South Africa: TMT In South Africa - Year In Review 2013

Last Updated: 21 November 2013
Article by Zaid Gardner

Most Read Contributor in South Africa, September 2018

I OVERVIEW

The South African TMT sector, while generally regarded as open and flexible, has been subjected to erratic and inconsistent policy formulation and regulatory implementation during the past decade. There was much optimism at the time of the introduction of a second fixed-line network operator (Neotel) and the enactment of the Electronic Communications Act (the ECA) in 2005, when the ECA was seen as legislation that would unshackle the market constraints and enable the optimisation of a converged environment. However, the anticipated opening up of the market was, and continues to be, hampered by a number of legal and regulatory bottlenecks, primarily because the ECA places an unduly onerous administrative burden on the regulator. This has led to a state of stagnation, uncertainty and litigation in the sector. Although the ECA has fundamentally changed the market structure of the TMT sector, legally opening up the market to competition, this has yet to materialise in practice. Consequently, the South African TMT sector continues to reflect a market with a number of vertically integrated, and somewhat dominant, operators.

In May 2011 the South African Law Reform Commission (the SALRC) released a Discussion Paper to elicit responses from the Department of Communications on its preliminary findings and proposals regarding the review and amendment of all ICT legislation applicable in South Africa. Following the SALRC Discussion Paper, the Department of Communications published the ECA Amendment Bill in July 2013. The ICASA Act is being amended simultaneously to ensure consistency in the legislation applicable to the sector. The ECA Amendment Bill proposes a number of important changes, including aligning the ECA with broad-based black economic empowerment (BEE), incorporating certain changes relating to ownership and control of commercial broadcasting services, refining licensing issues and improving the competition provisions. It should be noted that this amendment process is part of the broader ICT Policy Review Process that is being undertaken by the Department of Communications and which is expected to be completed in or around 2016.

The ECA Amendment Bill remains in draft form, and accordingly, this chapter describes the position as it stands under the current provisions of the ECA. It should be noted, however, that once the final ECA Amendment Bill has been passed, such amendments are expected to have a far-reaching impact on the future regulatory landscape in South Africa.

II REGULATION

i The regulators

The communications sector in South Africa, comprising telecommunications, media, broadcasting and information technology (collectively 'the ICT1 sector'), falls under the supervision of the Department of Communications (the DoC).

The regulator is the Independent Communications Authority of South Africa (ICASA).

The independence of ICASA is of paramount importance and it must always act in the public interest in carrying out its key functions, including:

  1. making regulations and policies that govern broadcasting and telecommunications;
  2. monitoring the environment and enforcing compliance with rules, regulations and policies;
  3. hearing and deciding on disputes and complaints brought by industry or members of the public against licensees;
  4. planning, controlling and managing the frequency spectrum; and
  5. protecting consumers from unfair business practices, poor quality services and harmful or inferior products.

ii Regulated activities

Under the Electronic Communications Act (the ECA),2 ICASA is empowered to grant service licences to both telecommunications and broadcasting service providers. The types of licences that ICASA may issue are electronic communications network (ECN), electronic communications services (ECS) and broadcasting licences. The ECA also makes provision for instances of licence exemption.

Any person may, upon invitation by ICASA, apply for a licence. ICASA must give notice of the application for a licence in the Government Gazette, and:

  1. invite interested persons to apply and submit written representations in relation to the application within the period mentioned in the notice;
  2. include the percentage of equity ownership to be held by persons from historically disadvantaged groups, which must not be less than 30 per cent, or such higher percentage as may be prescribed;
  3. set out the proposed licence conditions that will apply to the licence; and
  4. give interested third parties an opportunity to submit written responses to any representations submitted in respect of a licence application.

Furthermore, ICASA may conduct a public hearing in relation to any application for a licence. After considering an application for a licence, ICASA must notify the applicant of its decision, the reasons for that decision and any licence conditions applicable, and publish such information in the Government Gazette. Whenever ICASA grants a licence, it must do so on standard terms and conditions applicable to the type of licence, however, ICASA may impose additional terms and conditions to the licence as it deems necessary. A licence granted by ICASA will be effective and valid on the date specified in the licence.

iii Ownership and market access restrictions

The ECA imposes a number of statutory restrictions on the ownership and control of broadcasting licensees; however, no similar restrictions are imposed on ECN and ECS licensees in the legislation, although ICASA may, in terms of the ECA, publish regulations limiting the ownership or control of an individual licence in order to promote ownership and control by previously disadvantaged individuals and to promote competition in the ICT sector. To this end, ICASA published a Discussion Document on Ownership and Control3 in November 2009 and public hearings for interested parties and stakeholders were held in May 2010. A 'findings document' was published in September 2011, but the final outcome of this public process is still awaited; until such time, the ownership and control regulations published in 2003 in terms of the legacy Telecommunications Act still apply.

ICASA is also empowered to publish regulations that limit or restrict ownership or control of individual broadcasting licensees in order to promote a diversity of views and opinions.

It should also be noted that an applicant for a licence in terms of the ECA must show that it is a South African citizen (in the case of a natural person) or that it will be registered in South Africa with its principal place of business located within South Africa. Accordingly, a foreign owner will be required to incorporate a local company in order to obtain a licence.

Foreign ownership

In terms of the ECA, a foreign national may not, directly or indirectly:

  1. exercise control over a commercial broadcasting licensee; or
  2. have a financial interest or an interest either in voting shares or paid-up capital in
  3. commercial broadcasting licensee, exceeding 20 per cent.

Furthermore, no more than 20 per cent of the directors of a commercial broadcasting licensee may be foreign nationals.

Concentration of ownership and control

Section 65 of the ECA imposes restrictions on concentration of ownership and control of commercial broadcasting services. This is aimed at ensuring that a single entity or a person cannot monopolise broadcasting in South Africa and limit the view and opinion to just one. Section 65 does not, however, define 'control'.

Cross-media ownership and control

The provisions of Section 66 of the ECA impose restrictions on cross-media control. This section aims to regulate the ownership and control over different types of media such as print, sound broadcasting and television broadcasting; once again, this is to ensure diverse views and opinions. Section 66(5) of the ECA deems a 20 per cent shareholding in a commercial broadcasting licensee as constituting control.

Black economic empowerment shareholding

BEE is a strategic economic policy adopted by the government of South Africa to encourage business to provide opportunities to black South Africans previously disadvantaged by apartheid to share in the economic ownership. The BEE strategy was formally recognised in South Africa through the enactment of the Broad-Based Black Economic Empowerment Act (the BEE Act)4 in 2004. The BEE Act requires organs of state (like ICASA) to take an entity's BEE status into account when:

  1. determining qualification criteria for the granting of licences and concessions;
  2. developing and implementing a preferential procurement policy;
  3. determining qualification criteria for the sale of SOEs; and
  4. developing criteria for entering into partnerships with the private sector.

Section 9(2)(b) of the ECA requires ICASA to prescribe BEE shareholding thresholds for applicants for new individual licences, which must be set at a minimum of 30 per cent, but does not make it mandatory for ICASA to impose minimum BEE shareholding quotas when converting existing licensees to the new licensing framework.

It should, however, be noted that one of the objectives of the ECA Amendment Bill is to change the focus of the ECA from empowerment of historically disadvantaged persons to broad-based BEE and, to this end, the ECA Amendment Bill proposes to replace the required equity ownership by historically disadvantaged groups in Section 9(2)(b) of the ECA with broad-based BEE requirements set out under Section 4(3)(k) of the ICASA Act.

iv Transfers of control and assignments

Mergers and acquisitions in the telecommunications and broadcasting sectors fall within the jurisdiction of two regulators: ICASA and the Competition Commission, established in terms of the Competition Act.5 It is intended that ICASA and the Competition Commission will engage with one another and interact with respect to the investigation, evaluation and analysis of mergers and acquisition transactions, and complaints involving telecommunication and broadcasting matters.

Where a merger requires the approval of both regulatory authorities, then the parties seeking approval are required to submit separate and concurrent applications to each regulator. Each regulator will then make independent determinations based on their respective legislative requirements, although they may consult during the process.

III TELECOMMUNICATIONS AND INTERNET ACCESS

i Internet and internet protocol regulation

Internet-based services are not as regulated in the same way as telecommunications-based services, and in general there is little specific internet-related legislation in South Africa. In general, internet services other than content services are classed as ECS in terms of the ECA. Providers of such services require only an ECS class licence to provide internet services on a national basis unless the provider also provides voice telephony services using numbers from the national numbering plan, in which case an individual ECS licence is required. VoIP is not regulated except to the extent that numbers from the national numbering plan are used to provide the services.

The other statute relevant to internet-based services in South Africa is the Electronic Communications and Transactions Act (the ECTA),6 which aims to provide for the facilitation and regulation of electronic communications and transactions and to provide for the development of a national Internet strategy for the country. The ECTA also facilitates universal access to electronic communications and transactions and the use of electronic transactions by companies and individuals. This legislation also establishes structures such as cyber inspectors to monitor and eliminate cyber crime.

ii Universal service

The Universal Service and Access Agency of South Africa (the USAASA) was established by the ECA's legislative predecessor and continues to operate under the ECA. The USAASA's functions include the promotion of universal access and universal service, to facilitate and offer guidance on universal access and universal service and to facilitate public participation on universal access and universal service matters. The USAASA is further tasked with administering the Universal Service and Access Fund (the USAF), and each licensee must contribute 0.2 per cent of its annual turnover derived from its licence activities (i.e., ECS or ECNS) to the USAF.

In addition, the South African government is the single stakeholder in a broadband infrastructure company called Broadband Infraco. The company is one of the main investors in the West African Cable System (WACS), a high-capacity submarine system linking South Africa with the United Kingdom along Africa's west coast that landed in South Africa in April 2011. The South African government aims to use Infraco as its means to provide broadband services to the South African population at a much more affordable rate.

iii Restrictions on the provision of service

There are no limits on an internet service provider's freedom to control or prioritise the type or source of data that it delivers. Neither are there any specific regulations in force that deal with net neutrality.

Furthermore, in terms of Section 78 of the ECTA, there is no general obligation on a service provider to monitor the data that it transmits or stores, or to actively seek facts or circumstances indicating unlawful activity. This has the implication of shifting the onus onto the user to make service providers aware of inappropriate or harmful material on websites. In order to benefit from these provisions, however, ISPs must have a process in place for handling take-down notifications, and must also be a member of a recognised industry body.

The only recognised ISP industry body currently in South Africa is the Internet Service Providers' Association.

As a general rule, anyone who participates in the publication of defamatory content may be liable for defamation. For example, where defamatory content appears in a newspaper, not only the author but also the editor, printer, publisher and owner can be held responsible. Once it has been established that a website contains defamatory statements, then a take-down notification process should be applied.

iv Security

Section 2 of the Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA)7 generally prohibits the interception of any communications or transmissions in South Africa – Section 1 of RICA defines 'communications' as including both direct and indirect communications (which are in turn defined in RICA).

However, RICA does permit interception in certain circumstances, for example, if one of the parties to the communication has given written consent to such interception. In addition, law enforcement officers may intercept a communication without the consent of the parties if he or she has reason to believe that such communication is, among other things, a threat to public safety or national security.

Privacy and consumer protection

South Africa has not yet promulgated any specific legislation governing data protection or privacy. However, these matters are regulated in other legislation such as:

  1. the Constitution;8
  2. ECTA; and
  3. RICA.

Section 14 of the Constitution grants every person the right to privacy. In particular, Section 14(d) protects the right not to have the privacy of one's communications infringed. The courts have previously held that eavesdropping and electronic surveillance by private detectives and the stealing of tape recordings of confidential business meetings are criminal invasions of privacy. The courts have also previously held that a reasonable expectation of privacy is violated when a telephone conversation is intercepted by a third party without the knowledge or consent of the participants. As is the case with most Constitutional rights, the right to privacy is not absolute and is subject to limitation in terms of Section 36 of the Constitution. The limitation of the right has to be reasonable and justifiable.

Chapter 8 of the ECTA contains certain consumer protection provisions in relation to the collection, collation, processing and disclosure of personal information. To this end, Section 51 of the ECTA specifically requires that a data controller must obtain the prior written consent of the subject in order to process his or her information. However, it should be noted that the ECTA only applies to electronic transactions, and compliance with Chapter 8 is voluntary.

The above notwithstanding, a draft data protection law (in line with the UK and European data protection principles) – the Protection of Personal Information Bill (the PPI Bill) – has been proposed and is expected to come into force in the near future. The PPI Bill provides a broader and more comprehensive scope of protection in respect to the processing of personal information by responsible parties established either within or outside South Africa.

The PPI Bill is applicable to natural persons and juristic persons, and information that is protected includes personal information about an 'identifiable person', and the PPI Bill also makes provision for processing of special personal information. Special personal information relates to, for example, information concerning a person's religion or philosophy of life, race, political persuasion, sexual orientation and health.

The PPI Bill makes provision for the data subject to give his or her consent as a requirement for processing of personal information and also requires that personal information be collected for a specific, explicitly defined and legitimate purpose and that data should be related to the purpose for which it is to be used. The PPI Bill provides for the responsible party to take 'reasonably practicable' steps to make the data subject aware that the information is being collected; that it is being supplied by the data subject either voluntarily or not, and if not, the consequences that would result in a failure to reply, the name and address of the responsible party; and the law under which the collection is authorised.

Furthermore, the data controller must take adequate security measures to protect the confidentiality, integrity and availability of the information and no unauthorised persons should be permitted to view the information, no unauthorised person may alter the information and information must be readily available on demand.

Protection for children

Section 28 of the Constitution protects children's rights, particularly in terms of Section 28(2), where the interests of a child are considered to be of paramount importance and have to be protected at all times even from harmful content. In addition, the Children's Act9 is the overarching legislation that deals with issues pertaining to children in South Africa.

The Films and Publications Act (the Films Act)10 aims to regulate the creation, production, possession and distribution of certain publications and films by means of classification, the imposition of age restrictions and the giving of consumer advice. The Films Act places particular emphasis on the protection of children against sexual exploitation and ensures that the use of children in pornographic publications, films or the Internet is punishable.11

The Films Act also establishes the Film and Publication Board (the FPB).12 The executive committee of the FPB must appoint classification committees to carry out the functions assigned to these committees in the terms of the Films Act.13 The FPB is responsible for assessing all complaints against a particular film or publication that have been brought to its attention, and liaising with the classification committee with which it then gives the film or publication the appropriate age restriction if it has not already done so. The Films Act requires that age restrictions should be made clear to anyone intending to view material.

Cybersecurity

Chapter 13 of the ECTA deals with cyber crime. Section 86 and 87 list the situations in which a cyber crime is committed. These include:

  1. interception of communication without the consent of the communicating parties;
  2. using computer devices to overcome security measures used to protect data; and
  3. computer-related fraud and forgery.

The DoC has published a draft cybersecurity policy for South Africa (the draft policy).14 The draft policy provides that:

  1. a National Cybersecurity Advisory Council will be established to coordinate all cybersecurity initiatives at a strategic level;
  2. computer security incident response teams must be established to identify, analyse, contain, mitigate and report on the threats relevant to the parties;
  3. there is a need to develop proactive measures for the prevention of cyber crime; and
  4. there must be a development of regulatory, legal and technical for the reduction of cybersecurity threats.

Unfortunately, the draft policy has not yet been enacted into law, and as such has no legal force or effect in South Africa at this time.

IV SPECTRUM POLICY

No person may transmit radio signals in South Africa without a radio frequency spectrum licence. Chapter 5 of the ECA deals with the radio frequency spectrum.15 ICASA is empowered by the ECA to control, plan, administer and manage the use and licensing of the radiofrequency spectrum. In exercising this power, ICASA must have regard for regulations made by the International Telecommunications Union, the amount of spectrum available in the territory in which the licensee plans to operate, the type of services that the spectrum is to be used for and spectrum allocated to security services.

In March 2011, ICASA published the Final Radio Frequency Spectrum Regulations,16 which are intended to act as an umbrella set of regulations that are in principle applicable to all areas of radio frequency spectrum and to all types of licensed services, and are applicable to all frequency bands. These regulations establish the framework through which ICASA may allocate and assign radio frequency spectrum under the National Radio Frequency Plan.17 The regulations also set out the procedure and criteria for awarding radio frequency spectrum licences for competing applications, or instances where there is insufficient spectrum available. It is envisaged that these spectrum regulations will ensure transparent, fair and efficient procedures for radio frequency spectrum licence applications, and allow greater flexibility such that special conditions and procedures for specific frequency bands may be applied.

ICASA is also mandated by the ECA to plan for the conversion of analogue uses of the radio frequency spectrum to digital, including the migration to digital broadcasting in its preparation and modification of the radio frequency spectrum plan.

At one point the introduction of a Spectrum Management Agency was proposed. The Agency would be tasked with overall responsibility for the management of radio frequency spectrum in South Africa. However, this proposal has been held over and will be dealt with under the broader ICT Policy Review Process, which is under way. Until such time, ICASA remains responsible for the planning, allocation and management of spectrum.

V MEDIA

The Broadcasting Act, together with the ECA, regulates broadcasting activities, and both distinguish between public, commercial and community broadcasting services. These broad categories of broadcasting services are divided into the following subcategories:

  1. free-to-air broadcasting services;
  2. terrestrial subscription broadcasting services;
  3. satellite subscription broadcasting services;
  4. cable subscription broadcasting services; and
  5. any other class of licence prescribed by ICASA from time to time.

The South African Broadcasting Corporation (SABC) currently holds a public free-to-air broadcasting service licence, authorising it to provide three television channels (SABC1, SABC2 and SABC3) and various sound broadcasting services including 5fm, Metro FM, Radio 2000 and SAFM, among others. Electronic Media Network Ltd (M-Net) holds a private terrestrial subscription broadcasting service licence, authorising it to provide national pay television services.

ICASA has also issued approximately 90 four-year community radio broadcasting licences in nine provinces.

MIH Holdings Limited, through MultiChoice Africa, operates a subscription satellite broadcasting service, DStv. Four further subscription satellite broadcasting services were licensed by ICASA in 2008.

The South African government approved the Broadcasting Digital Migration policy18 in 2008 for the conversion of television broadcasting signals from analogue to digital. The policy provides a framework in which migration will take place in South Africa. The South African government has committed to the digital migration of television broadcasting services by 2015.

VI THE YEAR IN REVIEW

The ECA Amendment Bill (together with the amendments to the ICASA Act), published in July 2013, proposes a number of important changes, and signals a significant shift in the regulatory landscape in South Africa. The stated objectives of the ECA Amendment Bill include aligning the ECA with broad-based BEE, incorporating certain changes relating to ownership and control of commercial broadcasting services, refining licensing issues and improving the competition provisions. The provisions of the ECA Amendment Bill remain to be finalised, but it is expected that the amendments, once passed, will potentially have an impact on all commercial entities operating in the ICT sector in South Africa. The persistently topical subject of data protection is also expected to dramatically increase the demands on the compliance and operational requirements of organisations when the Protection of Personal Information Bill is passed into law, in the process bringing South Africa into alignment with its UK and European counterparts.

Over the next 12 months, the main policy and regulatory objectives in the sector which ought to take up significant attention and resources include stabilising the South African Broadcasting Corporation (SABC); the finalisation of the South Africa's national broadband policy (which is expected to pave the way for nationwide broadband by 2020); taking meaningful steps to ensure that spectrum allocation gets off the ground; as well as the launch of the much-awaited transition to digital television. The publication of a comprehensive framework for the unbundling of the local loop, which is currently dominated by Telkom and which has been stalled over the past 24 months, will also be an important development for purposes of increasing competition and ultimately benefitting the consumer.

VII CONCLUSIONS AND OUTLOOK

This chapter has highlighted the fact that the TMT sector in South Africa is competitive, dynamic and challenging, and the issues related to it are broad and constantly in flux. There is a clear need for more comprehensive and coherent policies to be established by the Department of Communications, and thereafter efficiently managed and implemented by the regulator ICASA. Such policies must promote competition in the market; encourage investment and innovation as well as a diversity of views; coordination of state enterprises active in the TMT sector; and a targeted universal services strategy to deal not only with the gaps in the market, but demand-side stimulation of the market. Notwithstanding these challenges, the latest developments, not least of all the proposed amendments in terms of the ECA Amendment Bill, should ensure that the TMT sector in South Africa is poised to enter an interesting – and hopefully positive – new phase.

Footnotes

1 ICT is defined in Section 1 of the ECA as meaning 'information, communications and

technology'.

2 Act 36 of 2005.

3 Government Gazette No. 32719, 17 November 2009.

4 Act 53 of 2003.

5 Act 89 of 1998.

6 Act 68 of 2008.

7 Act 70 of 2002.

8 The Constitution of the Republic of South Africa 1996.

9 Act 38 of 2005.

10 Act 65 of 1996.

11 Section 2.

12 Section 4(3).

13 Section 10(1).

14 Government Gazette No. 32963, 19 February 2010.

15 Section 1 of the ECA defines radio frequency spectrum as: 'the portion of the electromagnetic

spectrum used as a transmission medium for electronic communications.'

16 Government Gazette No. 34172, 31 March 2011.

17 Government Gazette No. 33409, 30 July 2010.

18 Government Gazette No. 31408, 8 September 2008.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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