Cover
Up to R1 billion is gathering dust in the Universal Service and Access Fund, while South Africans cry for basic telecoms services.
Since its creation, by the Telecommunications Act of 1996, the Universal Service and Access Fund has collected a lot of loot. How much is unclear. Where it is and what it has been used for is even less certain.
The Universal Service Agency has a mandate, as per the Act that created it, to ‘promote’ the goal of universal service (US) and to ‘encourage, facilitate and offer guidance’ with regards to efforts in that regard.
Renamed the Universal Service and Access Agency by the Electronic Communications Act, the Agency initially had a lifespan of five years, as did the Universal Service and Access Fund (USAF), also created under the 1996 Act.
The 2001 Telecommunications Amendment Act increased the Agency’s and the Fund’s lifespans, and limited the balance in the fund to R20 million. A further amendment to the Act increased to the number of contributors to the fund, and then the Electronic Communications Act increased that again. A Fund balance of around R800 million to R1 billion is estimated by industry. But no one, as far as Brainstorm has been able to ascertain, actually knows how much is in the fund, where the money is, or what has been done with it.
|
CHALLENGES As Cell C regulatory head Nadia Bulbulia put it: “It’s no secret that the industry is very concerned about the Fund and how it’s being utilised, and dispersed. We’re not sure how the apparently R1 billion in the Fund has been used, and then there’s the set top box issue.” At the time of going to print, the minister was not able to provide comment and the industry, as such, still has no idea what the minister aims to do about the missing millions. A further question hangs over Broadband Infraco, which, Cull says, has asked to be exempt from universal service and access obligations. While both broadcasting and telecommunications access services are critical, no one has stepped up to address Africa’s more pressing digital divide – that of internet access, and the speed and quality thereof. South Africa cannot afford to fall further behind its African peers or developed nations. It’s time for the USAASA problem to be resolved, so that the real challenges can be addressed. Beyond the comment included, none of the operators were willing to comment on what all of them consider to be a highly contentious, and political, issue. |
Mandate
As mentioned, the Agency is not actually required to directly facilitate universal service and access initiatives, as per the EC Act. It was established to administer the Universal Service and Access Fund (USAF), which exists to pay out subsidies to further the government’s goals of universal service and access.
|
DEFINITONS • Universal service is defined as 90 percent of a country’s households having access to a telecommunications service (usually fixed line telephony). |
The Agency is required to act in accordance with instructions from the minister of communications. And in order to gain access to the Fund, it has to get approval from Parliament.
As per the EC Act, ‘every holder of a licence’ is required to pay 0.2 percent of revenue (it was initially 0.16 percent but increased in 2003 per regulations to that effect) into the Fund every year. The money paid into the Fund goes to Treasury by way of the national revenue fund.
As this funding is not ringfenced specifically for telecommunications initiatives, it is unclear what has become of the contributions made over the past decade or so, which have been substantial.
MTN’s contribution to the fund last year, for example, was over R50 million. Vodacom’s is likely to have been more. Consider operators like Vox, IS, Altech, Cell C and their annual turnover, then work back for the last ten years (for simplicity’s sake) and you’ll see why this is a problem.
A significant amount of money gone ‘somewhere’, with no governance, no audit, no clarity as to where it has gone and what it has been spent on.
Sore point
The question of USAF contributions is something of a sore point with operators. As Ellipsis Regulatory Solutions head Dominic Cull notes: “[Contributions] have been frequently hauled out as a whip to industry.”
A source, who preferred to remain anonymous, noted: “The Fund is a problem area. Money was supposed to be used for demand-side subsidies, i.e. identifying needy people and helping them be able to afford a phone, and supply-side subsidies, i.e. subsidising network rollouts to under-serviced areas. But until recently, no thought was given to how to define needy people, or under-serviced areas. There’s always been a vacuum.”
USAASA supplied definitions of universal service and universal provision to the minister in January.
The minister approved these definitions and published them in the Government Gazette on 9 February, so some progress has been made.
|
SOURCES Universal Service and Access under the South African Electronic Communications Act – Lisa Thornton, Carmen Cupido and Kerron Edmundson, 2007. |
That said, Icasa is responsible for determining what constitutes an under-serviced area and then the minister again has to formally declare them as such, which hasn’t been done.
The minister is also responsible for determining what constitutes a needy person, which, again, hasn’t been done.
Broadcast problem
In terms of the EC Act, Icasa is responsible for deciding “the basis and manner of determining contributions,” per Thornton et al, and also “the date on which contributions are payable”. The minister decides how much of a percentage contributions must be. Contributions may not exceed one percent of turnover.
Neither has acted on this, however, so licence holders are still paying contributions per the repealed Telecommunications Act.
And while the EC Act includes broadcasting in the realm of universal service and access activities, broadcasters do not pay a percentage to the Fund; they pay contributions to the Media Diversity and Development Agency (MDDA). These contributions are meant to be offset against USAF contributions but Icasa hasn’t acted yet, so the broadcasters are, effectively, not contributing.
Why is this important? Because the main thrust of the Agency’s activities for the short term, as per the budget presented to the Parliamentary Portfolio Committee (PPC) on Communications in late March, revolve heavily around set top boxes and set top box subsidies.
The telecommunications players, needless to say, are not thrilled that their contributions to the Fund will be used to finance broadcast development activity. Easy money
The Agency has a budget of R67 million for the next financial year, including provisions made for “BDM* set top boxes (STB) capacity building R17 300 000”. The USAF has a budget of R218 613 000. This includes R180 million for “STB subsidy”, which, according to Lamani’s presentations to the PPC, refers to a scheme of ownership model, and subsidising “183 500 STBs”.
The USAF budget includes a further R13 653 579 for broadband infrastructure, to whit, the agency intends to have three under-serviced areas defined, and appoint a provider to roll out into that area through a competitive bidding process; a R4,1 million subsidy has been budgeted per area.
While this should be good news, the amount is significantly lower than that budgeted for broadcast rollouts, and, due to its lack of demonstrated capacity to spend said funds, the Agency is having a hard time convincing Parliament to give it a chance to prove it can manage said financing and said projects.
