a group subsidiary

Irene CharnleyCommercial Director

28 September 2001

Comments on the Telecommunications Amendment Bill Comments on the Telecommunications Amendment Bill

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Objectives of the Bill

1. Prevention of potential anti-competitive behavior Policy should enshrine the principle of preventing abuse of

market dominance, hence ensure a truly competitive market

2. Lowering of input costs Efficient utilisation of existing infrastructure will reduce input

costs, incentivise investors and lower costs to consumers

3. Promotion of customer choice Competition enablers must be implemented quickly and in a

sustainable manner to facilitate customer choice

To ensure sustainable competition, the following should be considered:

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Objectives of the Bill

Ensure reasonable market entry costs

Create an environment that enables new entrants to compete with Telkom

Liberalise sector in a phased manner to allow investors to recoup some costs

Provide incentive for infrastructure investment:

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M-Cell welcomes…

One additional operator with further licences to be

considered after 2005

Social development objectives eg E-rate & EDU NET

Broader economic participation via provisions for

SMME and BEE ownership

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Key comments

1. Infrastructure sharing provisions inappropriate

2. Delay in carrier pre-selection is anti-competitive

3. Universal Service Fund should fund USO roll-out targets

4. Only minimal amendments really necessary

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Infrastructure sharing

Inadequate provision for infrastructure sharing will:

Limit customer choice and competition in some areas

Increase the cost of services to the consumer

Lead to over-supply of facilities which is not matched by market demand

Result in inefficient and wasteful duplication of infrastructure

AND

Undermine SNO’s ability to expand into new areas not already connected to Telkom’s network

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Infrastructure sharing

Proposed two-year infrastructure sharing period:

Undermines role of ICASA to regulate interconnection

and facilities leasing

Inconsistent with internationally accepted principles of

infrastructure sharing

Conflict with Competition Act in relation to access to

‘essential facilities’

Temporary – hence not a policy issue

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Infrastructure sharing

Vital for SNO to gain access to Telkom local loop on non-discriminatory terms Residential customers and SMMEs not able to use SNO as a

local operator

International move towards LLU – critical catalyst for wider and cheaper internet access

Additional lines to existing customers will not increase real penetration

Local Loop Unbundling (LLU)

Policy should mandate ICASA to implement LLU over an appropriate timeframe

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Infrastructure sharing

S 32A (2), (3) and (4) dealing with two year sharing period

should be deleted

S 44 should be amended to provide for ongoing sharing of

facilities between PSTS and other operators

S 44 (7)(b) should be replaced with a mandate for ICASA

to implement Local Loop Unbundling

Conditions of access (ie interconnection, infrastructure

sharing and facilities leasing) to remain ICASA’s

responsibility as per amended S 43 and 44

Proposed amendments

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CPS enables customers to select their carrier of choice without having to dial a prefix

CS enables customers to select carriers on a call by call basis by dialing a prefix

Carrier Pre-selection (CPS) and Carrier Selection (CS)

WHAT DO THEY DO?

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Carrier Pre-selection (CPS) and Carrier Selection (CS)

WHY ARE THEY SO IMPORTANT?

Several years needed for SNO network to provide comparable levels of local access to that of Telkom…

THEREFORE

… without CPS and CS, customers not directly on SNO network will have no alternative to Telkom, even for national or international calls

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Carrier Pre-selection (CPS) and Carrier Selection (CS)

Allows consumers to benefit from competition from day 1 on national and international calls

Greatly facilitates customer choice by allowing customers simple access to multiple carriers

BUT

CS alone is not effective in promoting competition - dialing prefixes is a deterrent for customers

IF IMPLEMENTED?

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Carrier Pre-selection (CPS) and Carrier Selection (CS)International experience suggests a direct correlation between CPS and increased competition

Where CPS implemented, competitors’ market share

higher

With CPS: Sweden (24%), Austria (37%) compared to

No CPS: Spain (8%), Portugal (2%)

Early CPS: Switzerland - 45% in ILD traffic, 31% in NLD

Swedish regulator confirmed positive impact of CPS

89% of population aware of CPS, 1.1m households chose

alternative operator to Telia

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Carrier Pre-selection (CPS) and Carrier Selection (CS)

S 1(a) needs to be expanded to differentiate CPS

from CS

S 31 should provide for phased implementation of

CPS and CS from 7 May 2002

S 31 should also mandate ICASA to commission a

study (over a fixed period) to determine the most

cost-effective implementation plan

Recommendations:

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USO roll-out targets should be funded from USF Implementation should be carried out by industry

Money contributed to be used for two purposes:

co-ordinating skills training and development, for support

promotion of SMMEs service roll-out in under-serviced areas, creating sustainable

employment

Implementation coordinated by USA - roll-out

proportionate to investment by each operator

Universal Service Fund

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Only minimal amendments necessary

Telecommunications Act of 1996 well drafted and largely capable of giving effect to:

M-Cell recommends that amendments are affected only

where necessary

Government’s national economic objectives

1996 White Paper on Telecommunications

New telecommunications policy directions

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Only minimal amendments necessary

Interconnection and facilities leasing – existing sections 43 and 44

Under-serviced area licences – existing section 39

Sentech licence – existing section 38

Multimedia licence and definition – existing section 40 and the Broadcasting Act

…For example

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Conclusion

M-Cell supports the broad vision of the policy

Bill’s main objective should be to promote sustainable competition, and attract new investment through:

Implementation of competition enablers - CPS/CS (immediately), and LLU over time

Ongoing infrastructure sharing regulated by ICASA

Upholding ICASA’s role and power in regulating the industry

Telecoms Act of 1996 is well drafted and requires minimal amendments

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THANK YOU