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FM AMEMBASSY PRETORIA
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INFO RUCPDC/DEPT OF COMMERCE WASHDC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

UNCLAS SECTION 01 OF 03 PRETORIA 000271 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
DEPT FOR EB/CIP/BA 
USTR FOR CATHERINE HINCKLEY 
 
E.O. 12958: N/A 
TAGS: ECPS ETRD USTR SF
SUBJECT: TELECOMMUNICATION LIBERALIZATION MOVING AT A 
SNAIL'S PACE 
 
¶1. (SBU) Summary.  ICT Officer met with Independent 
Communications Authority of South Africa (ICASA) 
officials to discuss implementation of the Electronic 
Communications Act (ECA).  Market analysis, licensing, 
and spectrum management were identified as the main 
focus for implementation.  ICASA experienced high 
management turnover after the promulgation of ECA, but 
the situation has since stabilized.  Officials 
identified spectrum management as a concern that could 
hamper telecommunication liberalization. Officials 
noted that, despite additional licenses to satellite 
television service providers, the market was "not 
likely to become competitive any time soon".  ICASA 
wants to increase competition in satellite 
broadcasting, but is also concerned about protecting 
public broadcasting.  Although ICASA has made some 
strides in liberalizing the South African 
telecommunication market, market entry is still 
difficult for smaller service providers.  End Summary. 
 
------------------- 
ECA Implementation 
------------------- 
 
¶2. (U) ICT Officer met with Independent Communications 
Authority of South Africa (ICASA) officials on 
February 4, 2008, to discuss the regulator's role in 
implementing the Electronic Communications Act (ECA) 
of 2005.  Councilor Dr. Tracey Cohen described the ECA 
as heralding a new regulatory framework for 
liberalizing the telecommunication market in South 
Africa.  Cohen stated that market analysis, licensing, 
and spectrum management were the three areas of focus 
for ICASA as it began implementing the ECA.  According 
to Cohen ICASA took "a very EU-style, ex ante approach 
towards market regulations."  This approach required 
ICASA to conduct market analysis after the ECA was 
passed.  ICASA identified approximately "forty-one 
distinct communications markets in South Africa and 
decided that fourteen to fifteen of those markets 
would require regulatory attention" for ECA 
implementation. 
 
¶3. (SBU) Licensing.  Cohen stated that all 
telecommunication licenses are required to be 
converted under the new ECA regulatory regime.  (Note: 
A service provider cannot broadcast in South Africa 
without a license.)  ICASA Chair Paris Mashile 
emphasized that the agency is "working around the 
clock to meet tight deadlines for converting existing 
licenses".  The statutory framework for ECA provided 
the agency with two years to complete this conversion 
process.  Cohen noted that "a six-month extension is 
built into this requirement and no sanctions will be 
applied if ICASA misses this deadline".  Cohen 
expected the process to be completed by the end of 
2008 at the latest.  (Note: The statutory deadline 
called for the conversion process to be completed by 
June 2008.) 
 
¶4. (SBU) Spectrum Management.  ICASA officials noted 
that spectrum management is the area of greatest 
challenge for ICASA.  The agency is looking for 
equitable ways to distribute remaining spectrum. 
ICASA discussed the possibility of creating a spectrum 
auction mechanism with the U.S. Federal Communications 
Commission (FCC) during consultations in Johannesburg 
in 2005.  However, Cohen believed that South Africa 
"did not have a lot of appetite for an auction 
method".  She commented that despite increases in the 
numbers of licenses under the new regime, "big 
licenses are still not available" in South Africa. 
The large national fixed-line and mobile operators 
such as "Telkom, Neotel, Vodacom, MTN, and Cell C had 
no problems in obtaining a converted license." 
Qno problems in obtaining a converted license." 
However, Cohen stated that smaller internet service 
providers (ISPs) and value-added service providers 
(VASPs) would have a tougher time.   Approximately 
eighty of these ISPs/VASPs would like to obtain 
licenses, "but the spectrum capacity does not exist to 
provide more than one or two of them" with licenses. 
 
------------------------- 
ICASA Management Turnover 
------------------------- 
 
¶6. (SBU) ICASA experienced high management turnover 
 
PRETORIA 00000271  002 OF 003 
 
 
after the promulgation of ECA.  On the operations 
side, ICASA lost its entire executive management team 
in a year.  (Note: Press reports indicate that some 
left as a result of interpersonal disputes with the 
new Chairperson and others because they thought the 
agency lacked independence.)  Officials stated that 
all of the vacated posts have been filled.  Dr. Cohen 
commented that most of the vacancies were filled from 
outside the agency and a few individuals were promoted 
internally.  Therefore, she thought "the operational 
management team as a whole would need time to get up 
to speed".  She believed that ICASA's concern with 
high management turnover is an issue of the past. 
Cohen noted that there were also discussions to reduce 
the size of the ICASA Council, its regulatory 
decision-making body.  Currently nine Councilors are 
appointed by the South African President to serve 
four-year terms.  She indicated that discussions are 
underway to reduce the number through attrition as the 
councilors' terms expired. 
 
--------------------- 
Areas for Improvement 
--------------------- 
 
¶7. (SBU) Cohen identified spectrum management as an 
issue that could hamper telecommunication 
liberalization.  In her personal view, "South Africa 
should set-up a spot spectrum trading market to allow 
companies to exchange surplus capacity."  However, she 
thought this approach was "too market-based" to be 
successful in South Africa.  She noted that "Telkom 
had more spectrum allocation then it could ever hope 
to utilize."  Other companies could benefit from 
access to this spectrum.  According to Cohen, this is 
a "vestige of the monopoly status Telekom used to 
enjoy" under the old regulatory regime.  Cohen 
expressed the view that Telkom would be approached to 
give up some of its surplus spectrum allocations.  A 
new policy to address spectrum management would take 
at least three to five months to develop.  Cohen 
underscored the benefits of the 2005 FCC consultations 
for ICASA.  She expressed a need for ICASA to invite 
the FCC to conduct a third workshop on spectrum 
management. 
 
¶8. (U) In a statement dated January 30, 2008, Paris 
Mashile implied that conversion to digital 
broadcasting would increase the availability of 
spectrum in South Africa.  He stated that the South 
African Government announced its intention to switch 
over to digital broadcasting on November 1, 2008, 
years ahead of the International Telecommunication 
Union (ITU) 2015 deadline.  Mashile hoped that 
conversion to digital technologies would free up 
spectrum for a variety of uses such as e-government 
services. 
 
-------------------- 
Digital Broadcasting 
-------------------- 
 
¶9. (SBU) Cohen noted that despite approving additional 
licenses to satellite TV service providers, satellite 
broadcasting in South Africa was "not likely to become 
competitive any time soon".  ICASA ran public hearings 
on digital broadcasting licenses as a part of the ECA 
implementation process.  The hearings resulted in a 
recommendation to grant five new licenses.  However, 
she noted that e.TV (the first privately owned but 
free-to-air television station in the country) decided 
not to pursue its satellite broadcasting license and 
that the remaining four recipients serve very "niche 
market segments such as Christian broadcasting".  She 
added that Telkom Media, a subsidiary of Telkom, would 
like to enter the satellite television market since 
Telkom is "desperate to diversify".  Nonetheless, 
QTelkom is "desperate to diversify".  Nonetheless, 
MultiChoice has a strong hold on the market through 
its existing exclusivity rights.  Multichoice has made 
statements in the press that "any attempt to undermine 
the principle of exclusivity would lead to less 
investment, lower quality, and less content." 
 
¶10. (U) ICT officer inquired about the regulatory 
environment for foreign satellite operators. 
According to Cohen, South Africa has tried to "develop 
a regulatory framework for satellite operations for 
 
PRETORIA 00000271  003 OF 003 
 
 
ten years now without much progress".  Foreign 
satellite operators are required to establish a 
majority stake (51%) local presence or partner with a 
local company under the current regulatory 
environment.  Cohen indicated that this was unlikely 
to change since the "current GATT framework only calls 
for a maximum of 49% foreign ownership" and "no 
country anywhere has the appetite for full ownership 
by foreign entities".  However, she stated that this 
is a policy issue and any changes would have to be 
decided by the Department of Trade and Industry. 
 
---------------------------------------- 
Controversy over Free-to-Air Broadcaster 
---------------------------------------- 
 
¶11. (SBU) Responding to a question about the clash 
between ICASA and United Kingdom-based broadcaster 
Free2View, officials said Free2View does not have the 
authority to provide satellite signals without a South 
African license.  (Note: Free2View launched a 
satellite service in January 2008 to provide free-to- 
air service requiring consumers to make a one-time 
satellite dish and decoder purchase).  An ITU 
satellite operations memorandum of understanding 
required satellite operators to obtain government 
approval before it "can have a footprint in a 
country".  ICASA has threatened Free2View with a court 
interdiction if Free2View does not obtain a license or 
wait for ICASA to finalize its free-to-air 
broadcasting framework.  (Note: ICASA is not expected 
to finalize a regulator framework for free-to-air 
broadcasting in the next year.) 
 
¶12. (SBU) The Free2View case highlighted a dilemma 
facing ICASA.  Cohen expressed the view that ICASA 
wants to increase competition in satellite 
broadcasting, but is also concerned about protecting 
public broadcasting.  She hoped that free-to-air 
broadcasters would help increase competition without 
increasing costs to consumers.  Cohen stated that 
there was an Interim Consent provision in the old 
regulatory regime that allowed free-to-air 
broadcasters to operate without licenses on a 
discretionary basis.  The ECA did not include a 
similar consent provision.  She added that in her 
personal view Free2View should be allowed to 
broadcast, but emphasized that she was in the minority 
among the councilors.  She believed that ICASA would 
either refuse to approve Free2View's dish and decoder 
or seek a court interdiction.  Cohen noted that the 
courts had established precedence for action against 
unlicensed broadcasters in a case involving another 
unlicensed free-to-air broadcaster that was illegally 
utilizing MutliChoice equipment to broadcast 
pornography. 
 
¶13. (SBU) Comment.  ICASA has made some strides in 
liberalizing the South African telecommunication 
market; however, lots of obstacles exist for further 
progress.  Established entities such as Telkom and 
Multichoice secured market share under prior monopoly 
regimes, which makes it difficult for new entrants to 
offer competitive services.  A number of smaller 
mobile service providers have entered the market, but 
most have yet to turn a profit.  Additionally, ICASA 
has been slow in converting licenses and establishing 
regulatory frameworks for free-to-air broadcasting and 
satellite operations that would increase competition. 
The agency appears to be the need to increase 
competition with regulatory concerns. Scarcity of 
spectrum is an area of concern that will require 
creativity to manage.  The agency could benefit from 
incorporating lessons learned from FCC's management of 
Qincorporating lessons learned from FCC's management of 
spectrum distribution.  Hopefully, ICASA will have an 
opportunity to do this if and when they host the FCC 
for a third regulatory consultation.  End Comment. 
 
END TEXT 
 
BOST