ICT Sector Performance ReviewDepartment of Communication Stratplan20 July 2011Alison GillwaldExecutive Director, RIAAdjunct Professor, Management of Infrastructure Infrastructure Reform and Regulation, Graduate School of Business, University of Cape Town

Outline

Role of sector in growth

Sector contribution to economy

Global benchmarking

Benchmarking Africa - access, usage, pricesFixed-lines

Mobile

Interconnection

Internet/Broadband

Leased lines

Regulation

AnalysisAbsence of policy/vision

Lack of co-ordination (cross cutting nature of ICTs)

Legal framework - Institutional arrangements

Market structure - concentration/ownership

Licensing - ahead and behind

Universal Access - over taken by events

Broadband Policy - absence of vision/strategy

R &D

Policy recommendations

SA national indicatorsGDP growth since 1994 3.3%, last quarter 1.3%

GDP per capita $10700 - high GINI co-efficient

Contribution of transport, communications and storage 4.7% (7% estimate for ICT) of which telecommunications is about 3%.

Technology BOP (2006) - US 1.6 bilion payments vs Us200m in receipts

Less than 100 patents p/a - 0.02% of global patents

Poor human development - Life expectancy & Education

.91% of GDP on R&D expenditure (2009

1.4 Researchers per 1000 population (2009)

.61% share of world ISI publications

300 engineers produced annually

Total telecom income in 2008 R150m

National Planning Commission

SA ICT SectorTwo fixed fixed network operators + state owned broadband company

Three mobile operators building competing backbones

5 first tier Internet access providers with hundreds of ISP (ICT) and electronics sector comprises more than 300 companies and in 2001 was ranked 22nd in total worldwide IT spend.

Ministry of

and Public Enterprise

National regulatory agency (ICASA)

Universal Service Agency of South Africa.

e-skills Institute/Meraka Institute/Nemisa

DOC Vision 2020

(Lack of)Macro-economic ICT indicators

2005 2006 2007 2008 2009

ICT expenditure (% of GDP)

Mobile communications investment (current LCU)

Revenue from fixed services (USD)

Revenue from mobile services (USD)

Telecommunications investment (% of revenue)

Total income for the post and telecommunication industry (2006)

Telecommunications revenue (% GDP)

Value added, transport, storage and communication (constant LCU)

9.436 9.73 -- -- --

-- -- -- -- --

23 076 millions -- -- -- --

10 718 millions -- -- -- --

-- -- -- -- --

136 859 millions (*)

6,38 7,43 -- -- --

109 037 millions

114 455 millions

120 445 millions

126 041 millions

--

Source:ITU Indicators 2011The World Bank Indicators 2011(*) StatsSA

ITU -IDI

IDI: Three stages in the evolution towards an information-society:

1. ICT Readiness (infrastructure, access)

2. ICT Use (intensity)

3. ICT Capability (Skills)

Tunisia:

2002: 94 2007: 83

Turkey:

2002: 63 2007: 59

SOUTH AFRICA

2002 rank 77th

2005: rank 91st

2007: rank 91st

2008: rank 92nd

(WEF) Network e-Readiness Index

South Africa stable at 61st place (138 participating countries)

Fallen from 34th in 2004, 37th in 2005, 47th in 2006, 51st in 2007, 52nd in 2008. Gained only a position from 2009, when it ranked 62nd

It is only ranked 95 in terms of usage componentMajor barriers to market growth:

Lack of competitive or affordable backbone infrastructure/ bandwidth

High costs of access to communications

Effective regulation

Source: Nokia 2011 in Lirneasia, 2011

“Internet: still a significant gap between the richest countries and all the rest, which have a mix of larger-country stars (VietNam, China) that punch above their category averages, and dogs (South Africa, India) that fall well below”.Global ICT Statistics on Internet Usage, Mobile, Broadband: 1998-2009 (17 September 2010) University of Manchester.

Telecom investment & economic growth

Correlations between telecom penetration and growth - fixed, mobile, broadband.

Causality?

Network effects

World Bank 2010 10% increase in broadband penetration a accelerates economic growth by 1.38% points.

2004 2005 2006 2007 2008

South Africa 5,17 6,38 7,43 .. ..

Senegal 6,84 7,81 8,96 9,75 ..

Brazil 3,37 4,15 4,62 4,61 ..

China 3,30 3,19 3,06 2,88 ..

India 2,28 2,42 2,02 .. ..

Kenya 4,34 4,74 4,05 6,05 6,32

Turkey 2,78 2,60 2,27 2,51 2,27

Tunisia 4,08 4,28 4,17 4,20 4,33

Korea, Rep. 4,62 4,67 4,70 4,65 4,72

Telecommunications revenue as % of GDPSource: World Bank, IC4D database 2010http://databank.worldbank.org/ddp/home.do

Comparative investment in infrastructure

2001 2002 2003 2004 2005 2006 2007 2008

Kenya 9,13 10,47 23,28 12,72 18,93 21,56 16,60 19,21

Korea, Rep. of 134,55 193,69 108,01 112,32 117,89 137,70 141,17 128,65

Senegal 6,53 10,41 - 8,61 13,28 15,85 17,37 -

South Africa 31,10 15,74 19,02 - - - - -

Tunisia 22,00 31,26 41,20 41,56 26,83 29,55 22,35 29,32

Total annual CAPEX in telecommunications/population (in USD, including fixed, mobile and Internet services. It should include all operators) Source: ITU 2010, WB 2010.

Gaps in South African data reflect its failure to submit data over several years to

ITU for global indicator reports

Network Investment(CAPEX Rm)

Source: Operators Annual Reports

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Total: (including Neotel)R 95 875.02 millions

SA has a very concentrated market

result: high prices

The state remains a significant player in the telecoms market although it has sold its stake in some companies

Mobile market: dominated by MTN and Vodacom, CellC captures a small market share

Fixed market: dominate by Telkom, Neotel is a new entrant

Market Concentration

Herfindahl-Hirschman Index (using customer market share) Source: Vodacom & MTN Annual Reports, CellC press releases, authors’ own calculations

0

1 500

3 000

4 500

6 000

2001 2002 2003 2004 2005 2006 2007 2008 2009

The State is a significant player in the sector

Shareholdings in Telkom, Sentech and Infraco (through Eskom and Transtel)

New structure in state ownership

Sale of Telkom Media

Sale of IT company Aviria.com

Telkom sold a 15% stake in Vodacom to Vodafone; it distributed the remaining 35% to its shareholders

The Government continues to own 37,7% of Telkom and 14% direct shareholding in Vodacom

Market structureOwnership

Source: Research ICT Africa 2010 Sector Performance Review

Summary of SA telecom market

0

6 000 000

12 000 000

18 000 000

24 000 000

30 000 000

36 000 000

42 000 000

48 000 000

54 000 000

60 000 000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Estimated Internet Users (became obsolete in 2011)Mobile phone subscriptions (post-paid + prepaid)Fixed telephone lines

Source: ITU 2011

PerformanceFixed-lines | Access

2007 2008 2009 2010

Tunisia

South Africa

Botswana

Namibia

Senegal

Kenya

Cameroon

Benin

Cote d'Ivoire

Ghana

Ethiopia

Burkina FasoNigeria

Uganda

Zambia

Tanzania

Mozambique

Rwanda

12,57 12,09 12,34 12,30

9,28 8,97 8,68 8,43

7,10 7,28 6.93 6,85

6,40 6,61 6,63 6,66

2,35 2,01 2,30 2,75

1,24 1,68 1,68 1.14

1,03 1,36 2,27 2,53

1,37 1,38 1,48 1,51

1,32 1,88 1,46 1,13

1,66 0,62 1,12 1,14

1,13 1,13 1,13 1,10

0,78 0,95 0,95 0,871,07 0,87 0,96 0,66

0.55 0,54 0,72 0,98

0,76 0,73 0,71 0,69

0,40 0,29 0,40 0,39

0,36 0,35 0,36 0,38

0,24 0,17 0,32 0,37

The decline in Telkom’s fixed-line network has severe implications for the development of widespread affordable access to a comprehensive information infrastructure..

Number of fixed lines as a percentage of the population (Source: ITU 2011)

Does this household have a landline telephone in the dwelling?

2002

2003

2004

2005

2006

2007

2008

2009 16,90%

18,10%

18,40%

19,90%

21,50%

22,90%

23,70%

25,80%

Landlines 2002-2009

General Household Survey Data: Stats SA

PerformanceFixed-lines | AccessLess than 20% households have a fixed-line telephone

Large scale disconnection of subscribers unable to afford services60% of users are not interested in a fixed-line service even if prices were to come down

Negative consequences of timing and nature of privatisation:Sequencing - absence of competitionMaximisation of state asset came at some cost for development of a competitive sector.Anti-competitive practises chilling effect on competitive sector. Over the last 10 years, subscribers had been brought onto the fixed line market with the universal access targets set by Government as part of the privatisation. To-date they are unable to afford the service

Policy & regulatory bottlenecks:Delayed market entry, licensing delays, absence of competition enabling provisions in policy like LLU, absence of short term asymmetrical rates

The decline in Telkom’s fixed-line network has severe implications for the development of widespread affordable access to a comprehensive information infrastructure..

Number of fixed lines as a percentage of the population (Source: ITU 2010)

PerformanceFixed-lines | Price

Fixed-line prices of both voice and data are high

While not the most expensive by African standards based on OECD medium-user basket, SA has the highest priced basket.

Next five countries historically middle income comparators for South Africa.

Average monthly WTP for non-users that would be interested in getting a mobile phone - R 46.70 (USD 4.40)

Strategy of high installation/rental and lower usage prevent consumer uptake

South Africa

Poland

Czech Republic

Turkey

Hungary

Mexico

Finland

Greece

Belgium

France

Italy

OECD

Austria

Japan

Korea

Australia

New Zealand

Slovak Republic

Switzerland

Netherlands

Germany

Spain

Portugal

Sweden

United States

United Kingdom

Ireland

Denmark

Norway

Canada 41

76

89

111

122

137

182

198

199

200

207

227

253

270

277

285

286

288

300

302

311

313

348

355

428

447

504

540

556

830

OECD residential fixed-line basket: medium-usage

0

0,3

0,6

0,8

1,1

1997 1999 2001 2003 2005 2007

CPI increase Telkom price increase

Telkom 3 min call vs. Consumer Price Index in ZAR

Operators efficiency

179,00

181,75

184,50

187,25

190,00

2007 2008 2009 2010

Telkom ratio of fixed lines to number of employees

5100

5250

5400

5550

5700

2007 2008 2009 2010

Vodacom ratio of subscribers to number of employees

Is there a cellular telephone available to this household for regular use?

Source: General Household Survey Data: Stats SA

2002

2003

2004

2005

2006

2007

2008

2009 83,2%

77,3%

73,5%

67,7%

61,5%

49,6%

40,8%

35,4%

Mobiles 2002-2009

PerformanceMobile | Access

2006 2007 2008 2009

Botswana

Tunisia

South Africa

Ghana

Cote d'Ivoire

Benin

Namibia

Senegal

Kenya

Nigeria

Tanzania

Cameroon

Zambia

Uganda

Mozambique

Rwanda

Burkina Faso

Ethiopia

44,10 60,86 77,34 96,12

73,60 77,89 84,59 94,96

81,54 86,02 90,60 92,67

23,30 33,25 49,55 63,38

20,70 37,11 50,74 63,33

13,00 24,45 41,85 56,33

29,73 38,31 49,39 56,05

25,75 30,53 44,13 55,06

19,96 30,06 42,06 48,65

22,40 27,35 41,66 47,24

14,37 20,16 30,62 39,94

17,20 24,31 32,28 37,89

13,84 21,43 28,04 34,07

6,77 13,69 27,02 28,69

11,00 14,08 19,68 26,08

3,41 6,72 13,61 24,30

7,10 10,94 16,76 20,94

1,10 1,54 2,42 4,89

Total number 16+ with

mobile phone or active SIM

Share 16+ with mobile phone or active SIM

16+ own mobile phone/active SIM: lower 3 disposable

income quartile

16+ own mobile phone/active

SIM: top disposable

income

Nigeria 63 101 014 77.3% 74% 93%South Africa 20 185 135 62.1% 54% 84%Ghana 7 491 378 59.8% 53% 79%Botswana 645 737 59.5% 53% 83%Kenya 10 772 696 52.0% 42% 79%Namibia 625 707 49.3% 37% 86%Zambia 2 459 961 45.5% 36% 84%Cote d’Ivoire 5 042 524 41.8% 33% 63%Senegal 2 502 300 39.8% 29% 77%Cameroon 2 979 597 36.5% 28% 74%Benin 1 365 851 30.2% 20% 49%Burkina Faso 1 844 701 27.2% 19% 50%Mozambique 4 865 758 25.7% 17% 63%Tanzania 4 135 338 21.5% 14% 46%Uganda 2 924 095 20.7% 12% 46%Rwanda 520 259 9.9% 4% 26%Ethiopia 1 387 910 3.2% 1% 11%Mobile phone ownership (RIA Household survey 2007/2008)Mobile SIM cards as a percentage of the population (ITU 2010)

SA voice market is saturatingDisparities of access in relation to (income)Multiple SIMs (over count for 10% - 4.5 m)

PerformanceMobile | Access

Mobile penetration rates continue to be impressive

But in 2009 Tunisia and Botswana surpassed SA in terms of SIMs as a percentage of population

Supply-side data: penetration rate of 100%

Demand-side data: penetration rate of 62%Significant number of multiple SIMs (1.13 active SIMs per user) GDP per capita levels

high prices and control costs by not making off-net calls

Penetration levels for poorer people are still at only half the population

Majority of mobile phones in urban areas

RICA surveillance policy vs universal access policy

2009 -2010 Vodacom, declined nearly 5%

Major Urban

Other Urban

Rural

Urban 71%

49%

67%

75%

Mobile phone ownership by geographic area

OECD Mobile low usage basket

DenmarkFinland

SwedenNorway

GermanyNetherlands

LuxembourgSwitzerland

IcelandNew Zealand

AustraliaBelgium

PolandAustriaIreland

PortugalUnited Kingdom

OECDJapan

ItalyCanadaGreeceFrance

HungaryTurkeyKorea

MexicoSlovak epublicCzech epublic

SpainUnited States

South Africa 352280

251244242

232227

223217216

202196195

168164

160154

150148148147

144142

118111

108105105

8778

6050

Usage prices remain high in South Africa compared to virtually every other comparable country in the world

High prices limit usage

High price of interconnection influences prices

High prices limit other innovations like airtime transfers and data use

PerformanceMobile | Price

ARPU has declined

The decline up to 2007 is anticipated with the saturation of the higher end of the market

Also the compulsory registration of SIMs from July 2009 might have contributed to the decline of new SIMS and ARPU

Wholesale - InterconnectionTermination rates and retail rates comparison

Comparison of mobile termination rates in ZAR

SenegalKenya

MauritiusGhana

NamibiaNigeriaTunisia

ZambiaBotswanaRawandaTanzania

MozambiqueUganda

Côte d’IvoireBurkina FasoSouth Africa

BeninCameroon 16,00

12,3011,30

9,908,90

8,207,807,50

7,006,50

5,905,90

5,404,10

3,402,802,702,30

March 2011 OECD Basket costs in USDMarch 2011 OECD Basket costs in USDMarch 2011 OECD Basket costs in USDMarch 2011 OECD Basket costs in USDMarch 2011 OECD Basket costs in USD

Country

Name

Cheapest

High User

USD

Dominant

High User

USD

%

cheaper

than

dominant

Cheapest in

Country In

terms of

January 2011

Egypt 7,63 7,63 0,00% 100,00%

Kenya 9,10 12,35 26% 100%

Uganda 10,42 21,24 51% 84%

Mauritius 13,15 13,15 0% 100%

Tanzania 13,35 21,59 38% 66%

Ghana 13,98 20,37 31% 85%

Ethiopia 15,67 15,67 0% 60%

Rwanda 21,37 28,45 25% 100%

Nigeria 26,58 36,47 27% 100%

Tunisia 34,98 37,81 7% 93%

Benin 35,70 46,12 23% 100%

Namibia 42,17 66,36 36% 93%

Cameroon 43,39 43,39 0% 100%

Botswana 44,44 44,44 0% 100%

Angola 45,67 56,64 19% 90%

Senegal 46,22 46,22 0% 100%

Côte d’Ivoire 46,74 46,74 0% 97%

Burkina Faso 49,50 49,50 0% 100%

Mozambique 50,51 50,51 0% 100%

South Africa 52,04 55,51 6% 108%

Zambia 59,73 65,23 8% 100%

Zimbabwe 61,84 61,84 0% 100%

Swaziland 77,42 77,42 0% 100%

Cape Verde 105,88 115,98 9% 100%

Morocco 114,93 114,93 0% 100%

Swaziland 77,42 77,42 0% 100%

Chad 97,34 97,34 0% 100%

Cape Verde 105,88 115,98 9% 100%

Morocco 114,93 114,93 0% 100%

Wholesale - InterconnectionTermination rates comparison

SA mobile termination rates are among some of the highest in the world

at least 2-3 times higher than a number of African countries

Interconnect rates have remained the same for the last seven years

High interconnection rates justify high prices

mobile operators currently pay each other R1.25 per peak time minute for terminating calls on their networks

India

Cyprus

Austria

Sweden

Finland

Kenya

Tanzania

Botswana

Slovenia

France

Uganda

UK

Namibia

South Africa Peak

South Africa Off peak 0,77

0,89

0,4

0,52

0,43

0,45

0,49

0,55

0,2

0,46

0,29

0,329

0,173

0,031

0,77

1,25

1,06

0,93

0,86

0,83

0,77

0,71

0,63

0,62

0,59

0,55

0,54

0,24

0,04

Comparison of mobile termination rates in ZAR

Wholesale/facilitiesLeased linesTelkom is dominant in this market and prices have not reached competitive levels

Telkom’s high prices have been one of the factors in encouraging Neotel and the mobile operators to invest in leased line infrastructure

The investment saw prices drop from 2007 to 2008

However, prices between 2008 and 2009 have remained constant

Why? Because MTN and Vodaom’s investments are not for general resale but for the benefits of their own networks

Diginet (64kb) Diginet + (128kb - 1198kb per second)

IcelandDenmark

SwedenNorway

LuxembourgAustria

NetherlandsNew Zealand

GermanyIrelandTurkey

BelgiumGreece

PortugalFrance

United KingdomOECD

ItalySpainJapan

United StatesAustralia

CanadaMexicoPoland

KoreaSouth Africa (2009) South Africa (2008)

Czech RepublicSouth Africa (2007) 74 115

67 01265 65165 651

55 69551 06450 745

38 22535 672

30 20028 817

27 05626 410

24 69522 748

22 04320 71020 507

18 90518 261

16 77715 71615 65215 415

11 66211 376

8 0295 143

4 1744 063

Leased line prices using OECD methodology (USD PPP)

PerformanceInternet | Usage

SA continues to dominate internet access within sub-Saharan African but with lower penetrations rates and high prices by other lower middle income country standards

Percentage of household with Internet access at home

Source: ITU 2011

Kenya

Senegal

Tunisia

South Africa 10,09

7,74

4,50

4,04

Does the Householdhave access to thefollowing?

Source: General Household Survey Data: StatsSA

2005 2009

8,80%

6,40%

Internet Services

Ethiopia

Rwanda

Tanzania

Uganda

Cote d’Ivoire

Burkina faso

Zambia

Benin

Mozambique

Cameroon

Senegal

Botswana

Nigeria

Ghana

Kenya

Namibia

South Africa 4,8

3,3

2,2

0,3

0,6

0,1

0,9

1,2

0,9

0,1

0,6

0

0,5

0

0

0

0,1

14,8

11,2

5,5

5,1

5,1

4,5

4,4

4,1

3,8

1,9

1,6

1,3

1,3

1,2

1,0

0,3

0,2

Households with computerHouseholds with working Internet connection

Households with a working computer and internet connection in AfricaSource: RIA ICT Access and Usage Household and Individual Survey 2007-2008

Extraordinarily high prices and low penetration compared to other middle income countries

2,8 subscribers per 100 inhabitantsICTs and broadband at centre of economic policies in leading countries and of African best performers - Algeria, Tunisia, Morocco, Mauritius, Kenya.

PerformanceBroadband | Access

Broadband subscribers per 100 inhabitants, in OECD graph 2009

DenmarkNetherlands

NorwaySwitzerland

IcelandKorea

SwedenFinland

LuxembourgCanada

UKBelgium

FranceGermany

USAustralia

JapanNew Zealand

AustriaSpain

IrelandItaly

Czech RepublicHungaryPortugal

GreeceSlovak Republic

PolandTurkey

MexicoSouth Africa 2,8

7,27,8

10,511,5

13,516,016,817,2

19,220,620,821,621,9

23,625,425,8

27,428,028,128,529,0

30,030,7

32,032,032,833,5

34,535,8

37,2

The lowest uncapped and unshaped bandwidth being offered in most countries exceeds the highest in South Africa

PerformanceBroadband | Price

Minimum Subscription Price, USD for OECD countries, October 2009, compared to SA

TurkeyUnited Kingdom

PolandHungary

Czech epublicSweden

Slovak epublicMexicoAustria

United StatesKorea

IcelandGermany

FinlandGreece

SwitzerlandCanada

NetherlandsAustralia

IrelandItaly

JapanSpain

New ZealandPortugalBelgium

DenmarkSouth Africa

FranceNorway

Luxembourg 36,935,3

32,432,131,7

29,629,629,529,529,1

28,328,2

27,126,7

25,425,024,424,324,3

21,720,320,0

19,115,114,614,214,013,813,7

8,16,3

South Africa's lowest (left of bar) & highest (right of bar) broadband prices compared to OECD

44,48 34,63 34,29 33,85 33,67 33,37 32,17

30,68 28,47 27,89 27,46 26,91 26,15 26,07 25,36 24,95

23,44 23,44 23,22 22,46

21,51 21,46 21,34 21,17 20,93 20,33

18,74 17,58 17,34

15,62 14,82 14,50 14,31

13,52 255,15

Spain Chile Korea New Zealand France Luxembourg

Ireland Italy

Canada Czech Republic Netherlands Portugal Australia Switzerland Norway United States

Mexico Germany Austria

United Kingdom Iceland Slovenia Sweden Greece Belgium Poland

Denmark Israel Finland

Hungary Japan Slovak Republic Turkey

Estonia South Africa

83,05 79,89

64,30 127,01

70,14 110,03

65,92 46,63

145,81 69,53

100,92 357,42

111,19 66,71

610,17 144,95

117,70 58,83

86,35 55,95

66,69 1319,26

116,69 35,63

109,63 65,07

109,49 204,44

44,33 91,25

49,44 575,81

155,12 50,89

12 721

1 10 100 1000 10000

Spain Chile

Korea New Zealand

France Luxembourg

Ireland Italy

Canada Czech Republic

Netherlands Portugal

Australia Switzerland

Norway United States

Mexico Germany

Austria United Kingdom

Iceland Slovenia Sweden Greece

Belgium Poland

Denmark Israel

Finland Hungary

Japan Slovak Republic

Turkey Estonia

South Africa

Comparison OECD/SA Broadband subscription price ranges, Sept. 2010 (SA July 2011), all platforms, logarithmic scale, including line charge (or 3G modem), USD PPP

Undersea cable developments

Capacity of Undersea Cables

Source: Steve Song, Shuttleworth Foundation 2010

Telecommunications Regulatory Environment Survey 2009

TRE 2009 Score (-2 = very inefficient, +2=very efficient)

South African TRE 2009/2006

Market Entry

Scarce Resources

Interconnection & facilities

Tariff Regulation

Regulation of Anti-Competitive Practices

Universal Service Obligation (USO)

Regulation of QoS

Average

-2 -1 0 1 2

2009 2006MozambiqueTanzania

BotswanaIvory Coast

TunisiaGhana

UgandaCameroon

SenegalKenya

NamibiaBenin

South AfricaEthiopia

NigeriaZambia

Rwanda

-2 -1 0 1 2

Overall TRE 2006/2009 Score

Policy outcomes after decade and half of reform

Overall sector growth but suboptimal - South Africa steadily slipping down international and African indices.

While phenomenal mobile growth fixed line growth for voice services, opportunity to extend customers up value chain, inhibited by access and usage high costs, low PC ownership and IT literacy.

Growth in sector supported by high end users able to pay high prices but quickly becomes saturated, not reaching critical mass for network effects of next generation ICTs.

Low penetration of fixed broadband and unlike mature economies, mobile broadband used as primary service rather than complementary services for many broadband users - new challenges of backhaul

High prices for all retail and wholesale services inhibit optimal usage.

High input costs for business, inflate costs of service sector and inhibit investment, location of regional business headquarters and BPO opportunities with associated negative consequences on job creation.

Dearth of competencies and capacity in state institutions, private sector and users.

Absence of official ICT statistics and indicators for evidence based policy or vision or co-ordination from Presidential National Commission on Information Society and Development.

Contradictory Policy Framework/Legal Framework

DOC - No major policy review since mid-nineties (White paper on telecommunications/1996: Telecommunications Act)

1997: partial privatisation of incumbent (Telkom)

2002: introduction of a third mobile operator

2000: Independent Communications Authority of South Africa(ICASA) Act

Merging of 2 authorities: Independent Broadcasting Authority and the South African Telecommunications Regulatory Authority

No prior policy or law on convergence. It resulted in a single institution informed by two different statutes on broadcasting and telecommunications

Electronic Communications Transactions Act One of the earliest countries in the world to introduce e-commerce measures, emulates UNCITRAL but large portions not implemented and not implementable.

2001: Telecommunications Amendment Fixed competition, further mobile competition 2004 - delivery of voice services using any protocol by VANS and self-provisioning (subsequently clawed back), network operators resale, public payphone deregulated, ‘e-rate’ to public schools.

DPE created uncertainty around SNO, investors compelled into licence with state set aside (Transnet and Eskom) and then withdrawn in final instance to establish Infraco and led to delays that undermined both Neotel and Infraco’s viability.INFRACO ACT 2007

No policy co-ordination, cut across ‘managed liberalisation’, ultimately turf war between DOC and DOE

Public utility approach failed to understand or acknowledge regulated competitive environment

Lack of evidence of ability of broadband champions (Infraco backbone and Sentech wireless access) to compete effectively

As a result licensing delays undermined any possibility of success as events overtook intended backbone roll-out.

No serous consideration of more viable options - structural separation of Telkom, into common carrier backbone

No public consultation

Primary client Neotel and MTN and Vodacom built out own competing network

2005: Electronic Communications Act

Introduction of horizontal licensing framework

ICASA is in the process of converting existing licences into the new framework (required to be finished by law by Oct. 2008 with a 6 months extension)

ICASA through regulations requires entities that want to provide licence-exempt services to nevertheless apply for permission -> practically, it created another licence category

Outcome

Market remains structured around vertically integrated incumbent operators (effective duopolies in both fixed and mobile market)

Fixed-line market: incumbent retains dominance over the backbone/competes downstream with its competitors

Mobile market: effective duopoly resulted in price matching, poor service quality and uncompetitive behaviour

Failure: regulator has not been able to regulate incumbent operators effectively and enable fair competition in the market

Impasse in interpretations of policy and licensing transfer resolved by courts in Altech vs. Minister of Communications, ICASA and others.

Policy & Regulatory Framework/Licensing

Institutional arrangements

Members of the Council are appointed directly by the Ministry

The Minister issues policy direction to the board in carrying out its oversight functions (e-rate policy)

Universal Access Fund

Minister required to make determinations on what constitutes universal service and accessUSAASA is required to manage the Fund, in accordance with the instructions of the Minister

ICASA is responsible for prescribing the basis and manner of contributions (unable to without definitions from Minister)

The Minister is responsible for determining the percentage of turnover

Output

No co-ordination between three entities responsible for different dimensions of implementation

Imperceptible impact, with double negative impact, first on investment and then on failure to use funds effectively

Market realities have overtaken universal service policy and strategies

Policy & Regulatory Framework/Universal Access

2009: DoC issued a draft broadband policy

failure to address investment strategies

no reference to institutional arrangements and market structure

no reference to the regulatory framework or agency

no reference to InfraCo

no reference to the necessary coordination of the DoC (responsible for the liberalisation of the market) and DPE (shareholder of Infraco - state broadband operator)

failure to address regulatory and policy requirements

rights of way, spectrum management

no discussion of services and infrastructure

no reference to open access regime

failure to address issues related to infrastructure sharing

no discussions on functional and structural separation

no opportunity for leveraging PPP funding in infrastructure

absence of demand side stimulation or of role in economic recovery

Policy & Regulatory Framework/Broadband Policy

Vision for ICT sector in 5 years (Africa)/15 years (globally)

For the South African to have the leading ICT sector on the African continent, with the highest penetration levels and lowest prices on the full range of services required for effective participation in the knowledge economy and society.

Targets:

To have broadband in all public institutions (clinics, schools, libraries by 2012.)

To increase Internet access up to 40% of the population by 2014

To have broadband penetration rates (to the home) of 25% by 2015

SEOUL DECLARATION (2009)

WE DECLARE that, to contribute to the development of the Internet Economy, we will:a) Facilitate the convergence of digital networks, devices, applications and services, through policies that:- Establish a regulatory environment that assures a level playing field for competition.- Uphold the open, decentralised and dynamic nature of the Internet and the development of technical standards that enable its ongoing expansion and contribute to innovation, interoperability, participation and ease of access.- Stimulate investment and competition in the development of high capacity information and communication infrastructures and the delivery of Internet-enabled services within and across borders.- Ensure that broadband networks and services are developed to attain the greatest practical national coverage and use.- Encourage a more efficient use of the radio frequency spectrum to facilitate access to the Internet and the introduction of new and innovative services, while taking into account public interest objectives.- Encourage the adoption of the new version of the Internet protocol (IPv6), in particular through its timely adoption by governments as well as large private sector users of IPv4 addresses, in view of the ongoing IPv4 depletion.- Ensure that convergence benefits consumers and businesses, providing them choices with respect to connectivity, access and use of Internet applications, terminal devices and content, as well as clear and accurate information about the quality and costs of services

Develop a vision for the sector through the development of a integrated policy framework to:

Remove protectionist strategies, open markets to competition to meet pent up demand, while developing strategies for backbone investment

co-ordination of state enterprises

targeted universal services strategy to deal not only with the gaps in the market, but focus on demand-side stimulation of the market

Clarify institutional arrangements and design for sector through role and rationale clarification:

Professionalise regulator, reduce decision-making council and increase staff

ensure adequate resources and capacity to enable effective regulation of sector

Review policy, law and regulation to:Correct legal contradictions and regulatory bottlenecks

Open access regime for optimal use of networks and facilities and spectrum to enable entrepreneurship and innovation

Create enabling regulatory environments through removal of barriers to entry, service neutral licensing,

Competitively value spectrum for optimal access and use.

Recommendations toachieve this

Complete competitive entry regulation such as:

Carrier pre-select

Essential facilities regulations

Local Loop Unbundling

Determine rights of way for new entrants

Apply wholesale and retail price regulation, including:Determining glide path toward cost-based termination rates

Implement mechanism to value spectrum for competitive access and efficient use

Ensure access to essential facilities (cost with favourable terms for access and co-location)

Demand side stimulation for PCs, Internet broadband

Cross cutting: capacity building at institutional and individual level to exploit ICT enabled efficiencies and productivity gains.

Co-ordination between National Planning Commission and line departments and across departments and public sector

Create conditions conducive to investment through accountable capacitated institutions, certain regulatory environments and flexible policy frameworks

ICT R&D

"... infinite computational power, infinite bandwidth and infinite data capability...", former Minister Mosibudi

Mangena; Southern African Telecommunications Network and Applications Conference, September 2008

R&D

Limited basic and advanced skills in ICT,

- Low levels of ICT R&D investment. South Africa invests only 10.5%, in comparison with leading OECD countries which spend about 30% of their expenditure on ICT R&D,

- Lack of a critical mass of high quality research to enhance innovation and grow the economy,

- High telecommunications costs, especially broadband,

- Unresolved barriers to entry into the telecommunications markets, especially for Small Medium and Micro Enterprises (SMMEs), and

- Lack of proper economic models for providing connectivity to the marginalised rural communities where telecommunication network operators are reluctant to invest in infrastructure.

www.ist-africa.org

R&D research networksFour activities have been put in place to support the creation of R&D research network activities in South Africa and internationally.

South African National Research Network (SANReN) - high speed network designed to provide the research community in SA/SADC and the rest of Africa, with a very high capacity Next Generation Network.

will connect most research institutions nationally (100+ sites) through a 10-20 gigabyte national connect these centres at high speed to global research networks via connections to GÉANT in Europe, and possibly to Internet2's Abilene network in the United States.

South Africa has been connected to the GÉANT2 network since October 2004. GÉANT's initial 155Mbit/s connection is managed by the TENET on behalf of DST in South Africa.

TENET & CHPCTENET established in 2000 now managed by Higher Education South Africa

TENET's main purpose to secure Internet and information technology services for the benefit of universities - management of contracts with service providers, additional support services.

Centre for High Performance Computing (CHPC) - computational hub, initiated by the Department of Science and Technology, hosted by the University of Cape Town and managed by the Meraka Institute of the CSIR launched in May 2007.

In pursuit of excellence in world class science, engineering and technology research, the CPHC and SANReN, will operate in tandem to provide computational power and high bandwidth

interconnection in support of other science and engineering branches -molecular biology, medical and health science, astronomy, astrophysics, bioinformatics, advanced manufacturing and accelerate the research agenda of the 10 groups.

support infrastructure required for SKA, the NBN and the Global Earth Observation System of Systems (GEOSS) for weather, climate, water, disasters, health, energy, biodiversity and ecosystems.

National Advisory Council on Innovation (NACI)

created by legislation to advise the Minister of Science and Technology of South Africa, and through the Minister, the Cabinet, on the role and contribution of science, mathematics, innovation and technology, including indigenous technologies, in promoting and achieving national objectives.

improve and sustain the quality of life of all South Africans

develop human resources for science and technology

build the economy

strengthen the country’s competitiveness in the international sphere.

CSIR - Meraka Institute

I-hub - Innovation hubs and m-labs (infoDev)

NGO - e-Translate

Getting ICT back on national agenda

With a clear vision of e-Africa promote the development of an integrated and co-ordinated e-strategy for the country including:

Co-ordination with state with cross cutting nature of ICTs and integration of S&T, innovation and ICT policies.

Seamless, ubiquitous and affordable infostructure as necessary base of enhanced services underpinning modern economy

Robust, transparent and progressive political, legal and institutional framework for sector development as key contributor to economic growth and development, including job creation

Demand side stimulation for more equitable participation in economy and society and to create necessary critical mass for realisation of knowledge economy and society

Development of specialised competencies required for policy formulation, regulation and operation of sector and wider information literacy skills to stimulate uptake and effective use - e-workers, e-consumers, e-citizens.