Telcos unhappy over digital billions

Johannesburg, 14 Aug 2008

Telecommunications operators are unhappy over a proposal that could see them pay billions for the subsidisation of government's digital migration.

This comes as communications minister Ivy Matsepe-Casaburri announced she wants telcos' annual contributions to the Universal Service and Access Fund (USAF) to be increased five-fold, from a current 0.2% of profits, to 1%.

The USAF is to be used, among other things, to fund the roll-out of set-top boxes (STBs) to five million households so consumers can receive digital TV.

According to Universal Service and Access Agency of SA CEO James Theledi, the 0.2% per year paid by telcos at the moment represents just under R200 million, paving the way for them to pay up to a R1 billion a year in future, if Matsepe-Casaburri gets her way.

Government needs R2.45 billion to cover 70% of the cost of the STBs for poor households.

Telkom, Vodacom and MTN have contributed to the fund since 1999 and Cell C from 2001. Neotel is yet to contribute and, while the Electronic Communications Act allows for a broadening of the contribution base, this has not happened yet. According to Theledi, the accumulative amount in the fund, gathered by the USAF since inception, currently stands at about R800 million.

'Bottomless pit'

The Department of Communications (DOC) has not briefed the operators on the proposed use of the fund's money, or the proposed increase in contributions, and all say they are awaiting details from the department.

Regulatory officials from these operators and other industry organisations would not speak on the record, but expressed frustration at paying into a "bottomless pit".

They also expressed concern about the fund's lack of transparency, in particular the fact that it has hardly been used for its original objectives, namely infrastructure development for the previously-disadvantaged, disabled people and rural connectivity.

Furthermore, they are concerned that there seems to be no true reconciliation of how much money is actually in the fund, and whether the money is readily available.

"It has been a dream of government to use the money in the USAF for some time, but whenever it has tried to, it has turned into a nightmare," a former DOC official says. "A major issue is that the USAF is not public money, but belongs to the operators as they make 'contributions' in terms of their social obligations that are part of their licence conditions."

A regulatory executive from one of the network operators says: "We have been contributing to the fund since inception, and it has been used for absolutely nothing."

The executive says an audit of the fund is needed, and a proper three-year plan should be developed and implemented.

Might as well use it

Another telco regulatory official says: "Nothing has been done to help get disabled people connected, yet they make up 10% of our total population. Once the fund is being used for what it was originally meant for, then maybe we can talk about subsidising set-top boxes."

"Because the fund is not ring-fenced (money kept specifically aside by National Treasury) and is going into the general pot of the National Revenue Fund, we have no idea what is really available for any projects," a third regulatory executive says.

A counter view expressed by a former ICASA councillor is that since the fund is not being used for anything at all, it might as well then be used for subsidising STBs.

"I am sure the telcos will not be happy about this; however, let's face it, the fund has achieved nothing useful. And what's more, the roll-out of digital TV has been subsidised in every country where it has happened. For instance, the US has allowed for a voucher system, irrespective of the household's ability to buy a set-top box," the ex-councillor says.