Telkom, IS clash over VANS licences

Johannesburg, 24 Jan 2005

Last week`s hearings into the value-added network service (VANS) licences saw much argument over what a VANS provider should or should not be allowed to do, with Telkom leading the charge on one side, and Internet Solutions holding the fort on the other side of the table.

According to Telkom`s Graham Keet, it is the monopoly`s contention that the ministerial determinations are part of a policy trajectory leading to managed liberalisation, and are not representative of a policy shift, but simply provide a date upon which such managed liberalisation shall occur.

He told the Independent Communications Authority of SA (ICASA) that Telkom contests the idea that VANS be allowed to set themselves up as full-blown infrastructure providers; rather, the determinations simply allow them to use alternative infrastructure providers.

"If ICASA is to allow such self-provisioning, the authority must give serious consideration to the issues of spectrum usage and access to land," said Keet.

"We are also of the opinion that VANS may only carry voice in the course of providing such value-added services and are not permitted to carry voice as a standalone service. The Telecommunications Act would have to be amended for this to be legal."

He said that unless the Act is revised, there exists no need to revise the interconnection guidelines, as these would only be affected if VANS were allowed to provide standalone voice services.

One point that Telkom did, to an extent, agree with other players was in its contention that the licence fee is theoretically only there to cover the cost to the state of processing an application, so unless the cost recovery to the state was R30 000, then the proposed fee was too high.

"It is our belief that ICASA should not license VANS to self provide now, as a new regulatory regime is coming in the form of the Convergence Bill, and it would be wrong to pre-empt it by trying to implement a licensing regime that does not yet exist," said Keet.

"We believe it would be in the country`s best interests for the regulator to stay within the confines of the current Act and to be very careful, as it will be far harder to withdraw licences once they have already been awarded."

Vodacom backs Telkom

Mobile operator Vodacom stood behind Telkom during its submission to the authority, claiming it believes the ministerial determinations do not amend the Telecommunications Act or alter the market structure.

It is Vodacom`s contention that a VANS cannot operate as a basic telecoms service, but rather has to still add value, therefore it supports Telkom`s view that a VANS provider carrying voice would have to do so in a value-added manner, since the determinations do not convert a VANS licence into a public switched telephone service licence.

According to the company, it does not believe the minister`s intention was to allow VANS to compete with voice carriers on a basic facilities level, as voice carriers have a facilities-based licence, whereas VANS licences are supposed to be service-based.

However, the organisation`s contentions were questioned by councillor Paris Mashile, who said ICASA felt the idea is to think outside of the 'legal box`, as up to now there had been too much falling back on the legal aspects of issues.

"To quote Hamlet, we must ask whether it is better to suffer the slings and arrows of outrageous fortune, or take up arms against a sea of troubles. At some point, someone is going to have to bite the bullet, as it is extremely important to work together to try and alleviate poverty and improve the lot of all South Africans."

The alternative view

Internet Solutions (IS), one of the organisations that stands to gain from the liberalisation of the industry, took an alternative view to the existing voice providers, claiming it believes the minister was given the power by the Act to change the sector when the time was right for competition.

"We do not believe there is anything else that needs to be done to stimulate competition, now that the minister has assigned the dates for the determinations," said Siyabonga Madyibi, senior regulatory manager at IS.

"It is our belief that there is no limitation in the ministerial determinations or the Act where it is implied that VANS can only obtain facilities from licensed providers - statements such as these are being made to distract ICASA from the overarching issues and are being made by players desperate to protect their own revenue streams.

"It may be a bitter pill for Telkom to swallow, but the determinations give VANS the right to self-provide and anything else is simply smoke and mirrors," he said.

He also claimed there is nothing that suggests voice has to be carried as a VANS only, and not as a standalone service, as the only restriction on VANS was that they were not allowed to provide voice until a date determined by the minister.

"It is also very important that ICASA studies the interconnection issue carefully, as preventing VANS from interconnecting could lead to the ridiculous situation where VANS are able to connect to anyone in the world except for those who live in our own country," said Madyibi.

"An absence of proper interconnection guidelines will see one of two things happening. Either the status quo will be maintained in the telecoms industry, or we will see VANS developing an alternative national network where all VANS providers connect to one another outside of the other operators` networks."

He said that while IS supports the idea of empowering historically disadvantaged individuals (HDIs), the company believes such initiatives should be aligned with national and industry-wide schemes, such as the ICT charter.

"It would be discriminatory to single out VANS providers for specific HDI targets that are not applicable to other licence-holders," he said.

This view was backed up by the Communication Users Association of SA (CUASA), which proposed that VANS providers should be party to the ICT charter, along with all other industry members.

CUASA also aligned itself with the view of the Internet Service Providers` Association, saying the definitions of a VANS provider need clarity and the increased cost of a VANS licence was "impossible to justify and was a disincentive to smaller companies wishing to enter the VANS market".

Madyibi concluded by saying ICASA must put a lot of thought into the licensing process, as there is always a tendency by incumbent operators to interpret issues in a restrictive manner and to resist measures that affect their market share.

"ICASA needs to be decisive in regard to stimulating competition and must look to create an environment which will allow for true competition and thus provide greater choice for consumers," he said.