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National Integrated ICT Policy White Paper – Africa Analysis View

(Government Gazette 40325, published 03 October 2016)

- January 2017 -

Dobek Pater & Richard Hurst

Africa Analysis

pg 2 National Integrated ICT Policy White Paper (NIIP) – Government Gazette 40325, October 2016, © Africa Analysis

Table of Contents

1. Summary

2. Journey to a new ICT World

3. Statutory Bodies

4. Role of Governmentpen Access

5. New Economic Regulator

6. Wireless Open Access Network

7. Spectrum policy

8. Rapid Deployment Policy

Disclaimer:

• This document is based on information extracted from

Government Gazette 40325: National Integrated ICT Policy

White Paper (NIIP).

• The purpose of this document is only to provide a summary of

the NIIP.

• This document does not present a legal review of the white

paper.

• The source for all information presented in this document is

the Government Gazette 40325 published on the 03 October

2016.

• This document serves to provide an analyst commentary on

the various topics presented in the White Paper. The document

provides the reader with a non-legal interpretation based on

our reading of the White Paper.


In summary: (1) Significantly expanded government oversight and involvement, (2) fundamental wholesale market impact, (3) development of wholesale operator and (4) key spectrum licence implications and impact.

Flag Area Key Observations

Yello

w

Statutory Bodies • All statutory bodies will either be replaced or dissolved. ICASA, USAASA, and ZADNA will be absorbed into a new regulator, defined as the Economic

Regulator. All policy related functions will be transferred to the DTPS. A new Content Regulator is to be defined through a new broadcasting policy.

• New statutory bodies will be created that will absorb the function of the dissolved bodies.

Red

Role of Government • Government’s scope of oversight and its role are significantly expanded through the establishment of committees and the transfer of functions from

statutory bodies to the DTPS.

• All policy-related functions are centralised within the DTPS.

• There will be a range of new committees established. The scope of oversight across the ICT sector will dramatically increase.

Yello

w DTPS vs DoC • Each department will have a new policy. A new broadcasting policy is to be issued, but the timetable is unknown.

• Each department will have its own regulator reporting to it: a new Economic Regulator (DTPS) and a new Content Regulator (DoC)

Yello

w

Open Access Principle • The open access principle will be applied to telecoms infrastructure. This will lead to a fundamental restructuring of the telecoms wholesale market,

and the introduction of new products and services to give effect to the open access principle.

• There are wide ranging impacts on the large fixed and mobile network operators (MTN, Telkom and Vodacom).

Red

Wireless Open Access

Network

• A single Wireless Open Access Network is envisaged to be created that will offer broadband access using the high demand spectrum. It is proposed

that all high demand spectrum will be transferred to this operator.

• This development can lead to the ultimate contraction in the number of ECNS licence holders participating in the wireless market.

Red

Spectrum policy • Essentially, this is the nationalisation of spectrum in South Africa. Proposal to take back high demand spectrum from current spectrum licence

holders.

• There are significant negative implications for current spectrum licence holders. However, the policy will open up access to spectrum for the smaller

operators.

Ye

llow Rapid Deployment

Policy

• This provides open access to all infrastructure. This should accelerate competitive service expansion.

• Creation of a centralised GIS database that will provide a database on all infrastructure in SA.

Good for ICT sector

Negative for ICT sector

Warning for ICT sectorFl

ag


Journey to a new ICT world.

Stage OnePolitical Policy

Stage TwoGreen Paper

Stage ThreeWhite Paper

Stage FourAct

Stage FiveRegulations

The ruling party sets out its vision, mission

and specific objectives.

Department draws up a discussion document and publishes it for

commentary as a green paper.

The White Paper is a statement of intent and

a detailed policy plan which often forms the

basis of legislation.

A White Paper often forms the basis of

legislation. If necessary, changes to the existing law need to be made to

bring into effect the white paper position.

Where required, individual regulations

are issued.

The ruling party sets out its vision, mission

and specific objectives.

Department draws up a discussion document and publishes it for

commentary.

It is debated and adopted by Parliament

and approved by Cabinet.

The President then signs the Bill and it

becomes an Act and law in South Africa.

The regulator issues regulations.


New National Integrated ICT Policy White Paper

Creation of a single national wireless wholesale network, using

so-called high-demand spectrum, currently unassigned –

700MHz, 800MHz, 2600MHz

“Recovery” of spectrum already allocated to various

licence holders into one large spectrum pool for use by

the national network.

Creation of a more open access environment, with access to

essential facilities, infrastructure sharing, and wholesale /

retail separation.

Introduction of net neutrality.

Facilitate rapid infrastructure deployment through reduction /

elimination of red tape.

Creation of a separate regulatory authority for the

broadcasting market. – Going back to the status quo before

the creation of ICASA.

Creation of a new entity managing the universal service fund

(and taking this function away from USAASA).

The proposed new ICT policy seeks to address various aspects

of faster broadband services deployment at prices that will be

affordable to every household, e.g., pricing of services, open

access infrastructure, wholesale/retail separation, rights to use

existing infrastructure, or to deploy new infrastructure quickly

with fewer hindrances, and further allocation of spectrum.

The integrated policy is expected to increase competition in

the market, and lead to increased customer reach and more

diverse products entering the market.

The policy could also help SA meet its target of ubiquitous

broadband by 2030.

One big unknown about this policy is whether the wholesale

wireless infrastructure model proposed by the policy is

actually feasible.

Key caveats of the new proposed ICT Policy Rationale for the new proposed ICT Policy

The Integrated ICT policy is aimed at realigning key policies withgovernment’s developmental goals and providing a platform forcompanies to further develop the sector to compete globally.


New Integrated ICT Policy White Paper (cont.)

The policy would make provision of services using the ‘LTE’

spectrum more accessible to the smaller service providers,

who would not need to commit a large capex for

infrastructure deployment but rather work on an opex model.

Large players in the market would not be able to gain a further

strategic advantage, based on an exclusive access to the high-

demand spectrum.

Implementation of the new policy in its current format may

result in litigation by the large operators, which could retard

the use of high-demand spectrum by years.

It is important that the large i-ECNS licensees work with

the government and ICASA in this respect to resolve a

development that is potentially very damaging to the

market.

Certain aspects of the new Integrated ICT Policy are

questionable. There is also lack of clarity at this time how

various aspects of the policy will be implemented.

Potentially problematic areas include:

Single national wholesale open access network model –

This is an unproven concept to date and one that may

potentially not succeed.

Recovery of spectrum – What will be the impact on the

current spectrum holders?

New broadcasting regulator – Will this facilitate

migration towards convergence, or have the opposite

effect?

Net neutrality – What ‘flavour’ of net neutrality is right

for South Africa?

There are other methods of achieving the same results as

proposed by the new policy, but at a lower risk.

Potential impact on the market Viability of the new proposed ICT Policy

Everything that is contained in the Integrated ICT Policy White

Paper already exists in the ECA, … but many of these caveats

have never been implemented.


New Integrated ICT Policy White Paper (cont.)

Policymakers in a number of countries are proposing to

establish a single wholesale network (SWN) instead of relying

upon competing mobile networks to deliver 4G mobile

broadband services in their countries.

These proposals often appear to be motivated by concerns

that existing models of network competition have failed to

deliver sufficient network coverage, particularly in rural areas.

They may also arise from concerns about a lack of competition

in the retail market or a wish for government to take a direct

ownership interest in the telecommunications industry.

The GSMA commissioned Frontier Economics to critically

assess the economic case for SWNs in mobile

communications, looking at the cost and benefits of SWNs

compared with the prevailing network competition model and

examining how well are SWNs suited to meet government’s

socio-economic objectives.

The creation of SWNs can be expected to pose a number of

implementation challenges, including:

Establishing SWNs will involve a number of stakeholders likely

leading to time consuming and complex negotiations.

Building SWNs will typically involve major investments over a

period of years, with returns further away in the future.

Providing the appropriate structure and returns to attract the

required funding in SWNs will also likely raise complexities.

The SWN is also likely to require government support which

could lead to potential distortions of competition during a

period of co-existence of the SWN with existing network

operators.

The SWN will finally require regulation to protect consumers

from high prices – this will need to balance, amongst other,

the objective of encouraging the use of the SWN and providing

a return to investors in the SWN that reflects appropriately the

associated risks.

Single Wholesale Networks Challenges of Single Wholesale Networks

Source: Frontier Economics, 2014


All statutory bodies will either be replaced or dissolved, along with new bodies created.

Statutory Bodies - Summary Overview, 1/2 Africa Analysis Commentary

Existing statutory bodies

1 CCC • The Complaints and Compliance Committee (CCC) will be strengthen to better executive its mandate. • No commentary.

2 ICASA • Absorbed into a new Economic Regulator. • Based on the White Paper, all policy-related functions that

are currently with ICASA, will be reassigned to the DTPS.

3 USAASA • USAASA will be dissolved and its responsibilities will be split between the DTPS and the new Economic Regulator. • This agency was plagued by many issues that affected

performance.

4 Spectrum

Management Agency

• The Spectrum Management Agency described in the 2012 EC Amendment Act was not created. The White paper assigns

its roles and responsibilities to the DTPS and the new Economic Regulator.

• No comment, this body did not come into existence.

5 USF • The USF will be replaced by a new Digital Development Fund (“the Digital-DF”) responsible for providing universal

service and access support.

• No commentary.

6 . ZADNA • ZADNA will be dissolved and its functions absorbed into the new Economic Regulator. • No commentary.

7 Competition

Commission / new

Economic Regulator

• The Regulator will be responsible for defining markets through periodic reviews. It will be required to consult with the

Competition Commission before finalising and publishing the market reports and reviews.

• Legislation will set out the broad framework for this and stipulate that mechanisms to facilitate this be incorporated into

a Memorandum of Cooperation which should be reviewed at least every three years. The existing Memorandum of

Understanding between the regulator and the Competition Commission will need to be reviewed as soon as possible

after the publication of this policy to take into account its intentions and interventions

• No commentary.

8 National Consumer

Commission / new

Economic Regulator

• The regulator should work with the National Consumer Commission (NCC) to ensure that consumer-related issues in the

ICT sector are dealt with comprehensively. A co-ordinated approach will limit forum shopping and clarify information for

consumers.

• In 2015, the NCC signed a co-operation agreement with

ICASA.

• The agreement will need to be reviewed once the new

Economic Regulator is established.


All statutory bodies will either be replaced or dissolved, along with new bodies created.

Statutory Bodies - Summary Overview, 2/2 Africa Analysis Commentary

New statutory bodies

9 Content Regulator • A new Content Regulator will be created to regulate content. The roles and responsibilities will be defined in a new broadcasting policy (to be issued by the government).

• At this time, there is no indication as to the scope of responsibilities of the new proposed content regulator. With the creation of a separate regulator for content, will sufficient synergies be generated between ICASA (Economic Regulator) and the new regulator to drive convergence? The risk is that the two entities may fail to co-ordinate their activities as appears to be the case between the DTPS and the DoC currently.

• Potential duplication of functions may arise between the proposed Economic Regulator and the Competition Commission. Scope of responsibilities needs to be clearly defined.

10 Economic Regulator • This regulator is based on ICASA; it absorbs functions from other statutorybodies. The government has clearly delineated responsibilities between the government and the new regulator.

• The clarification of roles and responsibilities is critical to bring stability to the ICT sector. However, government participation in the sector, through the DTPS, has substantially increased.

• The strength and independence of the new regulator will be assessed once the legislation that gives effect to the regulator is signed into law.

11 ICT Regulatory

Review Tribunal

• The government proposes to establish an ICT regulatory review tribunal, which will be established to appeal decisions of the regulator and/or its committees.

• In principle, this is a good idea, however the test will be in the execution. • This may play a positive role in the market, however, the appeal rules will need to be narrowly and

well defined. Otherwise, this may become an avenue leading to retardation of market development, when many regulatory decisions are challenged by market participants.

12 Digital Development

Fund

• The Digital-DF will be a distinct fund established by and accountable to the Minister of Telecommunications and Postal Services. The primary focus of the Fund will be universal access projects. However, the Digital-DF will also provide universal service subsidies for members of identified segments of society.

• The expanded scope of the USF (to be called Digital-DF) is good in principle. It will, inter alia, act as a mechanism to channel private sector funds towards development of under-served areas. It is unclearwhether it will also manage private sector infrastructure investment directed at under-served areas. If its function is limited to a co-ordinating role where investment should take place, this should make the investment deployment more efficient. However, if Digital-DF collects private sector funds (e.g., from the infrastructure operators) and then re-allocates those funds to infrastructure build companies it thinks best suited to develop infrastructure in a certain area, it may be problematic.

• The biggest question is – How will the government ensure, in practice, the financial efficiency and accountability of the Digital-DF, which its historic precedents (USA, USAASA) struggled with? Will merely reporting to the DTPS be sufficient? Should there be Parliamentary oversight over the new fund?

• There exists the danger that the DTPS will use the fund to gain political support by allocating funds to project sponsors who support the government.


The Digital Transformation Inter-Ministerial Committee will drive ICT in SA.

Government- Summary Overview, 1/6 Africa Analysis Commentary

1 National

Government

2015 Nine-Point Plan

Alignment

• The Nine-Point Plan was a response to surmountable challenges affecting South Africa, which

included:

i. electricity challenges;ii. inadequate economic infrastructure in general;iii. unwieldy regulatory processes which delay investment; andiv. insufficient government coordination, which contributes to investor uncertainty.

• The Nine-Point Plan is designed to boost economic growth and create jobs. It identifies particular

programmes to stimulate the economy, including through boosting ICT infrastructure and

broadband rollout.

• The White Paper states that Nine-Point Plan lays the foundation for the polices and interventions

listed in it.

• This plan forms the basis for the policies set out in

the White Paper.

2 Inter-

Ministerial

Committee

Digital Transformation Inter-

Ministerial Committee

• Based on the reading of the assigned rights, as articulated in the White Paper, this committee will

gain executive oversight on all of government’s ICT initiatives, plans and strategies.

• This committee will review all relevant legislation, oversee the development of the detailed digital

transformation plan, and road map to realise and prioritise all policies included in this White Paper.

• This committee will drive the digital transformation of the public service.

• Ultimately, this committee can become the power

that dictates the future of ICT in South Africa.

3 DTPS Universal Service and Access

policy

• The Ministry will be responsible for formulating policy approaches to universal service and access to communications, including defining this concept in policy and legislation, setting the objectives for policy, broadly outlining the process of reviewing the approach adopted and broadly outlining universal service and setting targets and criteria for this.

• Thus, all policy-related responsibilities currently resting with USAASA and the regulator will be transferred to the Minister.

• The DTPS will consolidate all policy related matters within its department. The challenge for the DTPS is capacity to execute on this mandate.

4 DTPS Universal Service Obligations

(USO)

• The USO framework will incorporate access to broadband and this policy requires that the sector regulator regularly reassess obligations put in place to ensure alignment with definitions for universal service and access set by the Minister.

• The DTPS will further work together with the sector regulator to move towards a “pay or play” regime, in terms of which licensees will either pay to the Fund, or play in terms of rolling out universal service obligations.

• No commentary.


Government expands its role in the ICT sector.


5 DTPS Digital Development

Fund

• The USF, managed by USAASA, will be transferred to the Digital Development Fund and will be a distinct fund established by and accountable to the Minister of Telecommunications and Postal Services.

• Mechanisms will also be put in place to increase private funding and the current limit of one per cent of turnover of licensees provided for in the EC Act (Section 89(a)) will be replaced and the law should state that the levy will be at least one per cent.

• The Fund will be able to be used for a wide variety of ICT projects.

• There exists the danger that the DTPS will use the fund to gain political support by allocating funds to project sponsors who support the government.

6 DoC Broadcasting policy • The government, via the DoC, plans to issue a new broadcasting policy. No timescale is provided. • Commentary to be made once there is sight of the new broadcasting policy.

7 DoC Content Regulator • A new Content Regulator is envisaged in the White Paper. The roles and responsibilities will be provided in the new broadcasting policy (to be issued).

• The role and responsibilities of the envisaged Content Regulator should be set out in the new broadcasting policy.

8 DTPS Spectrum Policy • The policy proposes that the government through the responsible Minister acts as the custodian of the national frequency spectrum on behalf of the people of South Africa.

• It will also perform the international policy functions of signing country treaties with the International Telecommunications Union.

• In this regard, working in tandem with other Departments and public entities, it will be responsible for spectrum coordination with all role players that utilise the radio frequency spectrum as far as policy-making, planning and allocation functions to ensure alignment and coherence.

• The Minister will also be responsible for the coordination of the review and updating the National Radio Frequency Plan, within a year of each International Telecommunication Union (“ITU”) World Radio Conference (“WRC”).

• Given the depth of responsibilities assigned to the DTPS regarding the spectrum policy, we see this as nationalisation of the spectrum.

• In effect, through controlling the spectrum policy, the government will control the future allocation and use of spectrum for the provision of telecoms services.

9 DoC Spectrum Policy for

spectrum used in

broadcasting

• The Ministry of Communications is responsible for providing policy directives on the management of the radio spectrum for broadcasting and related broadcasting matters

• No commentary.

10 DTPS Economic Regulator • ICASA will be replaced by two new regulators. The Economic Regulator will be responsible for ICT regulation and enforcement and report to the DTPS.

• The new regulator absorbs various other statuary body’s regulatory functions (e.g. UAASA, ZADNA).• All policy making functions are transferred to the DTPS.

• The clarification of roles and responsibilities is critical to bring stability to the ICT sector. However, government participation in the sector, through the DTPS, has substantially increased.

• The strength and independence of the new regulator will be assessed once the legislation that gives effect to the regulator is signed into law.


Government plans to support many ICT initiatives.


11 National

Government

Hosting and data

centres

• Government will put in place measures to encourage the establishment of data centres in other geographic areas that can benefit from such facility. This will be done in collaboration with other stakeholders and will be part of a broader campaign to promote wider participation in the data centre market.

• Government will further support new data centre entrants by utilising their services.

Geographic areas plan – Is this realistically feasible? There is a reason why DCs are mainly based in Gauteng. Even such a relatively large urban centre as eThekwini has attracted little DC business.

One factor is the cost of transmitting data across networks (although the cost is diminishing). There are also “human factors”. If the government will force diversification of DCs into 2nd tier urban centres (e.g., Bloemfontein), how will it attract clients to such DCs? Through (uncompetitive) price regulation? Will future DC infrastructure build be enforced geographically, e.g., you will only get a permit to build in Kimberley? Will incentives be used to promote construction in certain areas?

There are examples of incentives not working to the intended degree, if other factors are not conducive. In such a case, private capital may just migrate to other markets in Africa / globally.

12 National

Government

Search and

navigation

• Government will facilitate development of South African search and browser applications that provide locally-oriented content. It will, for example, consider procuring ranking services on these platforms to develop and promote the local market.

No commentary.

13 DTPS Internet Exchange

Points (IXPs)

• Government will put in place measures to promote and facilitate the establishment of additional IXP’s in provinces currently not covered in order to cater for SA future internet traffic demands.

• If necessary, Government will develop specific interventions to address market failure in this regard should this emerge.

Given the expanding telecoms infrastructure in SA, decreasing prices of bandwidth and concentration of traffic geographically, is there really a need in SA for establishment of additional IXPs in smaller centres (than the current ones)? The amount of traffic passed locally in e.g., Nelspruit may not justify the cost of setting up such IXPs..

14 It is not clear

who would

drive this

development

Cloud computing • South Africa will develop initiatives to promote localisation data centres and to position South Africa as a data centre hub.

It is unclear who will take the lead on this initiative.


DTPS will define how spectrum is used.


15 DTPS National Internet Governance • Government will ensure that the mandate for the entity responsible for the governance and administration of the Internet (including the .za domain namespace) is extended to enable it to operate .za second level domain registries and address other current gaps.

• Government will further revive the national Internet Governance Forum as part of the National ICT Forum and ensure meaningful engagement with all partners on issues related to Internet governance and administration.

• Legislation will be amended where necessary to ensure a holistic approach to Internet governance and address existing loopholes. This will include introducing mechanisms to increase efficiency of administration of the domain name space.

• No commentary.

16 DTPS Spectrum policy (consolidation of

all policy functions regarding

spectrum)

• The development and approval of the National Radio Frequency Plan including the allocation

of spectrum for the exclusive use by national security services;

• Coordination across other Departments and sector-specific agencies whose industries are

impacted by policy related to the use of the frequency spectrum resource;

• Establishment of a National Radio Frequency Planning Committee with representatives from

Government Departments. The Committee would ensure fairness and equitable distribution

of Spectrum; and

• Establishment of a Spectrum Directorate to coordinate the work of the Committee.

• Essentially, this is the nationalisation of spectrum in South Africa. Proposal to take back high demand spectrum from current spectrum licence holders.

• There are significant negative implications for current spectrum licence holders. However, the policy will open up access to spectrum for the smaller operators.

17 DTPS USO imposed on spectrum

licences

• The regulator must obtain the Minister’s approval on the nature and form of all universal

service obligations before they are imposed on any spectrum licensees as a way of ensuring

that the obligations are coordinated, relevant and aligned with national policy objectives and

priorities.

• No commentary.

18 DTPS Rapid Deployment National Co-

ordinating Centre and a Rapid

Deployment Steering Committee

• A national coordination centre, working together with the SIP 15 infrastructure team, will be established to support rapid deployment and interface with local municipalities to fast track rights of way and way-leave approvals.

• No commentary.

19 Inter-ministerial Digital

Transformation

Committee

Digital transformation of the

public service

• Successful digital transformation will require extensive cooperation and collaboration between different government entities and spheres to ensure that the above principles are rigorously applied. Cabinet will lead this project through the Inter-ministerial Digital Transformation Committee (see Chapter Four).

• No commentary.




20 It is not clear

who would

drive this

development

Digital Access • Government will review all relevant laws to ensure they do sufficiently deal with new issues arising from convergence and digitisation.

• Government will lead and coordinate awareness campaigns on security mechanisms and tools that users can utilise to protect themselves from Internet crime, digital identity theft and cyber-bullying and ensure their children are protected.

• The sector regulator will be required to actively cooperate and collaborate with other relevant regulators (including self-regulators) to reinforce security of digital services and promote trust in these.

• No commentary.

21 It is not clear

who would

drive this

development

Digital Inclusion / Building a

digital economy and e-

commerce

• Government’s primary role in promoting the digital economy will be to create enabling frameworks to encourage innovation and enterprise – and therefore to address inequality in opportunity.

• No commentary.

22 It is not clear

who would

drive this

development

Digital Inclusion / Financial

inclusion

• A new regulatory framework will be introduced to ensure coordination between the ICT sector regulator and regulators in the banking sphere to ensure that licensees comply with requirements set out in financial services legislation.

• No commentary.

23 DoC Digital Inclusion / Developing

relevant digital content and

services

• Government is conducting a separate review on broadcasting and audio and audio-visual

content services, including considering the implications of convergence and digitisation on the

cultural and freedom of expression objectives underpinning that sector

• No commentary.

24 Inter-

ministerial

Digital

Transformation

Committee

ICT Industry Growth /

Role of the ICT sector in

industrialisation and

reindustrialisation

• Building on sections of this White Paper promoting digital transformation across society,

sectoral strategies are needed to promote the uptake and usage of ICTs in different industries.

This should be linked to strategies to promote local e-commerce.

• In this regard, sector specific strategies and plans (agriculture, tourism, and transport) are

needed to increase uptake and usage of ICTs throughout the economy.

• Alongside this is the need to address the high cost to communicate that inhibits the ubiquitous

utilisation of ICTs

• No commentary.




35 It is not clear who

would drive this

development

ICT Industry Growth

Coordinating

Mechanism

• Government will establish an ICT Industry Growth Coordinating Mechanism to facilitate

synergies across relevant Government departments and ensure bottlenecks are addressed.

• No commentary.

26 It is not clear who

would drive this

development

ICT RDI Investment and

Planning Advisory

Council

• An ICT RDI Investment and Planning Advisory Council including senior officials from various

government departments, as well as industry and research institutions (Universities and Science

Councils) and civil society representatives, will be established to support the Office of Digital

Advantage, which is provided for in the ICT RDI Roadmap.

• No commentary.

27 DTPS Digital Technology Hubs • The Departments of Telecommunications and Postal Services, Science and Technology and the

Meraka Institute will coordinate programmes to roll-out support mechanisms for the technology

hubs to be established in various centres of the country;

• Government will aim to develop at least one technology hub in each of the country’s metros and

one each in provinces without metros over the short-to-medium term.

• No commentary.


The new Economic Regulator is tasked with a range of interventions.

Economic Regulator Interventions, 1/1 Africa Analysis Commentary

1 Net Neutrality • The sector regulator will be required to hold an inquiry in consultation with the competition authorities into the

extent to which regulatory intervention is required to uphold the principles of an Open Internet.

• This should include an assessment of whether any unfair discriminatory practices are likely to be used in future and

a review of horizontal and vertical integration and concentration across the Internet value chain.

• The Policy text appears to advocate a complete net neutrality in its purest form. If this is the case, it may present the following problems:

• Competition based on service quality and differentiation in quality will be stifled. There will be no room for premium services (for people willing to pay for them) vs. best-effort services. The Policy erroneously assumes that bandwidth is infinite. It is not. Bandwidth availability and quantum is ultimately linked to infrastructure investments made by the service providers (or third parties).

• It may restrict infrastructure investment by the private sector service providers / investors who may decide to invest less if they are not able to charge a premium for higher quality services and realise a quicker ROI, particularly in the current economic climate where many infrastructure elements are purchased in hard currency vs. a relatively weak (and possibly depreciating) ZAR in which services are paid for.

• Even in the EU, where the original premise was complete net neutrality, the regulation is now leaning towards allowing premium services to exist. A better option for SA would be to allow service differentiation, but enforce regulation preventing discrimination of traffic (blocking / throttling) purely from an unfair competition perspective.

• If the state wants to have a completely neutral internet access, why not use its SOEs (e.g., BBI, Telkom) to create a state-owned alternative to private sector networks where all traffic will be treated equally without any prioritising, shaping, throttling, etc.

2 Hosting and data

centres

• The sector regulator will be mandated to help educate the South African public about the dynamics of hosting, and

regularly measure the growth of hosting awareness.

• The sector regulator will be directed to develop and implement strategies to widen participation in the ISP market,

including collaborating with other government entities to increase demand for services offered by new entrants to

the ISP market.

3 Internet Exchange

Points (IXPs)

• Nationally, Internet Service Providers (ISPs) will be mandated to peer at the exchange point in order to keep local traffic local.

• The sector regulator will be required to develop a regulatory framework to facilitate peering within two years of the publication of this White Paper.

4 Electronic Numbering

(ENUM)

• The sector regulator will be required to conduct an inquiry into the impact of ENUM technology protocols.

5 International Internet

Governance

• The sector regulator will be tasked with identifying issues related to Internet governance of relevance to South

Africa and proposing recommendations to address these.

6 Domain Name

management

• The sector authority will be specifically mandated to implement active marketing and awareness strategies to drive

the registration of .ZA domain names by South Africans.

7 Wholesale open

access regulations

• The regulator is directed to prioritise and develop wholesale open access regulations following adoption of this

White Paper.

8 Essential facilities • In the short term, until the EC Act is amended, the regulator is also directed to attend to the review of the

definition of ‘essential facilities’ to align it with the intentions set out in this policy.


Open access adoption will fundamentally change the market structure of the sector.

Open Access, 1/1 Africa Analysis Commentary

1 Open Access

principles relevant

to all networks

• The publication of Reference Offers will also assist in the implementation of this principle.

a) Effective access to infrastructure: Effective access refers to access by competitors that is easily obtained in

reasonable locations using standardised interfaces.

b) Transparency: Access must be provided in a way that is clear to all market players.

c) Non-discrimination: All access seekers must be granted access to networks in a non- discriminatory manner; a

vertically integrated infrastructure provider cannot favour services affiliated with its own company.

• This principle will be enforced by the regulator through regulations or licence conditions requiring unbundling and

submission of service level agreements.

• By inspection of the access provider characteristics, we can list the following as “deemed entities”:o MTNo Telkom (Fixed)o Vodacom

• The cost-based pricing will impact the large operators.• The active infrastructure sharing is directly aimed at the

two largest mobile operators: MTN and Vodacom. • Telkom will need to offer products across layers 0 to 3. This

would include: o Access at Layer 0 (conduits, ducts, collocation) and

Layer 1 (local loop, dark fibre, traditional copper passive infrastructure).

o Layers 2 and 3 include active equipment and provide for a variety of possibilities for implementation, ranging from bit stream services at different levels of the network (e.g. national, regional, local interconnection at layer 2 or layer 3)

2 Accounting

separation

• Will require the preparation of separate accounts for each of the different businesses operated by the same entity by

identifying and allocating the costs and revenues associated with each business, as well as the dealings between them.

3 Open access

principles relevant

to deemed entities

• An access provider will be “deemed” an open access network if it displays any of the following characteristics:a) It has significant market power in the relevant infrastructure market, orb) It controls an essential facility; orc) It has a network that constitutes more than 25% of the total infrastructure in that market; ord) It has a scarce resource, such as frequency spectrum, assigned to it for its exclusive use.

• The regulator will be required to publish a list of deemed open access networks as soon as possible after the finalisation of this White Paper.

4 A deemed open

access network

operator should

provide the

following

• Cost-based pricing: The Minister will require the regulator to develop regulations on cost-based pricing following the adoption of this White Paper.

• Active infrastructure sharing:1. National roaming: Deemed open access network entities must provide regulated national roaming to MVNOs in a

fair, transparent and non-ddiscriminatory manner.2. RAN sharing: Deemed open access network entities must provide regulated national roaming to MVNOs in a fair,

transparent and non-discriminatory manner.3. A Mobile Virtual Network Operator: Deemed open access network entities must provide hosting service to

MVNOs in a manner that is not anti-competitive.• Access to the network at Layer 3 and below: Deemed open access networks should provide equipment and facilities,

or such elements as are required by other licensees available at Layer 3 or below.


Wireless Open Access Network will be a single wholesale wireless broadband operator.

Wireless Open Access Network, 1/1 Africa Analysis Commentary

1 Policy approach • A shared approach to spectrum use is taken WOAN in high demand spectrum – potential problems:• The WOAN concept – This is a concept that has not proved itself to date anywhere in the world and certainly not on the scale

proposed in SA. The few existing examples are too young to conclusively decide whether they are successful. The WOAN may place SA on the bleeding edge (rather than the leading edge) of competitive broadband market evolution and SA cannot afford to bleed (either in terms of funding or timelines) if this experiment fails.

• Network management – The consortium managing this network will be very broad-based, representing various interests. How effective will such a consortium be in managing a network (infrastructure) that will need to be dynamic / agile in its response to changing market dynamics and customer demands?o How responsive will such a network be to technological evolution?o How responsive will such a network be to service provider needs?o How will the capacity on the network be allocated? Proportionally to investment? (probably not) or on an equitable

basis, i.e., every SP receives the same amount of spectrum access? (The assumption is that the network will not have infinite capacity due to physical spectrum constraints.)

o How will this constrain SPs that perform better than others in terms of spectrum constraint? Will this ultimately result in an uncompetitive environment where better performing SPs are restrained by limited capacity availability?

• Infrastructure investment – Private sector entities are invited to co-invest in this network. How much decision-making power will the various private sector entities have in terms of various infrastructure deployment aspects, e.g., choice of technology,prioritisation of geographic areas, extent of investment required per area? Lack of considerable power in deciding how one’s investment is applied may deter the private sector from committing sufficient investment to make this project feasible?

• Limited competition environment and innovation restraint – One of the currently competitive elements in the market is technology / infrastructure competition. Once this is taken out of the equation, competition will be limited to service quality.The standardised network technology / topology will limit the service providers’ ability to innovate in terms of their products / services based on technology.

• Other intervention mechanisms – There are other, far less risky, regulatory (and other) intervention mechanisms that couldbe applied to achieve the same ultimate objectives as the WOAN intends to achieve and to make the regulatory environment more efficient in general.o One possibility is to create a WOAN in competition to the private sector, as opposed to the only high-demand spectrum

network available in the country.• Currently, the high demand spectrum is defined. However, other spectrum frequencies may be determined as being in “high

demand” in the future, as technology evolves. Will the ICT Policy allows the government to demand return of such future frequencies from the licensees, as may emerge? If so, this could have a very negative impact on such licensees, depending on how the spectrum return process is structured.

2 Wireless OAN

concept

• The Wireless OAN will be a public-private sector-owned

and managed consortium, and will consist of entities that

are interested in participating.

• The regulator is responsible for the licensing of the

Wireless OAN (including both ECNS and spectrum

licences).

• The speedy licensing of the Wireless OAN is key to

meeting the 2020 targets set out in South Africa Connect

and the overall Vision 2030.

• The regulator is directed to follow a public process in

licensing the Wireless OAN.

3 Government

support for the

Wireless OAN

• Incentives will be provided to support wireless open access. These include:a) Reduced or waived spectrum fees.b) Access to public buildings and other type of public

infrastructure, e.g. poles, towers, ducts, rights of way at reduced costs through government facilitation.

c) Allocation of some funds from the fund responsible for rural and under-serviced areas.

• The regulator will be required to publish a list of deemed open access networks as soon as possible after the finalisation of this White Paper.


The government will plan spectrum; the regulator must issues spectrum licences.

Spectrum policy, 1/3 Africa Analysis Commentary

1 Policy approach • A shared approach to spectrum use is taken • The White paper sees a significant responsibility shift from the current regulator to the government. In essence, the government takes on the responsibility of deciding which spectrum band is used for which service.

• The new regulator’s role will be only to oversee and issue the spectrum licence.

• The statement that “The ICT White Paper recognises that spectrum policy should also be linked closely with broadcasting policy objectives and therefore provides that the Minister of Telecommunication and Postal Services and Minister of Communications will work closely together,” is superfluous. This has been the intention all along. The question is, how will this work in practice. From the current experience we know that depending on personalities heading up each of the departments, there can a large schism between the ministries and little co-operation takes place.

• Therefore, it would be more prudent to merge the two departments, as was the case before. This would ensure greater internal co-operation and synergies, and would also eliminate wasteful expenditure on doubling up on government administrative infrastructure, with the funds better utilised to drive the ICT Policy.

2 Roles and responsibilities • All responsibility for the spectrum planning and allocation passes to the DTSP.

• The new regulator’s role will be only to oversee and issue the spectrum licence.

3 National radio frequency

spectrum planning

• The Minister will make a determination in the best interest of the Republic regarding the service allocation to

be made in the national table of frequency allocations.

4 Aligning national universal

service objectives and

spectrum licensing

• The regulator is responsible for spectrum assignment which must be done in line with the National Radio

Frequency Plan and with national policy.

• The regulator must obtain the Minister’s approval on the nature and form of all universal service obligations

before they are imposed on any spectrum licensees as a way of ensuring that the obligations are co-ordinated,

relevant and aligned with national policy objectives and priorities.

5 Spectrum Fees • Administered Incentive Pricing (AIP) is a spectrum pricing method that has been adopted in a number of

countries and is the preferred methodology for South Africa. AIP prices are based on factors such as inflation,

technology, frequency band and geographic area covered.

• The model is ‘administered’ because prices are set by the Ministry, reflecting the opportunity cost of spectrum

while incorporating potential ‘incentive’ properties.

6 Spectrum sharing • Spectrum sharing in licensed bands has to be done between licensed entities and based on clearly defined criteria and conditions.

• Each instance of spectrum sharing in licensed bands shall require rigorous oversight from the regulator, and such sharing arrangements must be lodged with and approved by the regulator prior to their implementation.

• The regulator will be required to issue spectrum sharing guidelines, including provisions on dynamic and opportunistic spectrum access, in line with this policy.


Refarming of spectrum will require the operator to pay for the new usage.


7 Spectrum trading • Spectrum trading of non-high demand spectrum is permissible.

• Trading of high demand spectrum is not permissible.

a) Any unused high demand spectrum must be returned to the regulator.

b) The trading of high demand spectrum would perpetuate the current market structure which places inherent

value in spectrum and its exclusive use.

c) It would furthermore undermine the ‘use it or lose it’ principle and the application of open access provisions

to networks using high demand spectrum.

• The application of the refarming policy will require existing mobile operators to pay a new spectrum fee for the refarmed spectrum.

• Should this approach be retrospectively applied, then MTN and Vodacom, who have successfully refarmed spectrum, may face a significant spectrum licence fee increase.

8 Refarming • Licensees who refarm spectrum that has been assigned to them should be transparent and should report the

refarming of spectrum to the regulator.

• Refarmed spectrum will be treated in terms of its new use to the extent that pricing and/ or obligations are

impacted.

9 ‘Use it or Lose it’

Principle

• Assigned spectrum shall not remain unused for a period of more than a year, as per the licensing period.

• If it is not used, the ‘use it or lose it’ principle will be applied and it must be returned to the regulator.

10 Determination of

high demand

spectrum bands

• High demand spectrum in the context of this White Paper refers to spectrum where

1) demand for access to the radio spectrum resource exceeds supply, or

2) radio spectrum is fully assigned.

11 Identification of high

demand spectrum

• All IMT spectrum, which is essentially mobile broadband spectrum, meets the first criteria for ‘high demand

spectrum,’ as demand for the resource exceeds supply.

• IMT spectrum includes but is not limited to the 700 MHz, 800 MHz and 2600 MHz bands, as updated from time to

time in the National Radio Frequency Plan.

• It also includes the bands recently designated at the WRC-15, namely 1 427-1 518 MHz, 3 300-3 400 MHz, and

3 400-3 600 MHz.


The White Paper proses that all “high” demand spectrum is returned to the government.


12 Set Aside of High

Demand bands for

Wireless Open Access

• Where spectrum is considered to be ‘high demand’ , in line with the

principle of non-exclusivity, it must be used as a public good to

support the broader policy objective of open access and therefore

minimise infrastructure duplication, reduce costs and spur service-

based competition. As such:

All high demand spectrum will be assigned on an open access

basis.

All currently unassigned high demand spectrum will be set aside

for assignment to the Wireless Open Access Network (see

above) and will be treated in line with the above policy

principle.

The regulator will be required, following adoption of this White

Paper, to conduct an industry-wide public consultation process

to determine the terms and conditions, as well as the time

frame, under which the currently exclusively/individually

assigned high demand spectrum will be returned in accordance

to this policy. These terms and conditions will take into account

the following:

o Market developments

o Projected extent of availability of open access networks

• The regulator, upon completion of this consultative process must

make recommendations for the Minister’s approval on the terms

and conditions which will apply to the network and currently

assigned high demand spectrum.

WOAN and return of spectrum• The implementation of the proposed return of high demand spectrum to the use of the planned wireless

open access network, will lead to loss of confidence in investing in the infrastructure market.• Historically, mobile operators have driven the deployment of new high bandwidth services, by being

forced to refarm existing spectrum. This has enabled the country to remain abreast of and exploit new technology advances.

• Furthermore, the White Paper does not present how the government would ensure that the WOAN is a success. Failure, or potential failure of the WOAN, can place a significant financial burden on the state.

Infrastructure vs Service based competition• The challenge is that the competition thrives on the ability to offer a differentiated service to the

consumer. Our view is that competition that is driven by infrastructure-based competition is better than service based competition. Infrastructure-based competition morphs into service based competition, the less control an operator can exercise over the underlying infrastructure.

Technology decisions• The ability to invest in infrastructure drives competition (3G vs 4G in the mobile market). If MTN or

Vodacom had opted not to refarm spectrum, then 4G would have been introduced to the market at a much later point.

• If the proposed single wireless open access network is implemented, then questions need to be raised about its technology investment strategy.o What are the drivers to drive investment in new technology?o If the investment in new technology disadvantages some service providers, then would the WOAN

invest in new technology?o What levers will be put in place to ensure that the WOAN does adopt a proactive technology

investment process?2025 Scenario – End of network operators serving the wireless market• If by 2025, all services are delivered using the high demand spectrum that is allocated to the WOAN, then

will there be no need for mobile operators to operate 2G or 3G RAN networks? Under this scenario, the mobile operators would revert to service providers. In effect, the mobile operators will not be able to exploit their ECNS licence to offer wireless services.

• Extending this scenario further – given that the WOAN operates the only high demand RAN network, then there would be only one buyer of fibre to the tower sites. This could signal the decline and ultimate exit of operators who provide wholesale high capacity links to wireless sites.

• The introduction of a single WOAN can lead to the contraction of the telecommunications operator market.


Primary focus is on the deployment of optical fibre cable and wireless base stations.

Rapid Deployment Policy, 1/3 Africa Analysis Commentary

• 1• Scope of policy • In that regard the main infrastructure deployment challenges requiring policy intervention relate to the deployment

of:

• Underground fibre and ducts;

• Premises fibre and ducts, including in business parks and on private land;

• Aerial fibre, deployed on poles;

• High sites, including rooftops for wireless sites; and

• Masts and towers, and land or other property for such towers.

• While a wide range of infrastructure types are therefore covered by this policy, practical considerations and the

national importance of broadband mean the primary focus is on the deployment of optical fibre cable and wireless

base stations.

• This policy, when implemented, will boost the access to infrastructure.

• The policy ensures that the principle of open access is extended to accessing infrastructure in private buildings / gated communities.

Policy dangers• However, the drive to reduce duplication of infrastructure

can lead to negative consequences for infrastructure investment.

• The drive for open access across all deployed infrastructure will lead to there been no incentive for a retail service provider to invest in infrastructure. It’s retail competitors will be able to access the same infrastructure under the same conditions as the itself. Therefore there is no incentive to invest.

• Therefore, it will be infrastructure providers who will invest in infrastructure, A bigger infrastructure footprint implies better scale, therefore, we expect to see the infrastructure market consolidate to a few infrastructure providers. This consolidation will come from M&A activity.

Emergence of a single infrastructure network operator• Ultimately, there is no reason why there should be any

competition issue barrier to stop a single infrastructure provider emerging from continuous M&A, given that all infrastructure is offered on a cost price basis, in and open and discriminatory basis.

Driving technology investment• The same argument is raised about technology

investment. Once a monopoly is formed, then the incentive to invest in new technology is lowered as there is no competitive behaviour driving an investment decision.

• 2• Principles of non-

discrimination and

fair competition

• No electronic communications licensee can gain undue advantage due to the behaviour of landowners.

• Property owners must act on all similar requests to access their land or other property within a reasonable time,

taking into account the nature and scope of the request and electronic communications network service providers

must be treated equally by landowners.

• 3• Access to high sites

for radio-based

systems

• No owners of a radio site may refuse access to a licensee for the installation of broadband equipment unless it is

technically not feasible to do so.

• Radio high sites at national, provincial and local government levels will be made available for broadband equipment

installation at a cost-based rental and in line with open access principles and infrastructure sharing or facilities leasing

regulations

• 4• Approval of

applications and

permits

• Details the process.

• GIS Database of infrastructure

• It is expected that an improved digitised and automated GIS database which co-ordinates approval and permit

systems and which makes it possible to identify available sites and permissions will simplify the achievement of rapid

deployment.

• The Department should work with the municipalities, landowners and other stakeholder to develop such GIS database

in cooperation with the regulator within 24 months of the implementation of this policy.


All new buildings, and buildings undergoing renovation, must be equipped with facilities.


5 Access to trenches • The regulator is directed to include single trench provisions applicable to the ICT sector in its Rapid Deployment

Regulations.

• The regulations should provide that licensees must consult with other parties in the interest of the single trench

policy, and they should provide guidance on how the regulator envisages that licensees can get access or

capacity at a later stage if they are unable to participate at the time of trenching.

• An obligation should be put in place for licensees to include excess capacity in their deployment and to lease

spare capacity to other licensees at reasonable rates or such rates as prescribed under the open access policy

regulatory framework, whichever is lower. This should be supported by effective dispute resolution.

• The regulator should include such provisions in its regulations on Rapid Deployment.

• This policy, when implemented, will boost the access to infrastructure.

• The policy ensures that the principle of open access is extended to accessing infrastructure in private buildings / gated communities.

6 Access to infrastructure • In line with the openness that underpins the White Paper and in order to encourage the efficient use of public

infrastructure and to avoid duplication, rights of way of critical infrastructure (e.g. roads, pylons, etc.) and other

utilities (water, sewers, etc.) should be made available to communication entities for their networks.

7 Deploying electronic

communications

facilities in new

developments

• Section 17 of the National Building Regulations and Building Standards Act empowers the Minister of Trade and

Industry to make national building regulations. The provision enabling all new and other buildings undergoing

renovation to be equipped with facilities such as ducting for fibre optic cabling may be included the National

Building Regulations.

• All new buildings, and any buildings undergoing renovation, must be equipped with facilities such as ducting for

fibre optic cabling.

• Government supports choice. Buyers – in this case developers – should be free to choose a preferred

infrastructure provider, while infrastructure suppliers should be free to bid for developments they wish to

service. Similarly, consumers must be free to choose among competing ICT service providers. Given the first

network built in an area will often secure an effective monopoly, it is crucial that open access and competitive

provision of retail services are supported.


New Rapid Deployment National Co-ordinating Centre created to drive rapid deployment.


8 Institutional framework • DTPS

• New Economic Regulator

• Landowners at municipal, provincial and national levels

• Role of the Rapid Deployment Steering Committee

• Role of SALGA and Municipalities

• The policy sets out the responsibilities of each role player.

9 Rapid Deployment

National Co-ordinating

Centre and a Rapid

Deployment Steering

Committee

• A national coordination centre, working together with the SIP 15 infrastructure team, will be

established to support rapid deployment and interface with local municipalities to fast track rights of

way and way-leave approvals.

a) Establishment of common automated wayleave application systems based on an

understanding of common information requests across various bodies;

b) Creation of a GIS database and mapping of all fibre deployments and other electronic

communication facility deployments;

c) Coordination of infrastructure rollout and participation in other infrastructure coordination

fora such as SIP 15;

d) Engagement with relevant industry bodies dealing with ‘rapid deployment’ or any aspect

thereof; and

e) Provide advice to ECNS licensees on the provision of electronic communications facilities.

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