Douglas Cohen Specialist Economic Development & ICT 8 December 2010

1. REPRESENTATIONS BY SALGA IN RESPONSE TO GOVERNMENT GAZETTE NO 33467, VOL. 542, 17 AUGUST 2010. GENERAL NOTICE: 807 ICASA ACT (13/2000) HEARINGS IN RESPECT OF THE DISCUSSION DOCUMENT: UNIVERSAL SERVICE AND ACCESS OBLIGATIONS REVIEW Douglas Cohen Specialist Economic Development & ICT 8 December 2010 National Economic Development & Planning Directorate

2. Contents • Response Context • Position on USAO • Legislative and Regulatory Issues • Implementation Issues • General Comments / Additions

3. Response Context • South Africa’s currently liberalised telecommunication landscape shows that local demand is often not enough to attract broadband carriers to all regions of the country • Much of the South Africa’s economic activity is only concentrated in 6 Metros and 21 Secondary Cities. There are high disparities between urban and rural economies • This also reflected in the levels of US/UA and supporting broadband infrastructure

4. Response Context ICT Household Penetration Source: AMPS, 2009 Household, BMI-T 2010

5. Response Context • Research* in 2008 on municipal connectivity highlighted that: • Of the 283 municipalities about 3 in 51 themselves use Leased Lines. While the trend is moving towards broadband with only approximately a third of municipalities on Broadband (such as ADSL, Wireless Broadband or Virtual Private Networks). • The reason many municipalities remain on dial-up, or basic Digital Network (ISDN) services for their Internet connection is due to the very limited access and availability of affordable broadband. *Source: ForgeAhead 2008 ICT in Government Provincial and Local Government Study

6. Response Context • From a Local Government’s perspective it is imperative that all municipalities are enabled and empowered through the provision of broadband for their own internal-use but also for the opportunities broadband can bring as a socio-economic enabler within their local economies • It is ultimately a factor supporting improved service delivery

7. Response Context • Encouraged by the drive from multiple sectors within National Government on the importance for all spheres of government of to play a role in access to ICT’s, especially broadband, some local governments have proactively invested resources of their own in establishing broadband networks • There are however challenges in: • Defining the role of local government in facilitating the access particularly in rural areas • The limited ICT capacity and awareness within Local Government

8. Contents • Response Context • Position on USAO • Legislative and Regulatory Issues • Implementation Issues • General Comments / Additions

9. Position on USAO • The current US/UA system functions poorly: • The system is bureaucratic and complex • The US/UA system is largely centrally planned and supply-side driven • High demand on ICASA and/or USSASA to design upfront the required deliverables and have an effective monitoring and evaluation system. • The reporting on deliverables is dependent on the “operators” providing accurate information, and that such information is up to date.

10. Position on USAO • It is proposed that a demand-driven approach is more likely to succeed in addressing UA and US. • This does not mean that certain supply-side measures should not be implemented. • The extensive penetration of mobile telephony means that Universal Service has largely been achieved • The distinction between fixed line and mobile telephony is artificial and needs to be dropped when considering US telephony.

11. Position on USAO • Universal access to the Internet, and broadband access in particular, should be the current focus of this discussion document. • Focus on universal access to broadband connectivity. Broadcast services are not considered in our commentary. • However there needs to be consideration of the opportunities for access through digital broadcasting

12. Position on USAO • While there is largely a US/UA focus on rural areas there are large portions of the urban population for whom UA is a real problem • Addressing UA in urban areas also promotes demand for such services in rural areas • Marginalised urban groups are a quick win for UA.

13. Position on USAO

14. Contents • Response Context • Position on USAO • Legislative and Regulatory Issues • Implementation Issues • General Comments / Additions

15. Legislative and Regulatory Issues • Yes, USAO are a necessity • Important factors to license holders to carry USAO include: • Percentage of Market Share (voice and data) • Geographic reach / spread, i.e. the ability to roll out networks speedily and to areas most in need of access • The ability to generate sufficient profits by virtue of its license

16. Legislative and Regulatory Issues • Both ECNS and ECS licensees are responsible for UA, but that these UA obligations may be different for each category of licenses • ECS licensees cannot fulfill UA obligations in areas where no infrastructure exists • All licensees within a category of license need to carry the same UA obligations • UA obligations need to be greatly simplified

17. Legislative and Regulatory Issues • Universal access obligations should primarily focused on individual ECNS license holders and are focused on interventions in rural areas. • Differentiated and less onerous obligations on ECN license holders will: • Lower barriers to entry will promote competition within ECS in respect of services, price and entry of new, capable licensees into non traditional markets

18. Legislative and Regulatory Issues • USAO’s must be imposed on the licensees: • ECNS license holders require a UA obligation focused on providing broadband infrastructure that will enable access to broadband services • ECS license holders require a UA obligation focused on providing broadband services in the designated areas

19. Legislative and Regulatory Issues • Licensees contribution into the USAF • Yes, contributions must continue as the USAF is an important component of universal access. • The amount of universal obligation could possibly be lowered, given that the number of licensees with UA will have increased dramatically if all ECNS and ECS licensees have universal access obligations.

20. Legislative and Regulatory Issues

21. Contents • Response Context • Position on USAO • Legislative and Regulatory Issues • Implementation Issues • General Comments / Additions

22. Implementation Issues • The current USAO system seems to be in disarray, as evidenced by the reporting from the various operators who have USAO’s. • The USAOs themselves need to be simplified and the process for fulfilling these needs to transparent and easy to monitor.

23. Implementation Issues

24. Implementation Issues

25. Implementation Issues • Greater focus on demand side interventions will shift the locus of intervention from the licensees to “users” and intermediaries • The effect is that the power relations are reversed and give market power to the end user community. • The UA strategy should incorporate demand side interventions (Chilean Model) in addition to supply side interventions.

26. Implementation Issues • This would enable the following changes: • More effective use of the USAF by allowing intermediaries, communal facilities and public facilities to use funds from the USAF to buy services from licensees in designated area • All licensees with a UA in a designated area would be able to compete for the end-users business, providing diversity in providers and technology to the end user. • Simplified monitoring and evaluation completed by the end user of the service

27. Implementation Issues • The mechanisms manage demand side interventions are well established, including: • Funding of proposals made by intermediaries e.g. local municipalities or NGOs • Disbursement of funds to accredited intermediaries e.g. NGOs • Payment to the Service provider upon sign-off by the user • Payment vouchers

28. Implementation Issues • As highlighted in by the model successfully implemented in Chile, there is a role and an opportunity to work together with local government in driving an US/UA policy: • It is a demand side driven • Municipalities act serve as the anchor client for a local network (that ultimately benefits the larger community) • Existing Local Government facilities that could be make available / shared

29. Implementation Issues • Eligibility USAO of projects are: • “Projects deemed desirable from the viewpoint of the economy at large but unlikely to be commercially viable on their own*” • Supported by subsidies / incentives that render projects commercially viable • Attract competition from local and national telecommunications private sector services • Ensure that all investment in Broadband infrastructure is viewed as a public good Source: *Universal Service and Access Trends in Central and West Africa: Case Studies and Prospects

30. Contents • Response Context • Position on USAO • Legislative and Regulatory Issues • Implementation Issues • General Comments

31. General Comments • The National Broadband policy presents the view that all spheres of government act in unison to achieve bridging the digital divide. • Given that there are municipalities in South Africa without access to broadband, what is the position of ICASA and the USAO’s policy to include them in the obligations?

32. General Comments • Ensure that the ultimate objective is not lost: • Access is essential to the economic and social development of communities, cities, countries and continents

33. Thank You Questions & Discussion