Press release: ISPA Calls for Clarity on Application of Consumer Protection Act to Bandwidth

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The Internet Service Providers’ Association (ISPA) has sounded the alarm bell over the apparent intention of the National Consumer Commission to apply Section 63 of the Consumer Protection Act (CPA) to data or other electronic services.

“If Section 63 of the CPA is deemed by the Commission to be applicable to the payment in advance for data and other electronic services, we predict that it will have the effect of driving up prices considerably. This at a time when both consumers and businesses need all the help they can get,” says ISPA joint chair Marc Furman. “Such a move would also have the effect of hampering the vital drive to create jobs and increase broadband penetration.

World Bank research has shown that in emerging countries there is a direct correlation between broadband penetration and gross domestic product. It is research like this that lies behind the July 2011 compact between the ICT industry and government to work together to achieve 100% broadband penetration by 2020.

The CPA was promulgated in April 2011 with the aim of providing South African consumers with a solid legislative framework that protects their rights against unscrupulous vendors. Section 63 regulates when various types of prepaid certificates, cards, credits, vouchers or similar devices expire. The prepaid device expires only when its full value is redeemed, or after three years if the full value is still not redeemed. Until the full value of the prepaid device has been redeemed, the unredeemed portion remains the property of the purchaser.

ISPA contends that Section 63 only applies to transactions in which some form of actual prepayment device (“prepaid certificate, card, credit, voucher or similar device”) is issued by the supplier. Payment in advance for bandwidth does not fall under Section 63 because there is no prepayment device which “holds” the value to be exchanged for services in the future. Rather, it is a simple payment in advance for future access to services, which is specifically excluded by section 63(1).

“In fact, once a consumer buys the bandwidth, it is immediately available for consumption and no further ‘device’ is needed to gain access to it,” says Mr Furman.

ISPA notes that if Section 63 of the CPA is deemed to be applicable to the payment in advance of data and other electronic services, it would imply that it could be applied to all payments in advance. For example, could a consumer who paid for parking in advance roll over the days she did not use the parking bay in one month into the following month?

“Internet service providers offer a variety of data bundles and it is up to consumers to choose the one that mirrors what they will use. The price is obviously linked to the amount of bandwidth the customer commits to purchase in the course of the month,” says Mr Furman.

ISPA urges ISPs to spell out the contractual details of each data bundle very clearly to consumers, explicitly stating when data does not roll over from month to month.

“Applying Section 63 of the CPA in this way to bandwidth would actually have the unintended consequence of disadvantaging consumers rather than protecting them,” Mr Furman concludes.

Further Information

For further information, please contact the ISPA secretariat on the Contact ISPA page.