South Africa Connect

This article originally appeared in Business Day on the 11th of November 2008

A FLURRY of court action, with Communications Minister Ivy Matsepe-Casaburri on the losing side in two recent rulings, has again lifted the telecommunications sector out of the doldrums in which it found itself as a result of a lack of policy clarity and regulatory delays.

The Pretoria High Court denied Matsepe-Casaburri’s application for an urgent interdict to prevent the Independent Communications Authority of SA (Icasa) from issuing certain licences after the Johannesburg High Court refused to grant her leave to appeal against its judgment setting aside certain prohibitions in the telecommunications sector.

Matsepe-Casaburri can, of course, seek further relief from the Supreme Court of Appeal . If she does, it will open up a protracted legal process at the expense of taxpayers and consumers and again plunge the sector into limbo, delaying essential licensing and regulatory requirements needed to open up the market — not only to meet SA’s 2010 requirements but to provide relief to beleaguered consumers and business users.

The constraints being placed on the sector’s development — and on the economy more widely — by high telecoms prices and poor quality arising from the lack of competition in the market, have been the subject of several critical reports, including the 15-year Presidential Review.

Some relief from these constraints should flow from the high court ruling setting aside certain prohibitions in the telecoms sector and upholding the automatic conversion of their rights into the new licensing regime.

While those who would finally be able to enter the market unconstrained have been rubbing their hands in glee at these rulings — and those who thought they had got in through the flawed licensing process and closed the door behind them gnashed their teeth — not much has been said about the significance of Judge Norman Davis’s carefully reasoned judgment reasserting a sound institutional and administrative basis for a sector so long paralysed by indecision.

The original action was brought by hi-tech company Altech after it was excluded from the list of value-added network service (Vans) licensees, granted under the old Telecommunications Act, that would be converted to electronic communications network services (ECNS) licences under the new Electronic Communications Act. It also sought relief from a prohibition on Vans being able to provide their own network facilities without having to obtain these from incumbent licensed telecom network operators Telkom and Neotel.

The matter hinged on ministerial policy direction to Icasa last year, instructing the regulator to determine which, if any, Vans should be authorised to provide and operate electronic communications facilities or be granted ECNS licences. These are licences that permit an operator to build national networks and compete directly with the fixed and mobile operators in the market.

This direction related to the contested ministerial policy directives from 2005, which were interpreted by the regulator at the time to mean that Vans could self-provide. The day before the directives were to become operational, the ministry issued a press release rejecting this interpretation — resulting in a string of stranded investments, abandoned business plans and “pirate” operators.

In the process of selectively converting licences to the new regime, Icasa, with a largely new council, overturned its previous ruling, confirming the ministry’s view that operators could not self-provide. In terms of what Davis referred to as Icasa’s “tainted” licensing conversion process, Icasa envisaged that those selected Vans that received the new licences from the regulator after last year’s policy direction, with no clear criteria for their award, would be entitled to self-provide. So business plans were dusted off, investments resurrected and illicit services sought to become legal.

As a result, the respondents in the Altech case included not only Icasa, its chairman and Matsepe-Casaburri, but a long list of would-be licensees, who, having bayed for years for the opening up of the market to fair competition, were quite content to close the door behind them, having acquired licences in this flawed process.

However, in granting the relief sought by Altech, Davis declared the prohibition on self-provision in direct conflict with the enabling legislation and ordered that all Vans operators licensed before the start of the conversion process be allowed to “self-provide”, in accordance with the initial policy direction and the initial interpretation offered by Icasa in 2004. The judgment represents a defence of independent regulation and due administrative process. In striking down last year’s ministerial directives, Davis pointed to the significance of the regulator’s independence entrenched in the Icasa Act and to the requirements of the Public Administrative Justice Act.

He clarified the much-debated issue of whether ministerial directions are even reviewable by a court of law. He acknowledged arguments that the courts could not gainsay policy directions that depended on executive authority.

He contended, however, that Matsepe-Casaburri overstepped the line of pure policy or directions of a general nature when she prescribed to Icasa how the licence conversion would take place. In doing so, her actions shifted from those of an executive authority to an administrative action that fell within the ambit of the Public Administrative Justice Act. The directives, insofar as they constituted an administrative action, interfered with Icasa, Davis contended.

He argued further that even if the ministerial directives were not reviewable in terms of administrative justice, they were ultra vires or beyond the scope of the Electronic Communications Act. This illegality, he argued, was primarily because the act forbade the minister from interfering in the granting, amendment or renewal of licences.

In doing so, Davis defended the independence of the regulator, not on the grounds of some inappropriate international practice that had been policy-laundered in South African sector reform, as the concept of independent regulation has been caricatured, but because of its centrality to the creation of a certain policy and regulatory environment conducive to investors, supportive of competitive entry and protective of consumers.

Davis’s judgment further reminds us of the role of policy directives: it highlights the legal requirement on the regulator to simply “consider” any ministerial directive. The implication of this is that the onus is on the regulator, as the specialist agency, to decide what is in the public interest.

The judgment cuts through the defence of the ministry and Icasa that any automatic granting of network licences to former Vans operators would result in an absurd and unsustainable proliferation of network providers. This, Davis points out, is simply not correct. Only spectrum is scarce and it is anyway licensed separately. The real cost of building and operating a network would inhibit all 600 potential applicants from operating a network.

Perhaps most significantly of all, while arguing that justice required his immediate halting of a process “tainted by illegality”, Davis declined to substitute Icasa’s decision with his own on the grounds that it would undermine the separation of powers that underpinned the action. To do so would result in a decision that would be made without the benefit of the regulator’s expertise. Whether the regulator has the capacity to do justice to this decision is a matter for another discussion.

There is little doubt that the judgment gives the respondents cause to reflect on their various interests and to consider the hygiene of their administrative decisions.

In so doing, they should accept the outcome of the systems crafted and agreed to through various consultative processes precisely to test decision-making and protect against the infringement of fundamental principles in this critical sector of the economy.

Gillwald is director of Research ICT Africa! at The EDGE Institute.