High Court Action: Altech vs ICASA and 28 Others

I spent quite a substantial part of this past week at the Pretoria High Court, monitoring the case Altech vs ICASA and 28 others. As my company is one of 28 others (although not actively participating), and the results of the court case could have significant impact on our business in the next 3 - 5 years, I was there to monitor the proceedings. Interestingly, most of the non-participants (will clarify just now) from the industry was not there at the hearings - which I found very surprising.

The high court is a remarkably formal setting - every one stood up as the judge entered and left the court room; people leaving the court room bowed before the exited, and similarly bowed before they entered. Even when responses to opposition argument were polite and quite reserved - even if saying that the opposition lawyer's argument was stupid and wrong :) Given the fast track nature of the case (and even then, it took about 3 months to be heard), the judge was very well prepared, and very engaging. It is certainly very different to the TV law series - where the judges are usually passive controllers. Instead, the judge was very engaging - asking questions, clarifying arguments made etc. which made it very easy to follow the arguments (from a listener's perspective).

The case made by Altech is quite simple, but has very wide ranging implications for the South African Market. The core case is about the right of Value Added Network Service (VANS) Licensees to self-provide network infrastructure. ICASA (the regulator) and the Minister of Communications say no, and Altech say yes. But before I elaborate, some background.

Under the old telecommunications act of 1996, there were effectively 4 major types of licenses - public service licenses (for Telkom and Sentech effectively), private service licenses (for specific institutions such as Eskom), cellular operator licenses (for MTN and Vodacom) and VANS licenses which allowed service providers to provide value added services over a communication network. VANS licensees encompassed all ISPs and other corporate network service providers such as my company, which run managed networks for corporate clients. A couple of years ago, the Electronic Communications Act came into operation, which had a different licensing structure: Electronic Communication Network License (ECNS) which allows the license holder to build network infrastructure, Electronic Communication Service License (ECS) which allows the license holder to provide a service over a communication network and Radio Frequency (RF) licenses that allow a license holder to get access to specific radio spectrum.

Sine the old act is going to lapse next year, all existing licenses are being converted to the new license regime; and during this conversion the license holders cannot get lesser rights than they already have. ICASA instituted a conversion process last year for VANS licensees and basically decided to convert a selected number of VANS licensees to ECNS license holders through a competitive process. About 26 VANS licensees took part in the competitive process, including Altech. However, soon after the hearings and submissions of documents to ICASA was complete, Altech brought an urgent court case to stop the process, and joined all the participants in their case. Altech basically argued basically two points:

1. All VANS licensees already have the right to self provide infrastructure, and thus should get ECNS licenses.


2. The process undertaken by ICASA is illegal and should be stopped

Off course if the first argument succeeds, then the second does not matter much. But ICASA and the Minister's arguments in respect of the first point, in my opinion was a lot stronger than Altech. They argued that Altech basically misinterpreted the old laws and ministerial directives. Furthermore, the government is interested in a phased liberalisation program for telecommunication - and the big bang approach that Altech's case would produce (over 600 potential telecommunication service providers instead of about 10) was never envisaged so soon.

But worryingly for all the participants of ICASA's process, Altech's second argument was basically uncontested. If the Judge agrees, and grants the order requested by Altech - the next step of the phased liberalisation process which envisages the introduction of a few more network operators (indications initially was that about 6 new licenses would have been granted) will have to be restarted. This would set back the process by at least 18 months, and that is bad news for telecommunication in South Africa.