Digital divide widens

Early last year the Department of Communications (DoC) invited the Information Communications Technology (ICT) industry to a colloquium, asking the firms what they wanted from a new regulatory framework. This was part of a wider process intended to reconcile the disparate South African laws that are disabling the growth of the communications industry. At the time, the optimistic call was for deregulation and liberalisation, including such technical relaxations as allowing voice-over-IP, and more flexible arrangements for leasing of assets between network companies. Sadly, the culmination of this process, the new Convergence Bill, offers no such freedoms.

In preparing the Bill the DoC has done little more than repeal certain sections of the Telecommunications Act and the Broadcasting Act, copying and pasting them back into the new bill. Restrictive law from the existing piece of legislation has been inserted into the proposed new one under slightly different headings. But it is much worse. Due to the difficulty in demarcating technical or "horizontal" classifications within the communications business, the Bill has opted for all-encompassing definitions, which inadvertently (or intentionally) cover any business providing "sound, text, still pictures or other audio-visual representation" for commercial purposes. In terms of the proposed definitions a retail outlet selling fax or phone services would require a communications licence, as would any company selling a service on its web site.

Possibly government officials will say that this is not what the Bill intends and exemptions or more detailed clarifications of the licences will be forthcoming, reducing the compliance burden. But that's the point. In a technical world moving at light-speed, regulatory authorities are in no position to create definitions for every conceivable business delivering information electronically. By the time a new class of licence has been defined the industry will have moved on, or if not, South Africa's competitors will certainly have done so. As the Bill now reads, South Africa will be creating a self-imposed framework of legal uncertainty that is far too wide in scope. Firms will have to second-guess the regulatory body, not knowing whether their innovative new offering will meet ICASA's requirements.

Where is the "light touch" regulation that the industry requested, the dispensation that would allow ICT firms to invest in new technologies like broadband and wireless, giving the rest of us a competitive edge with which to operate in the global environment? It is certainly not contained in this Bill. However, the most serious problem is not that the regulation is "heavy touch" rather than "light touch" but that it contains uncertainty that leaves important matters to be resolved by the regulators through the exercise of administrative discretion. This is an unhealthy state of affairs that is not consistent with the principles of good law.

Parliament should not approve legislation that leaves such wide discretionary powers in the hands of an executive agency such as ICASA. Legislation granting discretionary power that is not properly circumscribed is tantamount to allowing officials blanket power to make new laws free of Parliamentary scrutiny. Law should be substantive in definition, clearly laying out what citizens may do and how they may do it. Contrast such clarity and certainty with the creation of a law, such as the bill under discussion, which allows the substance to be worked out later through "subordinate legislation" or regulations, a procedure that is dangerous in the extreme. Such open-ended legislation, because it is discretionary, puts in place all manner of perverse incentives, inevitably inviting corruption .

As an example, the bill grants ICASA powers to "prescribe regulations establishing a framework of wholesales rates to be charged for specified classes of communication services" but it doesn't say which ones? ICASA may also set pricing in the retail market if it deems that there is "no or ineffective competition", which it alone can decide because it is empowered to monitor competition in this sector, a function that is normally performed by the Competition Commission.

This pattern of law-making has been seen in several recent pieces of legislation, the Financial Advisory and Intermediary Services Act being another example, where executive agencies are granted the right to create undefined subordinate legislation after promulgation. Such legislation is not subject to the checks and balances applicable to bills considered by Parliament, which should be our only legislative body. In the Convergence Bill, Content Applications Service licences are mentioned yet there is no definition of what businesses will require them, how such licences will be issued, or what people would need to do to qualify for them. In fact, for this particular class of licence there is no mention of any procedure or guideline at all. We must wait for ICASA to tell us.

At the end of the consultative process between business and government, the industry should have been in a position to start planning its telecommunications investment. Instead, the country is lumbered with another example of poor legal drafting, creating uncertainty where there should be clarity, with too much unspecified decision-making power being placed in the hands of government officials. Regrettably, it was the industry that asked for a strong regulator, thinking that this would depoliticise the sector. Maybe they should have remembered the saying, "be careful what you wish for, you may just get it!"

Author: Neil Emerick is a freelance writer and author of the Free Market Foundation’s monograph, The real digital divide: Convergence and South Africa’s telecommunications and broadcasting policy which is available from the Foundation at R40 including VAT. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article\20 January 2004

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