The Independent Communications Authority of SA (ICASA) is failing in its mandate to create regulations that govern a competitive telecommunications environment, say industry insiders.
Key regulations regarding issues such interconnection termination rates, local loop unbundling and spectrum allocation have either been stalled or have not yet reached conclusion within the statutory period prescribed.
While the authority has cited complexity of market definitions, contradictions within the law or the absence of technical or administrative capabilities, leaving these regulations in limbo means the ideal of a competitive market remains unattainable.
“A competent independent and efficient regulator is always a vital component to the telecommunication industry. The current lack of delivery and apparent efficiency at ICASA gives the regulator and, by extension, the country, a poor reputation,” argues WWW Strategy MD Steven Ambrose.
“Of more importance is that the lack of delivery creates an environment of uncertainty and this translates into lower investment and growth, as the last thing any business needs is uncertainty,” he continues.
Ambrose argues that the lack of decisiveness and delivery from ICASA militates against its mandate to level the playing field, and facilitate competition, and this allows incumbent operators to continue with uncompetitive practices to the detriment of all concerned.
A recent research paper, by Research ICT Africa, highlights the authority's failure to deliver on these regulations and points to the effect this failure is having on creating competition in the industry.
Regulatory inefficiency
The research paper prescribes that regulatory bottlenecks in the existing law need to be removed for the new licensees to compete effectively in the market.
The paper points to examples of key regulations that have yet to be concluded. These include enquiries into spectrum allocation, particularly for high-demand WiMax spectrum, which started in 2006, but were not concluded, despite the conclusion of public hearings and the publication of a spectrum findings paper in June 2008.
It is unclear what the delay in this process is attributable to, but the licence conversion and recent approach of pricing spectrum to international benchmarks may have had some impact, highlights the paper. The Department of Communications has subsequently announced its intention to conduct a spectrum audit, but anticipates this will take two years.
“The failure to introduce these pro-competitive measures has had a chilling effect on new and aspirant entrants into the market, and is unquestionably a major contributor to the much lamented high cost of communications in the country,” notes the research paper.
Of more concern is the authority's indecision regarding key interconnect termination and local loop unbundling (LLU) regulations.
Decision pending
Research ICT Africa points to the lack of clarity regarding interconnect termination rate regulations, and that this is also undermining competition in the industry.
The lack of progress between mobile operators and the regulator eventually forced the DOC to issue a directive to ICASA the day before parliamentary public hearings were to begin, to reduce termination charges to no more than 50% above cost by the end of November 2009.
The directive, however, did not say when and how this would be done, and ICASA retained its position that it would be required to proceed with a formal process. However, the process is ongoing and still no decision has been made regarding the final regulations.
“Interconnect rates are critical to enabling newcomers to access the networks of dominant players on a 'level playing field' basis,” notes BMI-Techknowledge director of research Brian Neilson.
Research ICT Africa also highlights the urgent need for regulations regarding local loop unbundling.
LLU is provided for under the Electronic Communications Act. To this end, the minister of communications set up the Local Loop Unbundling Committee to address the issue of access to Telkom SA's last mile network. This is commonly referred to as the local loop.
The LLU process includes a number of regulatory interventions aimed at providing new market entrants access to the incumbent's local access network. The rationale behind LLU is to foster competition and reduce telecommunications costs by eliminating large investments by competitors to build their own infrastructure for last mile connectivity, explains the paper.
LLU is expected to encourage service-based competition, thereby encouraging innovation and growth of the telecommunications industry. The implementation of LLU is expected to be complete by 2011, according to ICASA.
Neilson argues that LLU is widely held as a great enabler, but, in fact, studies overseas have shown that it is most effective if it follows in the wake of significant infrastructure-based competition - which in SA is not yet in place. Full LLU is very difficult to implement and unlikely to happen any time soon.
“Decisive actions must be taken in certain areas, such as the local loop unbundling issue and the pricing of the interconnect termination fee; currently, ICASA appears to be under-resourced and, as a consequence, they are unable to coherently and efficiently create and enforce the actions that need to be implemented to successfully tackle these issues,” argues Ambrose.
Thus, analysts argue that it may still be a while before the market sees any real change in the regulatory environment.
“The solution is a complex and difficult one, as government has indicated that it wishes to control ICASA more directly, but has given no indication on how ICASA will operationally deliver on its mandate,” Ambrose concludes.
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