In February 2005, the latest draft of the Convergence Bill was published. If passed into law, the bill will make fundamental inroads into how the communications sector is regulated. Convergence takes place when the historically distinct print media, computing, telecommunications and broadcasting sectors start to overlap. Thanks to convergence it is now possible to make a telephone call over the internet, to read a newspaper online or to watch movies on a cellphone.

From a regulatory point of view, the old sector-specific boxes simply do not fit any more.

In line with worldwide trends, policy- makers in SA are rethinking ways of bringing the regulatory framework in line with these developments.
Rumblings of an overhaul of the regulatory framework were initially heard towards the end of 2003, when the first draft of the hill was published. Industry players hurried to hand in their written submissions. The bill then lay idle for a year until the second draft was issued this year.

Behind the scenes, rumours were rife that the proposed legislation was shelved after intense lobbying by the industry for it to be dropped. At the heart of the problem is the fact that no policy framework was formulated before the first bill was published. With a statute of this magnitude, it is common to conduct a green paper and white paper process before drafting the legislation.

The purpose of a green paper is to raise all the pertinent policy issues for comment, whereas the white paper sets out the broad policy principles on which the proposed legislation is based. The fact that a policy framework formulation process was not followed before the release of the second bill is an opportunity missed. Thus many complex policy issues underlying convergence remain unventilated. For example, what is the intended effect of the Convergence Bill on government’s policy of managed liberalisation for the sector? Where do providers of value added network services (VANS) stand?

These and other policy drivers are not clear at this stage. The second draft of the bill conceptually mirrors the first draft. The primary focus of the second bill re- mains harmonisation of regulation across the telecommunications and broadcasting industries. The bill aims to replace and repeal the Telecommunications Act and the Independent Broadcasting Authority Act, 1993. This is a welcome move, as the first bill had proposed to retain all these statutes alongside each other, which would only have led to confusion in the long term.

The second bill primarily deals with infrastructure regulation (that is, the regulation of telecommunication networks and broadcasting signal distribution systems) rather than content regulation (that is, the regulation of broadcasting and other content services), it is proposed to retain the Broadcasting Act, 1999 to cater for the overall regulation of the broadcasting industry, but to regulate the licensing of broadcasting services under the Convergence Bill.

Given the primary focus of the bill on infrastructure regulation, the licensing of broadcasting services sticks out like a proverbial sore thumb. Without taking a firm viewpoint on the matter, it is questioned whether it would be more appropriate to consolidate the regulation of broadcasting services under the Broadcasting Act. The most profound effect of the bill is on the licensing regime. A weakness of the present licensing framework is that it is sector and service specific. The new bill seeks to do away with the existing vertical system of licensing and to replace it with horizontal licence categories that classify activities according to the fundamental underlying nature of the service rather than the sector into which the activities Bill.

The bill creates four licence categories that are unhelpfully classified as communications network services, communications services, applications services and broadcasting services. The new licence categories relate to infrastructure provision (these are the providers of the basic telecommunication and broadcasting net- works), connectivity (these are the people who convey voice and data traffic over communications infrastructures), application services (the providers of enhanced telecommunication services, such as VANS) and broadcasting services (to the exclusion of internet and online content, which is difficult to police through legislation of this nature) Although the Convergence Bill is to be commended for attempting to keep the licensing framework in tune with technological change, there are a number of problems which hopefully will be ironed out before the legislation is finalised.

One such difficulty relates to the licensing methodologies. The bill seeks to introduce three types of licensing methodologies – individual licensing, class licensing and licence exemptions – to create more flexibility in the licensing framework. Unfortunately, it fails to appreciate the difference between individual and class licensing mechanisms. With individual licensing, the preapproval of the regulator is required, whereas with class licensing the regulator sets blanket licence conditions that apply uniformly to a licence category, but the regulator’s prior consentia not necessary. Whether an activity is individually or class licensed or licence exempt usually depends on its over-all sociocconomic importance to the economy.

Class licences are a useful tool for liberalised sectors of the market that require less policing, as they free the regulator from the administrative burden of pre-approving licences. As currently drafted, the Convergence Bill requires the pre-approval of the Independent Communications Authority of South Africa (Icasa) to grant a class licence, which is self-defeating. Another problem with the licensing framework is that only certain licence categories are eligible for a class licence – namely, conveyance and applications services – whereas infrastructure provision must be individually licensed. This is inappropriate if the intention is to introduce facilities-based competition in the long term.

Some countries (such as Malaysia, which was a source of inspiration for the bill) have exempted smaller network providers like private telecommunication net- works from the requirement to hold a licence altogether, which befits a liberalised market.

Although the bill has resulted in an overall increase in the level of independence of Icasa in the exercising of telecommunications services, some incursions still remain. Particularly, Icasa now has the final say over the award of service licences and not the communications minister, which is a welcome move. However, Icasa must still obtain ministerial pre-approval before it can impose individual licence conditions. All in all, the Convergence Bill is a step in the right direction. The current telecommunications and broadcasting frameworks are due for an update.

Business Day – 11 November 2005 – Authors: Caria Raffinetti – Edward Nathan