South Africa

INTERNATIONAL TELECOMMUNICATION UNION Document 7 29 April 2001 5(*8/$725<,03/,&$7,2162)%52$'%$1' :256+23 GENEVA — ITU NEW INITIATIVES PROGRAMME — 2-4 MAY 2001 &$6(678'<%52$'%$1'7+(&$6(2)6287+$)5,&$ 6RXWK$IULFD&DVH6WXG\ This case study was prepared for the ITU Workshop on the Regulatory Implications of Broadband by Alison Gillwald, Director, LINK Centre, Graduate School of Public and Development Management, University of the Witwatersrand <[email protected]>. “Broadband: The case of South Aftica” forms part of a series of telecommunication case studies produced under the New Initiatives Programme of the Secretary-General of the International Telecommunication Union (ITU). The Telecommunication Case Studies Project is being carried out under the direction of Dr Ben A. Petrazzini <[email protected]>, Telecommunication Policy Adviser in the ITU Strategy and Policy Unit (SPU). Other case studies – including studies on Broadband in Australia, Italy and Malaysia,– may be found at the webpage <http://www.itu.int/broadband>. The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of the ITU, its Membership or the Government of South Africa. 5HJXODWRU\LPSOLFDWLRQVRIEURDGEDQG &217(176 1 Introduction................................................................................................................................................ 4 2 Socio-political and Economic Background................................................................................................ 4 3 Characteristics of the South African Telecommunications Landscape...................................................... 5 4 International and Regional Policy Structures Affecting South Africa’s Telecommunications Market... 11 5 Future Developments............................................................................................................................... 12 6 Broadband: A Technical Perspective on Current Status and Options and Choices Down the Line ....... 14 7 Broadband: Legal Review and Regulatory Considerations .................................................................... 17 8 Arising Policy and Regulatory Issues for South Africa – Comments from Industry Players and Government.............................................................................................................................................. 20 9 Conclusions.............................................................................................................................................. 28 Annex............................................................................................................................................................... 30 ),*85(6 Figure 1: Fixed Line Growth (main lines in millions), Cellular Growth (subscribers in thousands) ............... 5 Figure 2: South Aftica’s Telecommunications Structure................................................................................... 7 Figure 3: Timeline of the key events in South Africa’s telecommunications sector ...................................... 14 TABLES Table 1: Universal Service and access figures for South Africa ..................................................................... 6 Table A1: Internet users in South Africa........................................................................................................ 30 Table A2: List of Interviewees ....................................................................................................................... 31 6RXWK$IULFD&DVH6WXG\ ,1752'8&7,21 In the policy formulation context of South Africa, broadband is understood to be the ability to provide a multiplicity of services, whether data, voice or video, at any speed. The speed of the services is likely to be a major determinant of cost. The price, based on the input costs, is likely to determine the demand and therefore the availability of broadband. Therefore, a suite of services should be available at slow and high speeds to meet the diverse needs and means of the population. This broader approach is seen as more appropriate and flexible for a developing country1. The utilisation of broadband and its practical capabilities of bridging the digital divide by providing robust Internet access with cost effective bandwidth has been the subject of much debate in South Africa and around the world. This case study focuses on some of the technical considerations of broadband, its possible modes of implementation and the potential for introducing new value-added services, and its current technical status in South Africa. Following discussion of the above, consideration is given to the policy and regulatory issues that arise for South Africa and that the policy makers will have to ponder. 62&,232/,7,&$/$1'(&2120,&%$&*5281' South Africa is 1’127 square kilometres consisting of nine geographical and political entities or provinces. South Africa’s total estimated population stands at 40.5 million.2 The total population of South Africa accounts for about 5per cent of the total African population estimated to be around 800 million. The GDP at real constant prices in the fourth quarter of 2000 was South African Rand 873,637 million3. The economy is based primarily on mining, agriculture, manufacturing and commerce. The exporting of mined minerals and gold accounts for over 60 per cent of merchandise export value. Private consumption expenditure increased steadily in real terms between 1993 and 1997, with the consumption of transportation and communications services in 1997 accounting for almost 85 per cent of total private expenditure.4 As service sectors continue to gain significantly within the economy, broadcasting has grown from 0.27 per cent in 1990 to 0.6 per cent of GDP in 1997. In line with international trends, the proportion of this income being made-up from subscriptions as opposed to advertising is on the increase. Telecommunications has grown even more dramatically and at 4 per cent South Africa already spends more on telecommunications as a percentage of GDP than most developed European nations. 5 Despite being touted as a beacon to the rest of Africa, South Africa faces many challenges around, unemployment, crime, education, delivery of health services, and housing. The country is relatively dependent on foreign investment and gears economic policy largely to that end. The slowing down of the world economy during 1998/1999 impacted negatively on South Africa with growth for 1998 being revised to a mere 0.7 per cent6. The upward turn in the economy has resulted in positive domestic growth that was recorded at 3.1 per cent in 20007. Despite national policies aimed at some levels of economic redistribution and poverty alleviation the country continues to have one of the highest Gini co-efficients in the world. The income gap is vast with household subsistence levels situated at less than US$ 200/month. The poorest 20 per cent of households (equivalent to 27 per cent of the population), account for less than 3 per cent of total income levels, whilst the richest 20 per cent of households, (equivalent to less than 3 per cent of the population) account for 65per cent of total income production8. 1 Interview with Director General, Department of Communications, South Africa, 13 February 2001<http://www.doc.gov.za/> 2 People of South Africa Population Census 6WDWLVWLFV6RXWK$IULFD, Report No. 1: 03-01-11 (1996) While this report is dated 1996, it was released in 1998 following a post-enumeration survey (PES), <http://www.statssa.gov.za> 3 SA Reserve Bank Time Series Analysis Sheet 1: GDP at market prices 1990-2000 4 South African Reserve Bank (SARB) Quarterly Bulletin 1998, <http://www.resbank.co.za> 5 Bain and Company SA: The South African Telecommunications Industry Structure and Regulation: How to destroy Value- Lessons form a global perspective, 5 April 2001, Johannesburg. 6 SARB: NRI6006z National Accounts Information. GDP at market prices, <http://www.resbank.co.za> 7 ibid 8 Yankee Group, 1999 < http://www.yankeegroup.com> 5HJXODWRU\LPSOLFDWLRQVRIEURDGEDQG )LJXUH)L[HG/LQH*URZWK PDLQOLQHVLQPLOOLRQV &HOOXODU*URZWK VXEVFULEHUVLQWKRXVDQGV Ã )L[HGÃ/LQH &HOOXODUÃ6XEVFULEHUV Ã Ã 6RXUFHÃÃFigures provided by BMI-TechKnowledge, South AfricaÃ Political transformation to a constitutional democracy was effected in April 1994 following the election of the African National Congress into power and the establishment of a Government of National Unity. The second democratic elections took place in June 1999 - providing the African National Congress with an even greater majority than in 1994 - and was accompanied by the former President Nelson Mandela’s succession by his deputy, Thabo Mbeki. &+$5$&7(5,67,&6 2) 7+( 6287+ $)5,&$1 7(/(&20081,&$7,216 /$1'6&$3( 7HOHGHQVLW\ Despite significant gains over the last five years, the distribution of telephony service in South Africa continues to reflect the highly uneven development of the infrastructure of the past - with 18 per cent of black households and 82 per cent of white households having telephony service. Universal access, measured as a 30 minute walk to the nearest phone has increased dramatically with over 80 per cent of all households having access. South Africa has over 100’000 public pay phones distributed nationally. While the positive effect of policies to bridge this gap are beginning to be evident, the differentiation in access and services between rural and urban households remains high - with 64 per cent

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