ICASA hangs up on handset subsidies in South Africa


The country's communications regulator, the Independent Communications Authority of SA (ICASA), will leave the tricky issue of handset subsidies to the National Consumer Commission (NCC), and will no longer try to regulate the issue.

Subsidised or “free” handsets have been a bone of contention for subscribers for years, as they are required to pay hefty penalties when wanting to get out of a contract before it expires. ICASA has been trying for about five years to regulate the issue so that consumers have clarity about what handsets cost.

However, this morning, the regulator said it had bowed to industry pressure to leave the issue up to the NCC, a regulatory body established in terms of the Consumer Protection Act (CPA). Handset subsidies will now be governed in terms of the CPA.

ICASA is consulting the industry to determine whether some parts of its mandate, which overlap with the overarching provisions in the CPA, should be exempted from the Act and continue to fall under its jurisdiction.

Councillor Fungai Sibanda says the regulator won't seek to have handset subsidies exempted from the CPA. He says ICASA had attempted to regulate the issue, but the industry told the authority to “back off” and let the CPA take precedence. “We listened to you.”

So-called “free” cellphones lock subscribers into two-year contracts. However, regulations promulgated just before the CPA came into effect in April only allow suppliers to charge a “reasonable” fee if consumers cancel a contract early.

This fee can take into account the value of goods that the subscriber will keep. Consumers can cancel a fixed-term contract by giving 20 days' notice.

Sibanda says there are several areas where the CPA overlaps with ICASA's mandate. These include: quality of service, contract terms and conditions, prepaid vouchers and handset subsidies.

ICASA wants to handle the jurisdiction of quality of service and have prepaid SIM cards exempted from the law. Sibanda says if the CPA applies to prepaid SIM cards, they would only expire after three years, which could see operators running out of cellphone numbers.

In terms of contract terms and conditions, ICASA is happy to leave most of the issues up to the NCC, barring charging and billing, as the body regulates price.

ICASA will submit a report on the exemption issue to trade and industry minister Rob Davies towards the end of August. The body may apply for conditional exemption if it needs to realign its legal framework to comply with the CPA.

ICASA has been trying to sort out the issue of handset subsidies since 2006, when it embarked on a consultation process to see if it should regulate this issue. In 2008, it published handset subsidy regulations, requiring operators to define how much consumers paid for phones.

However, Vodacom threatened the regulator with legal action if the regulations went into force, and ICASA bowed to pressure. At the end of 2009, a new code of conduct was released, but was much softer and more of a recommendation than a prescription.

ICASA put the entire issue on hold indefinitely in March this year. A Government Gazette indicated the “regulation-making process under review is hereby put on hold till further notice from the authority”.

Michelle Hajari, chairman of the South African Communications Forum ad hoc working group, which represents mobile operators, says the industry is happy to have handset subsidies fall under the CPA.