VZCZCXRO0905
RR RUEHDU RUEHJO RUEHMR
DE RUEHSA #4937/01 3541031
ZNR UUUUU ZZH
R 201031Z DEC 05
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 0563
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY

UNCLAS SECTION 01 OF 03 PRETORIA 004937 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
FCC FOR PBOATENG 
 
E.O. 12958: N/A 
TAGS: ECPS EINV ECON SF
SUBJECT: SOUTH AFRICA TELECOM REGULATOR CONSULTS WITH 
FCC 
 
 
SENSITIVE BUT UNCLASSIFIED; PROTECT ACCORDINGLY.  NOT 
FOR INTERNET DISTRIBUTION. 
 
REF: (A) PRETORIA 3001 
(B) PRETORIA 1441 
 
¶1. (SBU) SUMMARY.   Three FCC advisors met with 
telecommunications regulator ICASA (Independent 
Communications Authority of South Africa) to provide 
technical advice on competition and pricing during 
September 28-30.  FCC presentations covered US 
regulations and policies regarding pricing and 
fostering competition. ICASA is regarded by the 
telecommunications industry as a weak regulator unable 
to develop meaningful competition to the monopoly 
provider Telkom. FCC and ICASA concluded that they 
would continue to consult on the development of 
competitive alternatives to Telkom and, strengthening 
ICASA's capacity. END SUMMARY. 
 
¶2. (U) At the request of the Independent Communications 
Authority of South Africa (ICASA, the 
telecommunications regulator), a team of three senior 
officials from the Federal Communications Commission 
(FCC) traveled to Johannesburg September 28-30 to 
provide advice on regulatory matters.  The FCC team 
included Advisor for Africa and the Middle East Patrick 
Boateng, as well as Senior Advisor Jake Jennings and 
Senior Economist Chuck Needy of the Office of Strategic 
Planning and Policy Analysis.  Participating from ICASA 
were five of seven Councilors (equivalent to FCC 
Commissioners), technical and policy experts from 
ICASA, telecommunications industry representatives, 
Department of Communications (DOC) policy officials, 
and two Parliamentarians from the Portfolio Committee 
on Communications.  FCC presentations included 
unbundling the local loop to promote competition, 
pricing models for fixed and mobile services, as well 
as regulating undersea cable, broadband services, voice- 
over-Internet protocol (VoIP), and inexpensive Internet 
for schools. 
 
¶3. (U) The top priority for ICASA was to address the 
public outcry over high telecommunications prices. 
According to a market assessment study completed by 
Genesis Analytics in April 2005, telecommunications 
prices in South Africa were considerably higher than 
developed countries and most countries in its peer 
group.  Out of ten categories surveyed, prices in South 
Africa ranked the highest in the following five 
categories: international leased lines, business-local 
calls, business-ADSL, retail-ADSL, and domestic leased 
lines.  South African prices ranked second highest in 
business-mobile calls. (Ref A). 
 
¶4. (U) In advance of the FCC visit, ICASA conducted a 
needs assessment to identify areas for discussion.  The 
assessment identified five topics: VoIP regulation and 
access to emergency services, broadband regulation in 
general, pricing for telecommunications services, 
universal access (with particular emphasis on the 
implementation of the education-rate), and regulation 
of inappropriate content on mobile telephones.  In 
addition, the FCC team met with ICASA Councilors before 
starting the two and a half day consulting session to 
better understand ICASA needs. 
 
Industry Views 
-------------- 
 
¶5. (SBU) Industry representatives from Motorola, IBM, 
and WorldSpace also met with the FCC team before its 
consulting session with ICASA to identify areas where 
ICASA needed assistance.  Also participating in this 
meeting were a former Chief Operating Officer for 
Telkom (from SBC) and a legal advisor to a former ICASA 
Chairperson.  To a person, they each expressed 
frustration in their dealings with ICASA, an agency 
they criticized as being weak and incapable of 
fulfilling its mandate.  Industry representatives also 
characterized ICASA as becoming increasingly 
politicized.  As a case in point, they highlighted the 
compromise appointment of new ICASA Chairperson Parish 
Mashile, who they felt was inexperienced and probably 
incapable of providing the leadership needed to keep 
ICASA independent. 
 
¶6. (SBU) Industry representatives also believed that 
 
PRETORIA 00004937  002 OF 003 
 
 
the Minister of Communications held the balance of 
power on regulatory matters, and was pushing for even 
greater control.  As it stood, ICASA was wholly 
dependent upon DOC for line item funding.  Unlike the 
FCC, which derived more than 90% of its revenues from 
licensing fees and frequency auctions, ICASA was 
beholden to DOC for funding.  This hamstrung its 
mission, left it chronically short of funds, and caused 
many experienced staffers to seek greener pastures. 
They also pointed out that, at the time, DOC was 
pushing for passage of the Convergence Bill, now called 
the Electronic Communications Bill (Ref B).  The 
purpose behind this legislation was to make ICASA the 
sole regulator for telephony, post, Internet and data 
communications, as well as broadcast radio and 
television.  However, a DOC-sponsored amendment to the 
bill could have the Minister of Communications 
appointing the ICASA chairperson and all ICASA 
councilors.  This would threaten the independence of 
ICASA and further politicize the regulatory process. 
 
¶7. (SBU) Industry representatives expressed support for 
the development of a strong regulator.  However, 
frustrated with ICASA's performance, they seemed 
prepared to lobby DOC to achieve their individual 
objectives.  They were aware that if they took this 
route, they risked marginalizing ICASA.  Moreover, they 
believed that DOC possessed even less regulatory 
capacity than did ICASA. 
 
FCC Presentations 
----------------- 
 
¶8. (U) The FCC team opened the session with an overview 
of the U.S. system.  Boateng spoke about the FCC as an 
agency and its regulatory processes.  Jennings spoke 
about the U.S. regulatory framework and FCC policy 
goals, as well as fostering local competition and the 
roll out of broadband in the United States.  Jennings 
then led discussions on IP-enabled services (such as 
VoIP) and access to emergency services, as well as 
market power and market definition.  Boateng led 
discussions on alternative broadband technologies 
(WiFi, WiMax, broadband over powerlines), as well as 
administration of the U.S. Universal Service Fund. 
Needy led a discussion on fixed line and mobile 
telephone pricing, as well as undersea cable access and 
regulation.  Boateng concluded with a presentation on 
the administration of the U.S. Universal Service Fund. 
 
¶9. (SBU) ICASA sought expert advice on developing 
regulation that would enable a Second National Operator 
(SNO) to compete against Telkom and on ways to increase 
competition.  According to the FCC, ICASA could 
significantly reduce or eliminate the rates that Telkom 
charged for network access.  One way would be for ICASA 
to use foreign prices as benchmarks for access to 
leased lines, interconnections, and switched access. 
 
Fostering Competition 
--------------------- 
 
¶10. (SBU) Fostering competition was a major concern of 
ICASA officials.  South Africa had no coaxial cable 
television companies operating in its market and, 
therefore, this option for promoting competition was 
not viable.  The most immediate option appeared to be 
Eskom, South Africa's giant parastatal electric 
utility, which owned its own telecommunications network 
as well as a power grid that could be used to transmit 
broadband.  Eskom held a 30% share of the soon-to-be- 
licensed second national operator and a supplier 
relationship with municipal electric utilities that it 
could explore to role out local broadband services. 
[Note: In December 2005, ICASA finally issued a license 
to the second national operator (Septel). End Note.] 
 
Stronger Regulation Needed 
-------------------------- 
 
¶11. (SBU) FCC and ICASA concluded that they would 
continue to consult on the following initiatives: the 
development of competitive alternatives to the dominant 
provider Telkom via wireless broadband (WiFi/WiMax) and 
broadband over power lines; the reduction of access 
rates through stronger regulation and the use of 
foreign prices as benchmarks; and, strengthening 
ICASA's capacity politically, financially, as well as 
 
PRETORIA 00004937  003 OF 003 
 
 
operationally.  The FCC advisors and ICASA participants 
independently reported that the exercise "exceeded 
expectations." 
 
¶12. (U) Cable is based on FCC trip report. 
 
 
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