Member Article

Gone are the days when satellite communication was limited to those brick phones with long antennas. Satellite communications services are gaining traction globally as they offer alternative ways of connecting end users to the Internet and other related communications services. However, as electronic communications services via satellites become more popular and accessible, service providers are met with regulatory challenges.

In the South African context, electronic communications services are subject to the Electronic Communications Act (“ECA”). According to the ECA, electronic communications services, or ECS, are any service which consists wholly or mainly of the conveyance, by any means, of electronic communications over an electronic communications network, regardless of whether such services are provided on a wholesale basis or to end-user subscribers. Satellite communications services are therefore considered to be electronic communications services under the ECA.

An electronic communications network refers to a broad definition that encompasses any system of electronic communications facilities, and this includes a satellite system. Therefore, a person that makes available a satellite system in order to provide electronic communications services (or ECS) will be a provider of electronic communications network services, also known as ECNS, as defined in the ECA. To offer ECS and/or ECNS in South Africa, a person must hold the relevant licences issued by the communications regulator, the Independent Communications Authority of South Africa (“ICASA”). Persons wanting to offer satellite communications services would have to hold individual ECS and ECNS licenses, which allow a licensee to provide ECS and ECNS across South Africa. The first challenge faced by persons wanting to enter the South African communications market, is that it is not currently possible to apply for these licenses.

New individual ECS/ECNS licences can only be applied for from ICASA if the Minister of Communications and Digital Technologies issues an invitation to apply (ITA). Currently, the only way to obtain individual ECS /ECNS licenses is to find an existing licensee that is willing to sell its licenses and then apply to ICASA to transfer the licenses. The transfer application process is complex and very time-consuming.

Another hurdle to acquiring individual licences is adhering to the requirement that an individual licensee must have a minimum of 30% of its ownership equity held by historically disadvantaged groups, as required in terms of the ECA. As such, any person that wishes to offer satellite communications services in South Africa must: (i) be a South African citizen, or otherwise a juristic person (company) registered in South Africa; (ii) hold individual ECS / ECNS licences; and (iii) prove that 30% of the equity ownership in the prospective licensee is held by historically disadvantaged groups if it wishes to acquire such licences.

For multinational corporations in particular, complying with the equity ownership requirement can be a major obstacle to obtaining individual licences in South Africa.

According to the Codes of Good Practice on Broad-Based Black Economic Empowerment (“B-BBEE”), all businesses that participate in the South African economy must contribute to the goals of equity ownership. The Codes of Good Practice recognise that some multinational corporations may have international business practices that prevent them from adhering to the equity ownership requirement.

To remedy this, the Codes of Good Practice have introduced another way in which multinational corporations can contribute to the B-BBEE objectives instead of equity shareholding, which is referred to as Equity Equivalent Contributions measurement. The Minister of Communications and Digital Technologies and/or ICASA has unfortunately not yet adopted this measurement.

The Equity Equivalent Contributions measurement is a framework that the Minister of Communications and Digital Technologies could adopt for multinational corporations wanting to enter the communications sector while ensuring the promotion of B-BBEE within the sector. One of the stated purposes of the ECA is to facilitate diversity and transformation in the ICT sector by promoting B-BBEE. The use of the Equity Equivalent Contributions measurement aligns with the aims of B-BBEE in the ICT sector and would foster competition within the sector by opening up the tight list of entities that can offer communication services based on the equity ownership requirement.

Apart from the licensing requirements, other legal considerations that satellite owners must be aware of, include the application of public international law to satellites that are in orbit, including the question of which country has jurisdiction over the satellite when it is in orbit.

Satellite communications services would greatly benefit the South African economy and end users. More remote areas could get access to reliable Internet connectivity and more competition in the sector could drive down the cost of data. However, the hurdles that service providers have to go through before they can provide ECS or ECNS in South Africa are restricting entry to the market. The introduction of the Equity Equivalent Contributions as an alternative to the 30% equity ownership by historically disadvantaged groups has the potential of removing one of those hurdles. But for now, only time will tell how the Minister of Communications and ICASA will work with multinational service providers in regulating satellite communication services.

 

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