Showdown

IN LESS THAN A MONTH, the Transvaal High Court will hear three days of argument in the matter between Autopage Cellular, a subsidiary of Craig Venter’s Altech Group, and the sector’s telecoms regulator in Autopage’s endeavour to demand the right to build its own network – and the same for other value added network services (Vans) licensees that want to do so. The pivotal hearings are set down for 29 to 31 July.

Despite hollers of protest from most in the industry because of the delays, Autopage’s legal action could cause competition in the sector – regulator Icasa acceded in a 30 April letter that its attorneys (Madhlopa Incorporated) put the process of adjudicating potential new individual electronic network services (I-ECNS) licences on hold until a ruling is handed down.

The court set down a timetable for any opposing parties to file their documentation by 18 June. SA’s Communications Minister got in just on time, while other opposing parties included Icasa, Internet Solutions (Vox Telecom holds the same position and worked with it) and Irene Charnley’s Smile Telecoms.

Although it’s been agreed the judgment would be made on an urgent basis, Werksmans Attorneys director Kathleen Rice (acting for Smile) says it’s still not inconceivable for the process to run until early next year, particularly if the legal process pushes out Icasa’s January 2009 deadline for completing the licence conversion process.

Rice says the biggest problem is that while the determination of new I-ECNS licences is on hold, the other licensees would still see theirs converted, giving the incumbents an even greater advantage over potential new entrants and making it even more difficult for them to compete. For example, Telkom would be able to provide cellular services in addition to its fixed line offering.

Icasa’s decision not to go ahead, effectively dealt with the first part of Autopage’s application, which was an urgent interdict to stop the regulator (after the outcome of its competitive process) deciding who qualified for an I-ECNS licence.

The second part of Autopage’s application goes back to a 2004 ministerial determination, as part of which Communications Minister Ivy Matsepe-Casaburri said: “In terms of section 40(2) of the [Telecommunications] Act, 1 February 2005 shall be the date from when value added network services may also be provided by telecommunications facilities other than those provided by Telkom and the Second National Operator, or any of them”.

Autopage is now essentially saying that, because the Minister allegedly gave it the right to self-provide, it also has the right to have its Vans licence converted to an I-ECNS licence.

The Electronic Communications Act (ECA) says every licensee has the right to have its licence converted to a new class of licence on “no less favourable terms” than before.

The Minister’s reply to that (through the State Attorney) has essentially been to defend her 2004 position, which she clarified through the media in the wake of her seeming flip-flop that she never said Vans could self-provide. All she did was set a date, in terms of the old Telecoms Act (repealed after the introduction of the ECA), when other licensed operators – such as Neotel and other private telecoms network operators (PTNs) – could lease facilities to the Vans, in addition to those provided by Telkom.

Icasa interpreted her statement at the time that Vans could self-provide and made its interpretation of the Minister’s determination loud and clear. Yet in its answering court papers, it concedes it misinterpreted the Minister’s determination and that the correct interpretation of the law is that Vans are entitled to have their licences converted into electronic communication service (ECS) licences (which don’t allow you to build your own network).

The situation that Autopage seeks, Icasa said, would “yield an absurd result. For instance, SA would have more than 600 network licences if all the holders of Vans licences were automatically entitled to ECNSs. Nowhere in the world is there a country, particularly of the size of the Republic, with the limited frequency resources it has, that would have this volume of network licences”.

It goes on to say: “The spectrum is a finite natural resource” and in the absence of a spectrum licence, there’s “no value” in an applicant even possessing an ECNS licence.

There’s no disputing that. However, it boggles the mind that nobody in the industry chose to dispute the Minister’s determinations back in 2005 rather than now, when Icasa is about to breathe life into the ECA by pronouncing who gets to build its own network and who’ll be excluded.

The Minister says some operators are providing their own facilities illegally. And that’s probably why nobody disputed her determinations until now. It was convenient for some to be operating under a disputed, yet untested, framework. Whatever the outcome of the July hearings, at least the industry will have greater certainty of its rights in the future.

But why is Autopage going to court before Icasa has even made up its mind? It could still be in the running for an I-ECNS licence in the Icasa process.

Icasa published a “conversion matrix” in November 2007, in which it named six Vans that could be entitled to an I-ECNS licence. It excluded Autopage. However, subsequent to that, Icasa held hearings with all the Vans, at which they had to present detailed technical plans, financial projections, business records, proof of their ability to pay the fixed licence fee or shareholder details in an attempt to prove their eligibility for an ECNS licence.

Smile argues in its answering affidavit that although the Vans conversion process has been “lengthy” it’s also been “highly participatory”. Smile’s business plan depends on getting an I-ECNS licence. But though left off the list in November, it’s continued to participate fully in Icasa’s processes.

Autopage, Smile says, didn’t. “The applicant did not engage proactively at the stage when policy was being formed and cannot now complain about the approach adopted.”

It was only at the last minute – after Icasa gave Autopage another opportunity to submit the necessary information – that it did so, on 9 April.

Internet Solutions (IS) says in its answering affidavit (through attorneys Routledge Modise) that in addition to not complying with the requirements for a licence conversion, Autopage also doesn’t have the minimum 30% equity ownership by disadvantaged individuals to qualify to be considered for one.

IS argues Autopage hasn’t made a case as to why it might not receive an I-ECNS licence pursuant to Icasa’s process or why it would suffer “irreparable prejudice”. In fact, it accuses Autopage of having ulterior motives. It claims there was a telephone conversation between IS CEO Angus MacRobert and Altech chief technical officer Steven Sidley, during which Sidley said it would withdraw its application if IS let it participate in its own I-ECNS application.

“The only inference that may be drawn from this is that the applicant views its right and title to convert its Vans to an I-ECNS as defective and is using this application as a vehicle to frustrate the entire process unless the 19th respondent acquiesces to the applicant’s demands.”

How will it end?

IT’S UNCLEAR at this stage which way the court will rule. On the one hand, Altech Autopage is justified in challenging the right to self-provision. That’s caused much confusion in the industry and needs to be clarified once and for all. However, that should arguably have been done sooner.

And you can also agree with Icasa that the right to self-provision without spectrum is almost useless (although some players might still want to roll out fibre, fixed line infrastructure is much more expensive).

Stepping away from the legal arguments, it seems wrong – in principle – to delay the process at this late stage. That would only further advantage the incumbents.

We can only hope the judge is well-versed in telecommunications issues and can make a speedy decision.

VANS self provisioning – give your views

Finweek