VANS face more hurdles

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 21 Jan 2009

The Independent Communications Authority of SA's (ICASA's) slow pace in publishing licence fee regulations has local value-added network service providers (VANS) treating their new permits with caution.

The licence, which could allow several of the larger VANS to compete directly with the incumbents, may well come with a hefty price tag, which ICASA has yet to disclose. Companies like MWeb and Vox Telecoms are extremely concerned that the costs will render the licence worthless.

According to the draft regulations on the fees that ICASA has presented, the authority is looking to take a percentage of the revenue a company earns through the use of the ECNS licence.

The figure is currently set at 3% of gross revenue, which many of the VANS contested in last week's hearings on the matter. The figure essentially sees several companies paying around 30 times more than they did for their old VANS licence.

The long-fought battle to allow the VANS to self-provide seemed to come to a close last week, when ICASA finally placed the physical ECNS licence in the hands of providers. However, what should have been a step to true liberalisation of the telecoms market has been marred by what many are calling excessively high fees.

No celebration

VANS currently pay 0.1% of their annual turnover derived from licensed activities to ICASA, plus another 0.2% to the Universal Service and Access Fund.

MWeb CEO Rudi Jansen says the company waits with baited breath to hear the outcome of last week's hearing. “We will have no security in our new conversion until we know what we will be expected to pay.”

Jansen says MWeb's preference would be to have a fixed fee that can be budgeted for easily. However, he says representatives at the hearing submitted that the fee be dropped to 0.5% of revenue.

MWeb also hopes ICASA will accept its suggestion of a value-add fee system. Jansen explains that if MWeb adds value to a Telkom ADSL connection, then MWeb should pay the percentage. However, if it simply sells a Telkom ADSL connection, then Telkom should pay the percentage.

Vox Telecoms also has serious concerns around the current stipulation, saying 3% could represent R100 million a year for the company. It feels a figure in that region would not be worth the licence conversion.

The regulations also stipulate a new tax system, which would only add to that fee. Vox is likewise less excited by the conversion than it could have been.

Allied Technologies, the company that led the licence conversion battle, was not available to explain its stance on the licence fees, or its plans for the licence. However, CEO Craig Venter, in a media statement yesterday evening, said: “Strategies stemming from the issuance of the licences will be put in place which will significantly benefit the business and enhance shareholder value. We will announce details of these strategies in due course.”

Xhead = Cost of regulation

ICASA acting CEO Masie Mamaregane explained in an earlier interview that the fee structure should only be completed by March.

Mamaregane added that the proposed licence fee structure is based purely on economics and has nothing to do with the politics of issuing the licences. ICASA says the major factor in the fees is to cover the cost of regulating the industry.

ICASA's annual report shows that, in the 2008/9 financial year, it collected R2.1 billion in fees that went straight to National Treasury, while it had a budget of R250 million.

The regulator contends that ECNS licence conditions are generous, as a holder has the right to build a network, choose a frequency from the national spectrum, subject to availability, and participate in the national numbering plan.

WiMax next

The fee structure is not the only hurdle left for companies like MWeb and Internet Solutions, both of which hope the ECNS licence will lead to WiMax spectrum.

Jansen says the company has been planning the roll-out of WiMax networks in SA for years. It has already run several trial networks on a trial licence from ICASA. However, they were shut down after the licences expired last year.

The company will now have to start working towards meeting the requirements set out by ICASA to just compete in a planned auction for WiMax spectrum. The other option for the company is to fight the stipulations.

Last year, ICASA announced that companies hoping to receive WiMax spectrum could bid for it if they matched a 51% empowerment requirement, among others. Neither MWeb, nor Internet Solutions, have a BEE rating that would allow them to participate.