AUTOPAGE CELLULAR
PRESENTATION
To
PARLIAMENTARY PORTFOLIO
COMMITTEE ON COMMUNICATIONS
17 AUGUST 2005
Introduction
 Autopage Cellular welcomes this opportunity to present to the
Members of the Portfolio Committee on Communications
 Full details of Autopage Cellular and other Altech companies
which may be affected by the Convergence Bill, are included in
our written submission
 We have included the contents of this presentation together with
Altech Annual Report for your further information
 We progress to our commentary on the Draft Bill.
1
Objectives Of The Act
Commentary on certain key objectives:
(a) “Promote and facilitate the convergence of telecommunications and
broadcasting signal distribution”
 In the telecommunications area, this primarily means the competitive
bundling of communications services such as cellular, fixed line and
broadband internet access
 In many European markets, this is achieved by independent Virtual
Network Operators (VNO) which combine services from various
operators to provide competitive offerings to consumers
 VNO’s purchase wholesale minutes and access in bulk from various
operator networks, and resell these services competitively in bundled
and re-tariffed forms to the market
2
Objectives Of The Act
Commentary on certain key objectives:
(a) “Promote and facilitate the convergence of telecommunications and
broadcasting signal distribution”
 VNO’s have the ability to bill, re-tariff and service their own
subscribers, and usually have extensive sales and distribution
channels
 VNO’s are natural convergence entities
 As the largest independent service provider in the cellular industry,
Autopage Cellular is highly capable of graduating to a VNO role in the
industry.
Autopage has 500 000 post-paid subscribers in the cellular industry,
from all three networks: Cell C, Vodacom and MTN.
3
Objectives Of The Act
Commentary on certain key objectives:
(c) “Encourage investment and innovation in the Communications Sector”
(e) “Promote competition within the Communications Sector”
 The de-regulation of the sector and the promotion of competition are
critical to opening the sector to new players, technologies and
investment, resulting in better, more competitive and widespread
communications services
 A concern with the draft Bill, is that it seeks to broaden the license base
by bringing a number of new license categories: - “Communications Service Licenses”
(CSL)
- “Application Service Licenses”
(ASL)
4
Objectives Of The Act
Commentary on certain key objectives:
(e) “Promote competition within the Communications Sector”
but effectively renaming a category for existing incumbents
“Communications network service licenses” i.e. Telkom, Vodacom,
MTN, Cell C, Sentech, WBS and USALS.
 The effect is to discourage the entry of new investors into the
telecommunications sector at Network Operator level, preventing
rollout of innovative services such as wireless broadband, VOIP, and
self-provision of facilities by CSL (including existing VANS).
 The effect is also to over-license and over-regulate a competitive
market at the Application Service Licenses level. (ASL)
5
Objectives Of The Act
Commentary on certain key objectives:
(e) “Promote competition within the Communications Sector”
 Communications Service licensees (CSL) gain licensed recognition, but
no further rights and obligations, which would permit them to:
- Interconnect to other CNSL
- Have their own number range
- Have the ability to obtain approval of tariffs by the Authority
- Have the right to self-provide
 Regrettably the result is to further stifle innovation and investment
through litigation and disputes, rather than to de-regulate the sector
6
Objectives Of The Act
Commentary on certain key objectives:
(f) “Promote an environment of open, fair and non-discriminatory access to
communications networks”
 Together with
(b)
“universal connectivity …”
(g)
“empowerment of HDI persons …”
(n)
“promote consumer interests …”
 These objectives would be served by a healthy, competitive and lightly-regulated
market
 De-regulation of the telecommunications sector, particularly at the CNSL and
CSL levels will lead to:
- greater competitiveness
- wider availability of communications services
- affordable and accessible communications for consumers
7
Objectives Of The Act
Commentary on certain key objectives:
(f) “Promote an environment of open, fair and non-discriminatory access to
communications networks”
 New ventures will allow for further incorporation of empowerment at all
levels
o The Altech Group and its subsidiaries including Autopage Cellular
fully support empowerment in its many facets
o The Altech and Altron Groups have demonstrated a proud track
record of successful BEE partnership and broad based
empowerment achievements
o Autopage Cellular is proud to count among its staff, significant and
targeted demographic representation
8
Licensing Framework Commentary
Licensing Framework – Chapter 3
 3 levels of licensing are envisaged in the Bill
i) Communications Network Services Licenses
(CNSL)
ii) Communications Services Licenses
(CSL)
iii)Applications Service Licenses
(ASL)
 Specific concerns with CNSL
o Designed to limit licenses to existing incumbent operator licenses
currently in place
o It is clear that any new applications for CNSL will be protracted and
discourage new investment and innovation at this level in the industry
9
Licensing Framework Commentary
Licensing Framework – Chapter 3
 Many privileges and obligations attach to CNSL, which are not available to
smaller industry players: i) Provision of infrastructure – particularly wireless
(This can revolutionize penetration through fast deployment and low
capital cost)
ii) Interconnection
Prevented and over-regulated even between CNSL players
If relaxed, would allow pervasive and free communication between
licensees (CSL,CNSL)
10
Licensing Framework Commentary
Licensing Framework – Chapter 3
 Access and rights to Radio Spectrum
- As proposed, this is also restricted to existing Operator licensees
- Also prevents investment in and deployment of innovative wireless solutions
- This stifles innovation and makes further investment complex and difficult
 Communications Facilities Provision and Leasing
- A limited number of CNSL players will force an oligopolistic market to develop
in the provision of leased facilities
- A competitive market is essential to cut the ultimate cost and availability of
communications to the consumer
11
We illustrate our case for de-regulation as follows:
Case 1:
Wireless infrastructure provision
The process of obtaining CNSL needs to be opened up to allow for more and easier
licensing
-
Specifically point-to-point and point to multi-point wireless where deployment is
rapid and capital cost is low
-
Existing and Future VANS, fall into the category CSL
They must lease capacity which limits their ability to compete effectively
-
Broadband Wireless infrastructure would need CNSL licensing to gain access to
radio spectrum in terms of the Bill
New investment in this sector is stifled by the Bill. The process of licensing would
be protracted and slow
Conclusion:
The Bill should seek to de-regulate telecommunications, rather than entrench
existing CNSL players
12
We illustrate our case for de-regulation as follows:
Case 2:
-
Virtual Network Operators (VNO)
This model is becoming increasingly popular internationally. VNO’s are ideally
suited as convergence players, as well as promoting competition through own
tariffs and bundling. VNO’s purchase wholesale services from CNSL licensees
and resell services to the public
-
Typically VNO’s do not own or operate extensive Network facilities, but require
the following CNSL rights and obligations:
1. Interconnection rights to CNSL licensees
2. Own Number range (subject to NP)
3. Right to submit own tariffs to the Authority
4. Right to wholesale tariffs and facilities (CSL)
5. Self provisioning of wireless or cable infrastructure
13
Examples:
Typically highly successful VNO’s are:
Tele 2 AB:
- A Swedish VNO operator in 23 European Countries
(Revenues of SEK 36.9 billion and 22 million subscribers)
Virgin Mobile:
- Highly successful UK VNO operator with 4million subscribers
- Also Virgin/Sprint - USA
(2million subscribers)
- Virgin/Optus
- Australia
(600 000 subscribers)
Debitel:
- A successful European VNO operating in 5 countries
(Revenues of €3 billion and 10.4 million subscribers)
14
VNO – Concept Diagram
Fixed
Line
Mobile
Mobile
Switch
(Optional)
VIRTUAL NETWORK
OPERATOR
Broadband

Interconnection rights to other
networks

Own number range

Own tariffs and bundling

Right to wholesale
tariffs and facilities

Self provisioning rights
Subscribers
15
We illustrate our case for de-regulation as follows:
Case 2:
Virtual Network Operators (VNO)
Conclusion:
VNO players are well-suited to introduce greater telecommunications
competitiveness. Existing independent cellular Service Providers such as
Autopage Cellular are well-suited to become VNO’s.
16
Differences between SP and VNO:
Category
Service Provider
SP/ESP
Virtual Network
Operator (VNO)
Statutory
Contract with
Network/s
Licensed by law
Tariffing
“One line, One tariff”
Own tariffs and
bundling (ICASA)
Wholesale traffic
Discount on Network
Tariffs
-outgoing calls only
Wholesale rate per
minute
-Outgoing calls
-Incoming calls
Subscriber
Interconnect
Through Network and
Telkom
Direct to Network
(Interconnect)
17
Differences between SP and VNO:
Category
Service Provider
SP/ESP
Virtual Network
Operator (VNO)
Handset Incentives
Network and own
funds
VNO funds
Number Range
Allocated by Network
(subject to NP)
Allocated by license to
VNO (subject to NP)
Self-Provisioning
Channels
NO
YES
Switch Interconnect
Traffic
NO
YES (Optional)
18
Conclusions:

The Convergence Bill seeks to entrench existing CNSL players

It defeats its own objective of “Promoting Competition within the sector.”
And

“Encouraging investment and innovation in the communications sector”

It over-regulates by excessive layers of licensing without providing commensurate
additional rights

It should be restructured to de-regulate telecommunications and to encourage a
vibrant and competitive industry

As drafted, it has failed to do this
****************
19
THANK YOU
G. Passmoor
Group Executive
Altech
S.R. Blewett
Managing Director
Autopage Cellular