South AfricanTelecoms Companies are Happy With Regulator’s Reduced Licence Fees

Telecoms

A drastic slashing of the fees telecoms companies have to pay for the right to operate has been cautiously welcomed, after warnings that the initial hefty fee proposals threatened to drive numerous companies out of business.

Fervent objections from a variety of telecoms companies prompted the sizeable cut in the fees proposed by the Independent Communications Authority of SA (Icasa). Operators will now have to pay an annual fee of 1.5% of their gross profit, down from the far more punitive idea of charging 3% of their gross revenue.

"In principle we support Icasa's new proposals," said John Holdsworth, the CEO of ECN. "The new fee structure, which is based on 1.5% of gross profit instead of 3% of turnover, is vastly improved." The result worked out at about 10 times less then the original proposal, depending on the profit margin reaped by each operator. Incumbents with a higher gross profit margin would pay appropriately more than smaller, newer entrants, Holdsworth said.

Almost 40 companies submitted objections, with ECN saying its fee would leap from R100,000 a year to R3m if Icasa refused to revise its plans. That has clearly happened, and Icasa has given the industry until March 20 to comment on its new fee structure.

The Internet Service Providers Association has also welcomed Icasa's change of heart, which will help any Internet specialists that have ambitions to supply a wider variety of services. Start-up businesses will also be satisfied with the new structure, which excludes any company that is classified as a small business from paying an annual licence fee.

In a position paper explaining its new stance, Icasa said licence fees should support the aims of legislation designed to encourage competition, investment and innovation in the sector, ensure a variety of services at reasonable prices and encourage the growth of small enterprises. The previous monopolistic regime justified high licence fees as operators were guaranteed "excess profits". But the unintended consequence was that the high fees were passed on to consumers, creating some of the world's highest communications costs, Icasa said.

Licence fees were still needed to encourage competition, but they could be more modest and should vary according to the size of the operator. This would spare smaller companies the barrier of being forced to pay too much, as they would be if a fixed fee was imposed across the industry.

When Icasa staged hearings into its original proposals it was told that demanding 3% of the annual revenue was a disincentive to competition, and other countries charged a mere 0.5%.

During the hearings, Icasa's Thabo Makhakhe said the fees were clearly a vexing topic and all serious issues being raised would be studied before fees were finalised. Icasa was particularly concerned by comments that the fees could have a detrimental effect on the development of the telecoms and technology sector.

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