Press release: ISPA Welcomes ICASA’s Steps to Remedy Flaws in Draft Licence Fees

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The Internet Service Providers’ Association of South Africa (ISPA) has welcomed the publication of a significantly revised set of draft General Licence Fee Regulations by regulator ICASA.

The Association said that it is especially pleased that ICASA has moved to adjust its proposed licence fees for the new electronic communications network service (ECNS) and electronic communications service (ECS) licenses to more realistic levels. While ISPA is still researching the new structure, the new proposed licence fees of 1.5% of operating profit generated from licensed activities is certainly far more palatable than the initially proposed levy of 3% of annual gross revenue.

“ICASA is to be applauded for recognising the deficiencies in the first draft of the regulations and setting out to remedy them,” said Dominic Cull, one of ISPA’s regulatory advisors. “The decision to reduce annual licence fees and to base them on gross profit as opposed to gross revenue is a major step forward for the industry that will remove many of the difficulties which have bedevilled the calculation and levying of licence fees in the past under the Telecommunications Act.”

The Department of Communications and ICASA had perhaps previously worked under the assumption that companies in the telecoms industry were making excessive profits when it drew up the first draft of the regulations, said Cull. However, it is only the incumbent operators with significant market power making excessive margins in the telecoms industry. The previously proposed 3% of gross revenue may have been realistic for incumbents who have enjoyed strict market protection in the past, but did not take the 500 plus newly licenced operators into account.

Many smaller operators and ISPs are struggling to remain competitive. The initially proposed licence fees in the first draft regulations would inevitably have resulted in higher costs to consumers.

Cull said that ISPA particularly appreciates ICASA’s proposal to exempt small businesses from the obligation of paying licence fees since this will facilitate the entry of more small and medium-sized enterprises into the telecom market.

“Apart from encouraging real competition right at the grassroots of the telecom industry, such a move would no doubt facilitate transformation and dovetail nicely with ISPA’s initiatives to train entrepreneurs from disadvantaged backgrounds who wish to start an ISP, Internet Café or hotspot service,” he added.

ISPA does have some reservations about the latest draft regulations, especially insofar as administrative fees are concerned. It believes that the proposed fee of R50 000 for changing a shareholder or company name for licensed service providers is extreme. It also maintains that the interest rates and penalties proposed for late payments seem harsh.

“In general, however, we are pleased that ICASA is moving in the right direction. Overall we believe that they represent a lucid and practical approach to licence fees within the current industry and regulatory environment,” concluded Cull.

Further Information

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