Presentation to the Communications Portfolio Committee on the Telecommunications Amendment Bill Brett Dawson Managing Director

Agenda  Objectives of the Bill  Internet Solutions (IS)  The ISP and VANS business model  Can the Bill be improved to attain the Objectives ?  Uncertain Definition of PSTS  VOIP  VANS Definition  Strong Independent Regulator  Multimedia Services  Conclusion

Objectives of the Bill  Certain and stable Regulatory environment  Maximise value of Telkom and other State assets  Drive Competitiveness of Telecommunications Industry and South Africa in general  Enabling environment for SMME’s  Extend Universal Service and upliftment  Maximise opportunities that emerge from electronic activity.

Internet Solutions  Successful SMME  Started in 1993 by 3 University students.  Today employ 340 people, 46% are PDI’s  Services we provide:  Internet Access - to 1800 Corporates and SMME’s  VPN - Under OmniLink Company to 3000 offices/branches.  VISP  Remote Access - To over consumers (including ABSA)  Security  Hosting - Websites and Electronic applications  Both OmniLink and IS are VANS  Compete in a Vibrant, dynamic, compettitive Industry  Hundreds of ISP’s, VPN’s and VANS providers in SA.

The ISP and VANS Business MODEL  Recognise policy to obtain Basic Telco. Facilities from PSTN Licencee  Then ISP’s & VANS provide extensive Value-added Services on-top of that.  Security, user authentication, , Pro-active Management, Traffic prioritisation, Service Levels, Performance Reporting etc  Bundle our Services together with the Basic Telco facilities into one package.  For the Business Model to work the Telco facility MUST be shared:  Affordibility - No SMME could afford a dedicated facility.  Quality of Service  So… let a dynamic industry continue to evolve above the basic Telco layer to ensure:  Greater Universal Service  Lower Cost to Consumers  Vibrant SMME sector - across Whole country  Service Innovation

Achieving the Objectives of the Bill  Uncertainty of PSTS and PSTN defenitions  Not clear exactly what is included in the “exclusivity”  Ensure that we limit these to the Basic Telecommunications service  IF VOIP privelige is “part of” PSTS then Bill overturns ICASA ruling that IP is a VANS service.  Result - ISP and VANS Industry destroyed by HUGE Competitive advantage of PSTS Licencee.

Achieving the Objectives of the Bill  VOIP  Why do the PSTS Licencees need exclusivity on VOIP ?  The ISP’s and VANS DON’T want to be PSTS’s, merely want to convey Voice signals with the Data signals.  Basic facilities (that carry the voice and data) are obtained from the PSTS’s anyway.  Why discriminate against the ISP’s and VANS and SMME’s (in higher teledensity areas) ?  Seeking to assist SMME’s in under serviced areas but destroying in rest of Country ?  Government White paper - Voice exclusivity over !  Let a Vibrant Industry compete in this space for the benefit of all South Africans.  Let ISP’s and VANS transmit Voice

Achieving the Objectives of the Bill  VANS Definition.  VANS is a VANS worldwide - ‘electronic transaction service” makes no sense.  ICASA has developed a defenition for VANS after extensive consultation - please use it  IP is a VANS Service not a PSTS…….ICASA Ruling  Allow Voice from May Don’t destroy an emerging Vibrant Industry now ! Data only(VANS) versus Data + Voice is the Death knell of the Industry.  A VPN is NOT a PTN - Factually and ICASA Ruling.

PSTS’s can compete with VANS The PSTS Licencees can compete here anyway - through VANS licence. They have the size, muscle, skills, Government support, These are & will be Massive businesses. Let them have exclusivity over Basic Services and encourage Competition above that. Why do they need protection from ISP’s and VANS ? (eg VOIP exclusivity) We are Tiny businesses compared to them, with little means

Achieving the Objectives of the Bill  Strong Independent Regulator  There are three section 100 complaints currently affecting IS:  Telkom versus OmniLink 1 Aug 2000 : not resolved  Telkom versus Internet Solutions: 1 Feb 2001 : not resolved  SAVA versus Telkom Nov 1999 :  ruling in favour of SAVA 6 & 7 July 2000  Telkom took ruling to high court on review  sent back to ICASA, not resolved  Since Telkom witholds new services pending resolution of complaints, IS has had to build three backbone networks, two of which are frozen  This clearly has enormous implications for service costs and operating efficiencies  This has already stifled the growth of e-business initiatives amongst IS customers  No section 100 complaint affecting IS has yet been resolved  Must Beef up powers NOT dilute !!

Achieving the Objectives of the Bill  IS has been operating under a difficult regulatory environment for more than four years  Three networks, two frozen  Hundreds of thousands in direct legal costs  Man hours lost in legal disputes are critical for a small business  Telkom can and does withold services to IS unilaterally  No resolution of disputes by the regulator  A weak Regulator will:  Make it even more difficult for IS to continue its business  Result in endless legal disputes, with PSTN licensees witholding services  Put jobs in both IS itself and its 120-odd channel partners at risk  Slow down the growth of electronic business in South Africa and stifle innovation  Result in poor and overpriced service to SMME companies pursuing electronic business ventures

Achieving the Objectives of the Bill  Strong, Independent Regulator required to maximise value of Telkom Listing.  Avoid Voiciferous litigation, WTO complaints, Constitutional Complaints.

Achieving the Objectives of the Bill  Multi-media services ( Convergence with broadcasters)  Overlap with VANS without restrictions - Voice and leasing of basic facilities.  This will enable them to compete at unfair level of service and discriminatory pricing that will drive ISP’s and VANS out of business. RATHER:  Licence as a VANS  Allow VANS to carry Voice  Ensures same result.

Conclusion  Objectives of Bill met if:  Clearly define boundaries of PSTS to Basic facilities  Allow ISP’s and VANS to compete for Value-added services with all other parties PSTS’s, SMME’s and Multi-media services.  Define VANS correctly and Let VANS carry voice.  Allow Basic Infrastructure to be shared.  Ensure we have a strong Independent Regulator.  IS appeals to you to make the necessary ammendments to ensure we have a Vibrant Industry, a more compettitive Country and greater Universal access to telecommunications services.

Thank You