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Viewing cable 06PRETORIA2711, SOUTH AFRICA: TELECOM REGULATOR STRUGGLES FOR

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Reference ID Created Released Classification Origin
06PRETORIA2711 2006-07-03 14:35 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Pretoria
VZCZCXRO8102
RR RUEHDU RUEHJO RUEHMR
DE RUEHSA #2711/01 1841435
ZNR UUUUU ZZH
R 031435Z JUL 06
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 4313
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUCPDC/DEPT OF COMMERCE WASHDC
UNCLAS SECTION 01 OF 02 PRETORIA 002711 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR EB/CIB TCARNEGIE; FCC FOR PBOATENG/JJENNINGS 
USDOC FOR 4510/ITA/MAC/AME/OA/JDIEMOND 
 
E.O. 12958:  N/A 
TAGS: ECPS EINV ECON SF
SUBJECT:  SOUTH AFRICA: TELECOM REGULATOR STRUGGLES FOR 
INDEPENDENCE 
 
REF: A) PRETORIA 3001, B) PRETORIA 4621, 
      C) PRETORIA 4934 
 
Sensitive but Unclassified; Protect Accordingly.  Not For Internet 
Distribution. 
 
1. (SBU) Summary.  South Africa's beleaguered telecommunications 
regulator, ICASA (Independent Communications Authority of South 
Africa), received a bit of good news when constitutional changes 
guaranteeing the regulator's independence were proposed to 
Parliament June 22.  The Minister of Communications has made 
repeated attempts to gain control of ICASA through pending 
legislation.  The regulator has been struggling to operate 
effectively as three of seven councilors are departing, four of five 
senior managers have quit, the CEO has been suspended and the 
chairperson's management ability is under attack.  Industry analysts 
believe that ICASA's independence and capacities must be 
strengthened to implement new legislation targeted at increasing 
competition in the high-cost telecommunications sector dominated by 
the parastatal monopoly Telkom.  End Summary. 
 
Regulator Struggles for Independence, But ... 
--------------------------------------------- 
 
2. (SBU) The South African Parliament's Constitutional Review 
Committee has recommended changing the constitution's definition of 
ICASA from "broadcasting regulator" to a more accurate "electronic 
communications regulator".  The Committee seeks the change to assure 
that ICASA will be afforded special protection under section 192 of 
the constitution, allowing the regulator to remain independent. 
 
3.  (SBU) The recommendation is the latest development in pending 
legislation targeted at converging regulations in the communications 
sector.  In December 2005, Parliament passed and sent to President 
Mbeki for signature the Electronics Communication Bill (formerly 
known as the Convergence Bill) and the ICASA Amendment.  The Bill 
and the Amendment are inextricably linked as the Amendment gives 
ICASA the authority to implement the Bill.  Prior to passage, 
Minister of Communications Ivy Matsepe-Casaburri had succeeded in 
having last-minute changes made to the Amendment in order to gain 
greater control over the regulator.  The telecommunications 
industry, supportive of a strong independent regulator, cried foul. 
Mbeki subsequently refused to sign the Amendment and instead sent it 
to the Constitutional Review Committee with a request that it 
determine whether ICASA should enjoy the same special protection 
which guarantees independence that other South African regulators 
have.  The Committee agreed and is now engaged in a lengthy process 
to change wording in the constitution. 
 
4. (SBU) ICASA has long battled with the Minister of Communications 
to maintain its independence.  The Minister already indirectly 
influences the regulator as ICASA is prohibited from collecting fees 
for its services and must rely on the Minister for funding.  The 
Amendment would give the Minister more control through the power to 
hire and fire the seven ICASA councilors, a duty now handled by 
parliament and protected under section 192 of the constitution (Ref 
B).  During the Constitutional Review Committee hearings the 
Minister's Director General Lyndall Shope-Mafole recommended that 
the word "independence" be stripped from the regulators title. 
Leaders of the largest opposition party, the Democratic Alliance, 
called for Matsepe-Cassaburri's resignation.  Mbeki's rejection of 
the Minister's changes to the Amendment is widely seen as a rebuke. 
 
 
Faces Management Crisis; Meanwhile ... 
-------------------------------------- 
 
5. (SBU) The Committee's support for ICASA's independence is good 
news.  Unfortunately, ICASA is in the midst of a major management 
crisis which will leave it a weakened organization, at least in the 
short term.  Chairman Paris Mashile, who took his position in July 
2005 after serving three months as a councilor, is widely viewed by 
the telecommunications industry as a political compromise, who tends 
to side with the Minister.  Since taking his seat as chair, Mashile 
has seen his CEO Jackie Manche suspended in November for alleged 
misconduct.  Three of the seven ICASA councilors are leaving this 
month, and Parliament's ability to name replacements has been 
hampered by the pending convergence legislation.  One of the 
departing councilors, Mamodupi Mohala, came under 
conflict-of-interest scrutiny last month for being paid to do legal 
and consulting work for telecom providers while serving as 
councilor.  Four of ICASA's top five managers have quit, and many 
other senior employees have left, often to work in the 
better-paying, more stable private sector.  Meanwhile, Mashile also 
came under personal attack last month when exit reports from former 
ICASA employees were leaked to the press.  The reports allege that 
 
PRETORIA 00002711  002 OF 002 
 
 
Mashile arrived late to work, slept on the job and went on junkets 
paid for by the same telecommunication firms he is responsible for 
regulating.  Industry experts seriously question Mashile's and 
ICASA's ability to implement sweeping legislative changes contained 
in the Electronic Communications Bill which is likely to embroil 
ICASA in litigation and increase workloads. 
 
High Telecoms Costs Hinder Growth. 
--------------------------------- 
 
6. (SBU) South Africa is plagued with extraordinarily high 
telecommunication prices, which economists and senior government 
officials, including the President, say are hampering growth.  In 
his February 2005 State of the Nation address Mbeki condemned high 
fixed-line prices stating they cost ten times more than in developed 
countries (Ref A).  The Electronic Communications Bill seeks to 
converge regulation within the sector and open it up for 
competition.  Convergence would bring together services now offered 
separately by traditional fixed-line, mobile and data services 
providers.  The Bill allows competing telecommunication providers, 
mainly internet providers, to either use the nation's fixed-line 
infrastructure built and owned by parastatal monopoly Telkom or to 
build their own networks (Ref A).  A second national operator (SNO) 
was licensed by ICASA in December 2005 and is expected to begin 
fixed-line operations later this year (Ref C).  The SNO will have 
access to Telkom's local loop infrastructure for a two-year period 
and is seeking interconnect agreements with Telkom and the mobile 
operators.  However, industry analysts predict the SNO's market 
entry will do little to lower telecom prices for most South Africans 
as the SNO plans to concentrate on the business-to-business market 
segment.  Some market liberalization and price competition has 
occurred in the cellular phone market segment which enjoys three 
established operators, and a fourth, Virgin Mobile, entered the cell 
phone market in late June.  Number portability between cell phone 
providers is set to begin next month allowing cell phone users to 
switch providers without changing phone numbers. 
 
7. (SBU) Comment.  Building ICASA's capacity, and implicitly its 
independence, primarily through assistance from the Federal 
Communications Commission remains a key Mission goal.  A third round 
of FCC-ICASA consultations is currently held up while ICASA deals 
with its management and legislative issues.  TEITELBAUM