Lawyers, VANS plot telecoms revolution

Johannesburg, 25 Feb 2002

The Telecommunications Amendment Act passed late last year has created more problems than it solves and is flawed to such an extent that not challenging it would be suicide for some businesses, legal experts say.

A workshop on the implications of the Act last week spent much of its time looking at various ways of forcing changes in the legislation. Whether it should be challenged - an action sure to absorb plenty of time and money - was decidedly a non-issue.

"Instead of managed liberalisation, we have managed re-restriction and are in fact going backwards," said Webber Wentzel Bowens lawyer Gal Batsri of the amendment.

The analysis of the amendment by telecommunications lawyers from four other firms who participated in the workshop, organised as an educational event, found much the same thing.

Batsri believes value-added network services (VANS) providers face the biggest problems.

"The commercial impact is that in the post-exclusivity period it is going to be more restrictive for VANS and certain PTNs [private telephone networks] than during Telkom`s PSTS [public switch telecommunications service]," he said. "In my professional opinion that is an inescapable conclusion."

The issue of voice-over-Internet Protocol (VOIP) is central to his assertion. VANS have been complaining bitterly about VOIP restrictions they say will put them out of business. Telkom and its future competitors will be able to offer the service but VANS are prohibited from doing so.

Other trouble spots, which affect a wider range of companies and individuals, include a seemingly contradictory "multimedia licence" granted to State-owned signal distributor Sentech, a lack of measures to make it possible for new operators to compete with Telkom, and blurry definitions.

Challenge strategy

The lawyers believe that these and the various other problems they identified also leave the Act open to challenge. Complaints to the Competition Commission or a challenge in the Constitutional Court, or a combination of the two have a good chance of success, they believe.

Unfortunately, just proving that a law is stupid is not enough, said advocate Patric Mtshaulana.

"Depending on the degree of irrationality, within certain bounds, irrationality is not in itself grounds for a constitutional attack," he said.

But he does see a possibility of arguing that the VOIP restrictions amount to the uncompensated expropriation of VANS property or that VANS are being unfairly discriminated against. He sees little justification for either.

Then there is the Competition Commission, a regulator that carries a very big stick. As the dominant player in its market, Telkom is subject to its jurisdiction, said Alistair Baben der Erde of Webber Wentzel Bowens. If it is shown to be abusing that dominance (as many believe it is), the Commission could take a number of actions, including awarding a penalty of up to 10% of the company`s annual turnover. It can also order that the defending party pays the costs of the complaint, a fact which commends it to the small players considering a challenge.

Yet even the Commission can be drawn into a legal morass of challenges and appeals. "The process can still be tripped up by somebody with lots of money," said Lee Mendelsohn of Edward Nathan & Friedland.

However it is done and whoever challenges the legislation, the situation should come to a head relatively soon. SAVA, the SA Vans Association, has estimated that its industry has one year before it is inevitably dominated by Telkom as a result of the Amendment Act.