/10 are to accelerate the rehabilitation and digitisation of broadcasting signal distribution infrastructure.  • Over the medium term, Sentech will focus on the digitisation of its signal infrastructure and the roll-out of the ICT infrastructure required for 2010 FIFA World Cup • Sentech’s 2006 Annual Report shows that approx. 75% of Sentech’s expenditure is on its broadcasting network [R497m (75%), while only R172m (25%) is in multimedia and telecomm] – indicates business focus of Sentech

  21. Sentech • UK took approx. 10 years to digitise analogue broadcasting infrastructure, South Africa is trying to do that in 3 years. No single enterprise can run such huge multiple interventions (digitisation and broadband penetration). • Clear that Sentech’s focus will be on digitisation in the medium term because it is a huge undertaking on its own. • Merging Sentech and Infraco is not an option • Given budget allocation and priorities, Sentech is fundamentally a broadcasting signal distribution company.

  22. Neotel Exclusivity

  23. Neotel Exclusivity • Commercial agreement between DPE and Neotel, which will be regulated and be compliant to existing South Africa laws requiring access on reasonable requests; • To ensure that low costs are passed down to subscribers, the agreement will require Neotel to provide transparent pricing of Infraco’s infrastructure access charges to Neotel; • If InfraCo was licensed, exclusivity would be subject to the provisions of the ECA and the Competition Act; • Practically, however, a default exclusivity of at least 1-2 years would exist anyway by virtue of; • The licensing process with ICASA will take some time – in the meantime InfraCo is a subcontractor under the Neotel license; • InfraCo currently only has an optical transmission layer – Neotel’s IP layer is used to deliver service to customers • InfraCo would take at least 1-2 years to build its own IP layer in order to be able to provide service to other customers

  24. Conclusion • Infraco is a strategic Government intervention required immediately to introduce competition in the ICT services market by providing catalytic Broadband capacity at affortable prices • Infraco will provide only backbone national long distance fibre and the undersea cable • All parties submitting comments to the Bill agree that Infraco should be licensed • To expedite the intervention and align South Africa with other advanced manufacturing economies, Infraco should be licensed immediately through a deemed licence clause in the Bill, which is a lawful and constitutional exercise of Parliament’s legislative authority and discretion;

  25. Conclusion • Sentech is a broadcasting signal distributor and its business focus in the medium term is on upgrading its aging broadcasting infrastructure and digitalisation • As a commercial enterprise operating in a dynamic fast-paced industry, Infraco should be classified as a Schedule 2 major public entity • The relationship between Infraco and Neotel is subject to South African laws (ECA and Competition Act). Failure to grant Infraco a licence will entrench the status quo • Preferred options: • Deemed licence in current Bill; • ECA amendment

  26. END Questions?

More Related