All's well that ends well?

The awful grinding of hearings, colloquiums, consultations and ministerial determinations, about the value-added network service (VANS) providers' cogs in the local telecommunications market, received a welcome spurt of grease in August.

The Transvaal High Court ruled that Altech Autopage Cellular was entitled to self-provide, sparking much rejoicing among those waiting for the ruling. Acting Judge Norman Davis found that the minister of communications, Ivy Matsepe-Casaburri, had overstepped her authority in some of her specific orders to regulator ICASA and ruled that ICASA was to award Altech a coveted individual electronic communication network services (I-ECNS) licence.

ICASA did not appeal the ruling, but the minister did. “The effect of the learned judge's judgement is that he has defined the scope and content of the 'managed liberalisation policy, which is greatly contested in the market,” the minister said in her application for leave to appeal.

For the first time ever, there is a stake in the ground.

Jacques Du Toit, MD Orion Telecom

Judge Davis denied that leave a month later, ordering the minister to pay costs.

On 6 November, the High Court ruled against Matsepe-Casaburri's urgent interdict against ICASA, to prevent it from issuing telecommunications licences to VANS providers. Just over a week later, on 14 November, the regulator announced its intention to issue electronic communications network service (ECNS) and electronic communications service (ECS) licences to VANS.

In a notice published in the Government Gazette on 14 November, ICASA stated it will convert all VANS licences, including those granted after 19 July 2006, to ECS and ECNS licences. This means all VANs will have the long-awaited right to self-provide.

ICASA published a proposed draft licence and a proposed licence conversion framework, and issued an invite to all interested parties to submit written comment on the proposed process by 5 December. It intends to issue licences by 19 January 2009.

According to the proposed framework, potential licensees will be required to indicate whether they require a class or individual licence, proposed geographic coverage area, submit a comprehensive technical plan, and commence the rollout of the network within 12 months of the licence being issued.

Says Arthur Goldstuck, CEO of World Wide Worx: “This takes us back to the beginning of 2005 where we expected VANS to self-provide. The telecommunications companies in a position to invest can now do so without the cloud of uncertainty hanging over them. It will open up competition and will open opportunities for niche and under-serviced areas.”

According to Dominic Cull, ISPA's regulatory advisor and who runs Ellipsis Regulatory Solutions, there was a final option for the minister: “She could have lodged a petition with the Supreme Court of Appeal (SCA) in terms of which she can request they consider whether she should have the right to appeal against the original Altech decision. Such petition must be lodged within 15 court days of the delivery of the TPD judgement, refusing her leave to appeal (ie, 21 November).”

But on 21 November, the minister announced she would not be appealing the decision, the first time the telecommunications industry had taken the minister on in the courts and won. VANS can now self-provide and 2009 should see a flurry of activity as those who can afford the licence fees and the infrastructure costs start putting their own equipment in place without having to go through Telkom. In the end the minister was distracted by politics.

“She had expressed her intention of having the Electronic Communications Act amended to clear up the 'ambiguity' of the licences,” noted ITWeb. “However, with the end of the parliamentary year looming, and the fact that politicians' attention will be focused on the run-up to next year's general elections, this seems to be a distant prospect.”

And so it proved to be.

Anton Potgieter, CEO of the Huge Group, says the Altech ruling will have an enormous impact on competition.

“The policy of managed liberalisation has had limited success thus far, and there's considerable merit in the market itself now being allowed to take the lead in addressing the high costs and limited service access inherent in our industry,” he says.

Jacques du Toit, MD of Orion Telecom, says the decision is double-edged.

“On the upside, it's been confirmed that, by next February, we'll have a licence,” he says.

“For the first time ever, there's a stake in the ground. We can start planning and working towards D-Day, and finally moving forward. The downside is that it opens the licence to everyone. In reality, not many of the 300 companies [awarded VANS licences] will be able to execute the licence to its full potential. This could create a situation where a lot of new, opportunistic entrants will emerge without the ability to deliver a reliable service. If not managed properly, it could harm the reputation of the industry.

“Our next step is to pursue and finalise the granting of the licence. Once this has been done and confirmed, we can commence with the new negotiations. By this stage, we will be deemed the same as Telkom and the other network operators, and will, therefore, be able to negotiate changes based on the fact that we will be an ECNS licence-holder and no longer a VANS licence-holder,” he points out.

For those VANS waiting for years to get started on building their own infrastructure, the magic words “the same as Telkom” must surely be sweet music to their ears. But, Hillel Schrock, business solutions director at Internet Solutions, agrees that an I-ECNS licence isn't an automatic ticket to equality with Telkom.

“It has become clear that, in reality, very few traditional VANS licensees will be able to make efficient use of an I-ECNS. Where smaller VANS will use additional licence rights is, ironically, for direct and indirect development of a society dependent on information for education, job creation and other societal progress. Unfortunately, up and down court processes, like the one driven by the Department of Communications, plays into the hands of those with an incentive to delay progress of competitive communications and of development.”

Could minister Matsepe-Casaburri limit the damage to herself and her department by amending existing legislation? According to Edwin Thompson, senior executive of operations, regulatory and legal affairs at Verizon Business, it would be a non-starter.

“In order for her to do that, she would have to, through the Electronic Communications Act (ECA), remove existing rights from licensees - rights generated by the original Telecommunications Act. That, in my opinion, should not be allowed to happen, as it would have a significant impact on investor confidence, and international and local investment trust in local government.

“Imagine, for example, what Telkom investors would think if rights were removed, limiting its offerings?” he says.

“The bottom line is that a key factor in the public proceedings leading to the drafting of the ECA was that the Act should never take away existing rights. In making such changes, it would send the message that no licence rights are secure. Therefore, investment in the telecommunications industry, as a whole, would carry high risk.”

VANS are finally allowed to self-provide. But, few will have the resources and the capital to offer telecommunications services to businesses and end-users.

The best we can hope for is that a few sizeable, but agile, players with that potential will start using speed to market, new technology and innovative pricing to give the incumbent telcos a royal kick up the backside. After years of delay and being ripped off, the beginning of the end may be in sight.

* With additional reporting by Samantha Perry and Paul Vecchiatto.
* Ivy 'well advised to lay off' - Paul Vecchiatto, ITWeb, 7 November 2008.

The last few months of legal punch and counterpunch was the penultimate round of a long boxing match between the DOC and the industry.

The key milestones that have passed in the last two years are as follows:

2006
February: Department of Communications minister Ivy Matsepe-Casaburri blasts the private sector for what she says is its reluctance to come to the party on the local loop. “One of the things I have learned about the private sector is that sometimes we do things in the hope that the private sector will come to the party,” she says. “But we have learned that the private sector doesn't always come to the party if it is not convenient for them.” Quite how the private sector is supposed to come to the party when it has been outlawed at every step isn't made clear.

Very few traditional VANS licensees will be able to make efficient use of an i-ECNS.

Hillel Shrock, business solutions director, IS

July: The Electronic Communications Act (ECA) replaces the Telecommunications Act. But the ECA doesn't recognise the TA's service categories and so specifies that conversion to the new licensing framework must take place.

August: The DOC minister publishes a list of various existing licensees, which needed to convert to the new regime.

2007
March: A draft matrix of those players that will be able to have VANS licences converted to ECNS licences is published by the DOC. The following month, Altech submits a response in which it asks to be allowed to self-provide.

October: ICASA publishes a second draft matrix and holds a workshop in which it grills potential licensees.

November: The third draft matrix is published. Altech is not among the lucky five that have I-ECNS licences “under consideration”.

December: ICASA decides that VANS will be converted to electronic communication services (ECS) licences - sans the extremely important 'n' for network - and that a competitive process will follow for ECNS licences.

2008
February: ICASA gives Altech a draft I-ECS licence for comment. Altech supplies the comment later in the month.

It would send the message that no licence rights are secure.

Edwin Thompson, senior executive of operations, regulatory and legal affairs, Verizon Business

March: ICASA holds hearings about the conversion of VANS licences, but it becomes clear that VANS will not be allowed to self-provide, ie, the conversion will only be to i-ECS licences. Altech objects strenuously, calling the process followed by ICASA illegal.

April: Altech applies to the Transvaal High Court, claiming ICASA has effectively done an about-turn on self-provision because of pressure from the DOC minister. Furthermore, it says the process has been flawed and that converted licences are now being treated as new applications.

31 August: The High Court rules that VANS may self-provide and should be issued with I-ECNS licences. Industry is understandably happy, especially when, a week later, ICASA says it will not appeal the decision, but will almost immediately issue VANS their eagerly-awaited I-ECNS licences.

19 September: The DOC minister says she will appeal, claiming danger to the government's managed liberalisation policy.

23 September: Altech informs ICASA that the High Court's judgement is still in effect and that what the DOC minister does is effectively irrelevant to it awarding the company an I-ECNS licence, on pain of contempt of court. ICASA agrees, but 10 days later withdraws its notice to start issuing licences.

20 October: The DOC minister urgently applies to stop ICASA issuing licences, claiming it will interfere with her right to appeal.

31 October: The High Court refuses the DOC minister leave to appeal, and orders her to pay costs. “As things stand, ICASA is now required to proceed to issue all VANS licences issued prior to 19 July 2008 with an I-ECNS licence as well as an appropriate ECS licence,” notes Ellipsis Regulatory Solutions lawyer Dominic Cull. “I would anticipate that ICASA will issue a further notice in this regard shortly. For the sake of clarity, note that the competitive process that certain VANS previously participated in, in order to obtain an I-ECNS licence, is now defunct and of no further relevance. This is clear from the judgement refusing the minister leave to appeal.”

6 November: The Pretoria High Court rules against Matsepe-Casaburri's urgent interdict against ICASA to prevent it from issuing telecommunications licences to VANS.

14 November: ICASA announces its intention to issue ECNS and ECS licences to VANS.

21 November: The minister announces she will not file a petition against the decision, leaving the way open for VANs to self-provide.