1. a group subsidiary Irene Charnley Commercial Director 28 September 2001 Comments on the Telecommunications Amendment Bill

2. 2 Objectives of the Bill 1. Prevention of potential anti-competitive behavior  Policy should enshrine the principle of preventing abuse of market dominance, hence ensure a truly competitive market 2. Lowering of input costs  Efficient utilisation of existing infrastructure will reduce input costs, incentivise investors and lower costs to consumers 3. Promotion of customer choice  Competition enablers must be implemented quickly and in a sustainable manner to facilitate customer choice To ensure sustainable competition, the following should be considered:

3. 3 Objectives of the Bill  Ensure reasonable market entry costs  Create an environment that enables new entrants to compete with Telkom  Liberalise sector in a phased manner to allow investors to recoup some costs Provide incentive for infrastructure investment:

4. 4 M-Cell welcomes…  One additional operator with further licences to be considered after 2005  Social development objectives eg E-rate & EDU NET  Broader economic participation via provisions for SMME and BEE ownership

5. 5 Key comments 1.Infrastructure sharing provisions inappropriate 2.Delay in carrier pre-selection is anti-competitive 3.Universal Service Fund should fund USO roll-out targets 4.Only minimal amendments really necessary

6. 6 Infrastructure sharing Inadequate provision for infrastructure sharing will:   Limit customer choice and competition in some areas   Increase the cost of services to the consumer   Lead to over-supply of facilities which is not matched by market demand   Result in inefficient and wasteful duplication of infrastructure AND Undermine SNO’s ability to expand into new areas not already connected to Telkom’s network

7. 7 Infrastructure sharing Proposed two-year infrastructure sharing period:   Undermines role of ICASA to regulate interconnection and facilities leasing   Inconsistent with internationally accepted principles of infrastructure sharing   Conflict with Competition Act in relation to access to ‘essential facilities’   Temporary – hence not a policy issue

8. 8 Infrastructure sharing  Vital for SNO to gain access to Telkom local loop on non-discriminatory terms  Residential customers and SMMEs not able to use SNO as a local operator  International move towards LLU – critical catalyst for wider and cheaper internet access  Additional lines to existing customers will not increase real penetration Local Loop Unbundling (LLU) Policy should mandate ICASA to implement LLU over an appropriate timeframe

9. 9 Infrastructure sharing   S 32A (2), (3) and (4) dealing with two year sharing period should be deleted   S 44 should be amended to provide for ongoing sharing of facilities between PSTS and other operators   S 44 (7)(b) should be replaced with a mandate for ICASA to implement Local Loop Unbundling   Conditions of access (ie interconnection, infrastructure sharing and facilities leasing) to remain ICASA’s responsibility as per amended S 43 and 44 Proposed amendments

10. 10   CPS enables customers to select their carrier of choice without having to dial a prefix   CS enables customers to select carriers on a call by call basis by dialing a prefix Carrier Pre-selection (CPS) and Carrier Selection (CS) WHAT DO THEY DO?

11. 11 Carrier Pre-selection (CPS) and Carrier Selection (CS) WHY ARE THEY SO IMPORTANT? Several years needed for SNO network to provide comparable levels of local access to that of Telkom… THEREFORE … without CPS and CS, customers not directly on SNO network will have no alternative to Telkom, even for national or international calls

12. 12 Carrier Pre-selection (CPS) and Carrier Selection (CS)   Allows consumers to benefit from competition from day 1 on national and international calls   Greatly facilitates customer choice by allowing customers simple access to multiple carriers BUT   CS alone is not effective in promoting competition - dialing prefixes is a deterrent for customers IF IMPLEMENTED?

13. 13 Carrier Pre-selection (CPS) and Carrier Selection (CS) International experience suggests a direct correlation between CPS and increased competition   Where CPS implemented, competitors’ market share higher   With CPS: Sweden (24%), Austria (37%) compared to   No CPS: Spain (8%), Portugal (2%)   Early CPS: Switzerland - 45% in ILD traffic, 31% in NLD   Swedish regulator confirmed positive impact of CPS   89% of population aware of CPS, 1.1m households chose alternative operator to Telia

14. 14 Carrier Pre-selection (CPS) and Carrier Selection (CS)   S 1(a) needs to be expanded to differentiate CPS from CS   S 31 should provide for phased implementation of CPS and CS from 7 May 2002   S 31 should also mandate ICASA to commission a study (over a fixed period) to determine the most cost-effective implementation plan Recommendations:

15. 15   USO roll-out targets should be funded from USF   Implementation should be carried out by industry   Money contributed to be used for two purposes:   co-ordinating skills training and development, for support promotion of SMMEs   service roll-out in under-serviced areas, creating sustainable employment   Implementation coordinated by USA - roll-out proportionate to investment by each operator Universal Service Fund

16. 16 Only minimal amendments necessary Telecommunications Act of 1996 well drafted and largely capable of giving effect to: M-Cell recommends that amendments are affected only where necessary   Government’s national economic objectives   1996 White Paper on Telecommunications   New telecommunications policy directions

17. 17 Only minimal amendments necessary  Interconnection and facilities leasing – existing sections 43 and 44  Under-serviced area licences – existing section 39  Sentech licence – existing section 38  Multimedia licence and definition – existing section 40 and the Broadcasting Act …For example

18. 18 Conclusion  M-Cell supports the broad vision of the policy  Bill’s main objective should be to promote sustainable competition, and attract new investment through:  Implementation of competition enablers - CPS/CS (immediately), and LLU over time  Ongoing infrastructure sharing regulated by ICASA  Upholding ICASA’s role and power in regulating the industry  Telecoms Act of 1996 is well drafted and requires minimal amendments

19. 19 THANK YOU