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Date : 13/01/2004
Source: Independent Communications Authority of South Africa (ICASA)
Title: Langa: Launch of ICASA Position Paper on Ownership and Control


ADDRESS BY ICASA CHAIRPERSON MANDLA LANGA, AT THE LAUNCH OF ICASA POSITION PAPER ON "THE OWNERSHIP AND CONTROL OF BROADCASTING SERVICES AND EXISTING COMMERCIAL SOUND BROADCASTING LICENCES", 13 January 2003

1. INTRODUCTORY REMARKS

The Independent Communications Authority of South Africa ("the Authority") is pleased to announce the publication today of the Authority's Position Paper on the Ownership and Control of Broadcasting Services and Existing Commercial Sound Broadcasting Licences.

The background to this Position Paper is set out in detail in the document itself and I do not want to repeat it here. But it is important to underline that the Paper constitutes the Authority's first major policy review of commercial broadcasting, particularly commercial sound broadcasting, in the last seven years.

The Authority has reviewed:

* the statutory limitations on ownership and control of broadcasting services, as set out in sections 48, 49 and 50 of the IBA Act;
* the commercial sound broadcasting sector, particularly the so-called Greenfields licences; and
* the feasibility of issuing additional commercial sound broadcasting licences.

This inquiry was informed by written and oral responses to the Discussion Paper, which was published on 27 September 2002. ICASA received nineteen submissions. Eighteen of these indicated their wish to make oral presentations. Oral hearings were held at the Authority's offices from 10 to 18 February 2003.

In analysing the framework for the regulation of ownership and control of commercial broadcasting services, the Authority has been guided by, amongst other things:

* the need to encourage investment in the broadcasting industry;
* the need to promote stability within the broadcasting industry;
* the need to encourage ownership and control of broadcasting services by persons from historically disadvantaged groups;
* the need to promote the most efficient use of the broadcasting services frequency bands;
* the need to ensure that broadcasting services, when viewed collectively, are controlled by persons or groups of persons from a diverse range of communities in South Africa;
* the need to ensure the protection and viability of public broadcasting services; and
* the need to ensure fair competition between broadcasting licensees.

The Position Paper is divided into four parts as follows: Introduction, Submissions, Findings and Proposed Amendments.

Part C: Findings sets out the Authority's policy decisions on commercial sound broadcasting with respect to matters that were the subject of this inquiry. This includes the Authority's approach to amendments to the legislation, consolidation and plans for licensing additional commercial sound broadcasters.

Part D deals with Proposed Amendments and sets out the Authority's proposed legislative amendments to Schedule 2 and sections 48, 49 and 50 of the IBA Act. In the interests of further public input, the Authority has decided to gazette the contents of Part D for written comment. After these comments have been taken into account, the Authority will submit the proposed amendments to the Minister, as required by the IBA Act.

Interested parties will have until 13 February 2004 to make submissions on the proposed amendments set out in Part D. However, the Authority will not reopen comment on the policy issues that have now been settled in this Position Paper and will only consider comments on the proposed legislative amendments. We hope to conclude this process and present our final proposed amendments to the Minister by the end of February 2004.

For the purposes of the launch today, I want to summarise the main findings of the Position Paper. These are set out in more detail in Part C of the Paper and constitute the Authority's policy positions on the way forward for commercial sound broadcasting in particular and commercial broadcasting in general. These policy positions also underpin the draft legislative proposals that are published today for comment.

2. SUMMARY OF FINDINGS

2.1 Regulated Consolidation in an Analogue Environment

The legislative provisions under review in this inquiry deal only with ownership and control of commercial broadcasting licences in an analogue environment. The Authority believes that a digital broadcasting environment will require a new regulatory regime with respect to ownership and control.

However, the Authority does not agree with the view that the advent of digital broadcasting is reason enough to dispense with ownership limitations on analogue commercial broadcasters. In the current South African broadcasting environment, digital sound and television broadcasters reach a very small percentage of total radio and television audiences. In fact, analogue sound and television broadcasters are still the major purveyors of information, entertainment and education.

Therefore, in the short-to-medium term, factors such as share of audience and scarcity of spectrum will still inform the Authority's policy with regard to the limitations on the ownership and control of commercial broadcasting services.

The Authority's policy, as reflected in this Position Paper and proposed amendments to the law, is based on the notion that a measure of regulated consolidation should be allowed in a context, which sees the licensing of additional commercial sound broadcasting services.

For the Authority, `regulated consolidation' means consolidation that is permitted within the confines of the regulatory dispensation. This policy is therefore strongly underpinned by the policy goals of diversity of ownership and control, as well as investment in the broadcasting industry.

The policy requires that the limitations on ownership be relaxed but not dispensed with and that new commercial licences are issued in an orderly and phased manner.

ICASA believes that the retention of albeit, relaxed structural limitations are important to ensure diversity of ownership and control in the South African broadcasting industry. The Authority is also required by the IBA Act to promote investment in the South African broadcasting industry. The Authority believes that through regulated consolidation and the granting of additional commercial sound licences, there will be a marked increase in investment opportunities in the broadcasting industry.

Notwithstanding the advantages of consolidation for the commercial sector, the Authority has to protect the public interest and more particularly diversity of ownership and control, culture, views and opinions. The new measures proposed by the Authority will continue to promote this diversity imperative.

The Authority's main decisions on the licensing of new stations and amending licences of existing stations can be summarised as follows:

2.2 Increasing Coverage Areas of Greenfields licences

The Authority has decided to ensure that, where possible, the Greenfields stations may apply for similar or the same coverage areas as the six privatised, former SABC stations.

In deciding whether or not it will be possible to consider and grant applications for increased coverage areas by Greenfields licensees, the Authority will also have to take into account its plans to licence additional commercial sound broadcasters in the primary and secondary markets. The Authority has to balance the policy objective of increasing coverage areas of existing broadcasters with the objective of creating new opportunities for commercial sound broadcasting in South Africa.

2.3 Additional Commercial Sound Licences

Regulated consolidation can only take place in the context of licensing additional commercial sound broadcasting services.

Therefore the Authority has decided to set out its plan for licensing additional commercial sound broadcasting services in secondary and primary markets. For the purposes of this inquiry and for the regulation of the commercial sound broadcasting sector going forward, the Authority regards the primary markets as the geographical markets of Gauteng, Cape Town and Durban. Secondary markets are those mainly metropolitan areas outside the primary markets.

2.3.1 Secondary Markets

Taking into account the Terrestrial Broadcast Frequency Plan, the Authority has decided to licence commercial sound broadcasters in four provinces. During 2004/05 financial year the Authority will invite interested parties to apply for commercial sound broadcasting licences in each of the following provinces:

Limpopo
The Licensee should cover the following towns: Mokopane, Polokwane, Makhado, Musina, Thohoyandou, Tzaneen, Phalaborwa, Giyani and Arconhoek.

Mpumalanga
The Licensee should cover the following towns: Nelspruit, Witbank, Middleburg, Standerton, Lydenburg, Ermelo, Bethal, Piet Retief, and Lydenburg.

Northern Cape
The Licensee should cover the following towns: Kimberley, Upington, De Aar, Colesburg, Calvinia and Springbok.

North West
The Licensee will cover the following towns: Mafikeng, Potchefstroom, Rustenburg, Klerksdorp, Litchenburg, Zeerust, and Ventersdorp.

The Authority intends to grant further licences in the secondary markets of Eastern Cape and Free State and may invite applications for a further two licences in these markets during the 2005-6 financial year.

2.3.2 Primary Markets

Taking into account the Terrestrial Broadcast Frequency Plan, during the 2005-6 financial year the Authority will invite interested parties to apply for new commercial licences in Gauteng, KwaZulu-Natal and Western Cape. The Authority is committed to granting at least three new commercial licences in primary markets, in addition to the re-licensing of Capital Radio and the former Punt Geselsradio frequencies.

The Authority has taken into account that there is still a strong demand for commercial sound broadcasting licences in the primary markets. Therefore it is important to ensure that the momentum of further investment in the industry is not lost.

2.3.3 National Commercial Licences

The Authority has upheld its 1996 policy decision and has decided not to invite applications for a national, commercial sound broadcasting licence. Due to frequency limitations, a new national commercial radio network would be difficult to establish.

Within the current frequency plan, the Authority believes it can continue to create more opportunities for investment and diversity through the licensing of metropolitan/regional stations than through the licensing of a national commercial station.

2.4 Empowerment

During this inquiry the Authority was presented with various proposals with regard to the definitions of historically disadvantaged persons and black economic empowerment. In order to promote consistency across the broadcasting and telecommunications sectors, the Authority has decided to adopt the same approach to defining historically disadvantaged persons in the broadcasting context as the definition set out in regulations on "the Limitation of Ownership and Control of Telecommunication Service". This definition incorporates most of the elements of the proposals placed before the Authority.

The Authority will also be guided by any Code of Practice issued pursuant to section 9 of the Broad-Based Black Economic Empowerment Act.

2.5 Amendments to the IBA Act

I can now summarise the Authority's main decisions with respect to proposed amendments to the IBA Act.

2.5.1 Two Options for Amending the IBA Act

The Authority has proposed two options for amending sections 48, 49 and 50 and Schedule 2. In Option One the Authority proposes the deletion of these sections and their replacement by regulations on the same subject matter.

Option Two involves the amendment of the relevant sections and the retention of the ownership limits in the statutes.

2.5.2 Definitions of Control, Deemed Control and Financial Interest

After taking into account all the representations, the Authority has proposed a number of consequential amendments regarding definitions of `control', `deemed control', `financial interest' and `securities'. These amendments clear up areas of legislative uncertainty which have emerged over the last few years.

2.5.3 Limitations on Foreign Control of Broadcasting Services

The Authority has decided to give effect to government and the broadcasting industry's view that the percentage-based limitation on foreign ownership should be increased without necessarily allowing foreign persons to control broadcasting services. A provision allowing for an application for exemption on good cause has also been proposed.

The Authority proposes that section 48 be amended to provide that:

* One foreign person shall not, whether directly or indirectly, have securities in a South African unlisted public or private company holding a commercial broadcasting licence equal to or exceeding twenty-five percent
* One or more foreign persons shall not, whether directly or indirectly, have securities in a South African unlisted public or private company holding a commercial broadcasting licence equal to or exceeding thirty-five percent
* One foreign person shall not, whether directly or indirectly have securities in a South African listed public company holding a commercial broadcasting licence equal to or exceeding thirty-five percent.

The proposed amendments to section 48 have been set out in detail in the Position Paper.

2.5.4 Limitations on Ownership and Control of Broadcasting Services

It is the Authority's view that a consolidation of broadcasting interests and the control of a multiplicity of commercial services does not automatically mean an end to plurality and diversity of voices. The Authority's `regulated consolidation' approach recognises the potential impact of consolidation on diversity.

There are currently 13 commercial sound broadcasting licences and section 49 limits control by any person to a total of four licences (that is, two FM and two AM licences). While the Authority's proposed changes to the legislation would allow companies to control more licences, the Authority also plans to licence at least 7 new commercial sound broadcasters over the next two years. At least 4 of these licences will be granted in secondary markets, and at least 3 will be granted in primary markets. By March 2006, this should increase the current number of commercial sound broadcasting licensees from 13 to 23, taking into account the sale and licensing of Capital Radio in the short-term, as well as the re-licensing of the MW frequencies forfeited by Punt Gesels Radio.

In order to move towards a more technology neutral environment and because of the disparity between the amount of AM and FM licences that have been issued, the Authority has decided to dispense with the legislative distinction between FM and AM broadcasters. It is therefore proposed that the legislation should refer only `to the control of commercial sound broadcasting services' and not distinguish between AM and FM, for the purposes of ensuring diversity of ownership and control.

Consequently, the Authority has proposed that no person shall be in a position to exercise control over more than two commercial sound broadcasting licences which have the same licence area or substantially overlapping areas.

The Authority has also decided to recommend that legislation dispense with a finite numerical limit on the number of commercial sound broadcasting licences. A structural, percentage-based limitation is proposed as follows:

"No person may control more than 35% of the number of licensed commercial sound broadcasting services".

In other words, if the law were amended today, a person would be able to control five commercial sound broadcasting services. For example, in an environment where 23 commercial sound broadcasting services are licensed no person would be able to control more than eight licences.

The advantage of this system is that it retains a measure of proportionality whilst capping the ownership of commercial sound broadcasting licences. Therefore, there will be no need to constantly amend the law should more commercial licences be issued or withdrawn.

2.5.5 Limitations on Cross-Media Control of Broadcasting Services

The Authority believes that while it is important to retain limitations on cross-media control of commercial broadcasting services, these limitations need to be clarified.

The Authority has agreed to clarify section 50 by proposing amendments in this regard. The confusion between readership and circulation has been removed and the Authority has proposed that the threshold percentage of average weekly ABC circulation in the licence area should be raised to 25%. The amendments to section 50 are set out in detail Part D of the Position Paper.

2.5.7 Practical and Procedural Considerations

The Authority has made a number of decisions with respect to practical and procedural issues. These are set out in the Position Paper and it is not necessary to repeat them here. However, it is important to reiterate that ICASA has decided to continue with our policy of entering into non-binding discussions, on an informal and 'without prejudice' basis, with potential parties to a transaction, so that parties can gauge whether or not there are impediments to their proposed transaction from a regulatory point of view.

3. CONCLUDING REMARKS

We believe that today's launch is an important milestone in the history of South African commercial broadcasting. The regulator has provided clarity on prospects for the industry's future growth, development and consolidation, whilst also ensuring that diversity of ownership and control, culture and opinion continue to be protected in the public interest.

Although we are proposing amendments to the IBA Act and seek further public comment on these proposals, the Authority is required to continue regulating the commercial industry in terms of the law as it currently stands - until such time as Parliament amends the relevant provisions.

This inquiry has involved the resolution of several complex policy and legal issues that impact on the future ownership and control of commercial broadcasting licences. The fact that this process was completed in sixteen months benchmarks South Africa very favourably when compared to other democratic jurisdictions. Similar investigations have taken other communications regulators more than two years to complete.

ICASA is confident that our policy positions and draft amendments address industry, government and public concerns, and will breathe more life into a sector as it is able to plan and invest for the future.

THANK YOU

Source: Independent Communications Authority of South Africa (http://www.icasa.org.za)

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