South Africa, which recently made a great leap forward in the opening up of competition in the telecommunications is in danger of making an even bigger leap backwards thanks to the license fees being proposed by ICASA. ICASA has proposed that operators possessing an I-ECNS license pay 3% of gross income as a fee. The I-ECNS license is what is required to be a national infrastructure operator e.g. Telkom, MTN, Vodacom, et al and hopefully soon some new entrants. ICASA has further proposed that holders of an I-ECS also pay 3% of gross revenue. I-ECS licenses apply to anyone delivering electronic services e.g ISPs nationally in South Africa. Thus, companies providing both infrastructure and services nationally will be obliged to pay 6% of their gross revenue as a license fee.
Three days of hearings, being held by ICASA, on network license fee structures finish today. If criticism in the press and the number of submissions to ICASA on the topic (31 of them!) are anything to go by, the proposed fees are out of all proportion with the revenue required by ICASA for its operations. British Telecom (BT) in particular have made a thoughtful and detailed submission comparing the proposed structure and fees to international best practice. As ICASA doesn’t appear to have put the submissions online, I take the liberty of putting the BT one here. Please contact me if you’d like others.
So are the proposed fees fair? There is a wealth of analysis in the submissions but one might also simply take a look around and see what fee structures are in use in other countries:
An infrastructure license in Kenya has a 15 million Ksh (USD 200,000) initial licensing fee and then costs 0.5% of Annual Gross Turnover or 100,000 Ksh (about USD 1,300) whichever is higher.
To become a Public Infrastructure Provider in Uganda, there is a USD 100,000 entry fee and then an annual feel of USD 10,000 per annum plus 1% of Gross Annual Revenue from Licensed services.
In Malawi, a national mobile license costs USD 100,000 plus 5% net operating revenue. A national fixed line network costs USD 200,000 and 2% of net operating revenue. Note that is net not gross.
To be a national operator in Tanzania costs 600,000 USD and then 0.8% of Gross Annual Turnover (GAT)
Taking the comparison outside of Africa, in Bulgaria the incumbent pays 1.1% of its annual income (doesn’t say net or gross but I assume gross). Interestingly it charges the mobile operators the remaining money to cover its expenses up to a maximum of 1.1 % of their annual income.
Even a casual comparison with other countries highlights the fact that the proposed fees by ICASA are pretty steep. It is hard to understand why ICASA would propose to charge such egregious fees, the cost of which, if implemented, is sure to be passed on to consumers.
One might have imagined that since South Africa generates so much more revenue from telecoms than most other African countries, that the percentage might actually be lower than most African countries. So does anyone out there actually charge 3% of gross revenue as a license fee? Yes, St. Vincent and the Grenadines, population ~ 120,000.
Let’s hope the submissions help the regulator make a more informed decision.