E-rate gets corrected

Changes to the E-rate regulations will finally allow the service providers to make a profit, says Dominic Cull, regulatory specialist at Ellipsis Regulatory Solutions.

Driven by the Department of Communications (DOC), the regulator published its notice to amend the E-rate regulations last month, which will allow service providers a chance to make a small profit out of provision of services to public education institutions.

The regulations now stipulate: “An upstream licensee must meet another licensee's request to provide an E-rate” to the various institutions. This requirement provides directly for companies that are not network service providers, but only Internet service providers.

The E-rate regulations have been the bane of the Internet industry since 2004 and actual regulations only got off the ground in March last year. However, these regulations have made it impossible for smaller Internet providers to offer services to schools, since they would have to operate at a loss.

The regulations specify that public schools and public tertiary education campuses must be given a 50% discount on all Internet services and equipment supplied by service providers.

The trouble was that the regulations did not take into account that some companies provide both access networks (ECNS and ECS licensees) and Internet services, while others lease the network and provide the service on top of it (ECS licensees only).

While the regulations themselves did not prescribe that companies should operate at a loss, they did not stipulate that ECNS providers should pass the prescribed discount to ECS providers. By all accounts, they haven't passed on the discount.

For almost a year, ECS providers have been forced to take a profit knock, or not provide services to schools at all. This completely negated the purpose of the regulations, which was to provide affordable Internet access to South African learners.

The amendments to the regulations now provide for these companies, forcing the network providers to discount the line leasing. According to Dominic Cull, regulatory specialist at Ellipsis Regulatory Solutions, the changes will finally allow the service providers to make a profit, albeit small, from providing services to schools.

He says, while the regulator is calling the changes an amendment, he believes it is actually a redraft of the regulations. “Companies like Telkom have never had to and didn't pass on the discount to providers like Web Africa,” he says.

Cull says the amendments have been driven by the DOC, which has called all the relevant players, including ICASA, into meetings over the last few months. He says the regulator had previously been reluctant to change the regulations, saying there was nothing wrong with them.

He adds that the department has been instrumental in the changes. “Within a couple of months, the DOC understood that there was a problem and pushed to have the regulations changed,” he says.

The DOC's strategic plan includes a broad look at the way Internet access is provided to the country, specifically when it comes to the poor.

Related stories:

• ICASA gives e-rate teeth
• The e-rate travesty
• School e-rate benefits not happening

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