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A step closer to the real world

By Arthur Goldstuck

In a week which saw the prime interest rate drop to its lowest level in 18 years, South Africans may have been forgiven for becoming blasé about good news. An equally important announcement, not because it affected as many people, but because it represented a dramatic shift in the regulatory mindset, was made two days earlier, to little fanfare.

The Independent Communications Authority of South Africa (ICASA), which a few weeks earlier had failed in its mandate to select an equity partner for the Second Network Licence operator, thus delaying the onset of competition in the fixed phone line market, seemed to shrug off its regulatory shackles on Tuesday.

After months of deliberation, and after studying submissions from 18 interested parties, it approved both the operation of wireless hotspots and Internet Cafes.

Key to its announcement was the decision that local area network (LAN) equipment does not form part of a public switched telecommunications network (PSTN) or what most of us know as POTS (Plain Old Telephone Service).

ICASA has in effect fired the starter’s pistol for a new industry of wireless hotspots, by accepting some of the major arguments made by potential industry players about the nature of equipment used in hotspots, and the manner in which they differ from telelcoms equipment.

“Arguments were presented by various stakeholders, both in written submissions and during the oral hearing, in an attempt to demonstrate that wireless local area network (WLAN) equipment that is situated on the premises occupied or used by the LAN owner can be regarded as Customer Premises Equipment (CPE),” ICASA said in its statement.

It added that the licence which gives Telkom exclusivity over PSTN equipment carried the following definition of CPE: “An item of approved equipment which does not form part of the Public Switched Telecommunications Network but is connected or intended to be connected to terminal connection equipment, whether fixed or portable, and by means of which signals are initially transmitted or ultimately received.”

It noted that WLAN equipment constituted a LAN on customer premises, was therefore “without a doubt” CPE, and consequently not prohibited by law. The words the industry awaited with baited breath came in the following understated fashion in the ICASA announcement:

“3.2.1 In terms of section 36B (2) of the Telecommunications Act, the LAN equipment does not form part of the PSTN.

“3.2.2 The service provided to the public on the premises occupied by a customer (i.e. Hotspot owner) is not part of the local access telecommunication service.

“3.2.3 LANs are providing a service on a customer premises. Services provided on a customer’s premises have historically not been licensed by the Authority and therefore the Authority sees no need to treat WLANs differently.

“3.2.4 The 1995 Radio Act Declaration (Notice 1790 of 1995) places an unnecessary limitation on the use of WLAN which is not related to any spectrum efficiency argument, namely that LAN’s “shall be confined to the same premises/building and between the computer systems of the same user”. The Authority will amend the provision in the Radio Regulation (Notice 1790 of 1995) as follows: the whole phrase “and between the computer systems of the same user” will be deleted.

“3.2.5 In an attempt to create an environment of innovation that will benefit
the sector, and for the avoidance of doubt, the Authority will exempt all
commercial services provided on customer premises from a service licence in
terms of section 33(2) of the Telecommunications Act.”

This means, in effect, that hotspots and Internet cafes are legal, as long as the service is provided within the borders of the hotspot or café owner’s customer premises.

And with that, for the first time since the birth of the commercial Internet industry in 1993, the regulators have come out openly, clearly and unambiguously in support of open competition in at least a category of data access in South Africa.

It is easy to overstate the importance of this decision; in the short term, it is not going to mean a gold rush for anyone but the suppliers of equipment to the hotspots. No business model has yet been identified for making hotspots profitable immediately or on a sustainable basis, either here or internationally.

But the importance of the decision cannot be overstated in terms of the attitude shift it represents, and the level of understanding it reveals with regard to the needs of the access industry and market. All kudos to ICASA: If this is the beginning of a trend, we may yet be able to mention the words telecommunications and competitiveness in the same breath in South Africa.

Arthur Goldstuck is editor of The Big Change and MD of World Wide Worx. He can be contacted on

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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