On the 27th of February 2008, the Department of Communications published a notice inviting comments on Proposed Guidelines For Rapid Deployment of Electronic Communications Facilities in Terms of the Electronic Communications ACT, 2005 (ACT NO. 36 of 2005). Among other things the guidelines propose the mandatory minimum 51% “African or South African” (is it just me who feels jarred by that phrase?) ownership of all submarine cables landing in South Africa (SAT3 excepted).
In a heretofore unprecedented move, Telkom, Vodacom, MTN, Neotel, and Cell-C have made a joint submission in response to the proposed guidelines. Previous industry submissions have often been complementary but this is the first time every major telecom operator has spoken with a single voice. One could argue that this is a sign of widespread collusion among incumbent telecom operators in South Africa or perhaps simply a sign of collective industry indignation at the counterproductive steps being taken by the Ministry of Communications.
The submission makes a number of arguments.
51% African or South African Ownership
The operators argue that insisting on 51% “African or South African” ownership doesn’t make a lot of sense as it may inhibit the spread of competition in undersea cable access (the IWTGC cable comes to mind) and South African companies already comply with BEE requirements. The submission goes further to argue that the Minister has exceeded her authority in using Section 21 of the Electronic Communications Act to require majority African or South African ownership of undersea cables. It is hard to deny this argument and indeed to understand why the DoC is sticking to its guns on this issue.
The submission also argues that the proposed guidelines, rather then facilitating “rapid deployment”, actually introduce an additional approval stage which will only increase the amount of red tape. The guidelines also do not “provide procedures and processes for obtaining any necessary permit, authorisation, approval or other governmental authority” as is indicated in Section 21 of the Electronic Communications Act. The operators argue that the guidelines would be better described as “Submarine Cable Authorisations”. Again, it is pretty hard to argue with their case. It seems evident that the “rapid deployment” guidelines, as they are currently described, are going to result in slower deployment .
Trampling on ICASA
The operators also point out that much of what is covered within the proposed guidelines, is already covered by the authority of the Electronic Communications Act and ICASA. They have declared their intention to ignore the guidelines as they believe they have “no legal standing.”
The Economics of Undersea Cables
I have to admit I was pleasantly surprised by this submission at least until I came to Chapter 7 entitled “The Economics of Undersea Cables” in which:
“the operators noted that although they support the principle of open access there still needs to be incentives for operators to invest in cables; and thus the operators support the concept of justifiable price discrimination between investors and non investors”
they say that:
“If a consortium, by virtue of an ‘open access principle’ was forced to sell bandwidth to investors and non investors at the same price – there would simply be no incentive to invest.”
This is what I dislike about the term “open access“. People seem to lay claim to it under almost any circumstances, so much so that it has lost some of its weight as a strategic approach. Surely it is not hard for the operators to see that if they are an investor in the cable and they are forced to buy bandwidth at the same price as non-investors, that they would still enjoy a de facto discount as a result of the profits from their overall cable investment. Investing in undersea cables is a profit-making enterprise on its own, as Seacom (with no telco operator investment) provides evidence of. Open Access proposes structural separation of communication infrastructure to increase consumer choice at every level of communications infrastructure from cables to data to services. This poorly argued and manifestly incorrect explanation of the “economics of undersea cables” mars what is otherwise an important message to the Department of Communications.