Picture: BLOOMBERG/WALDO SWIEGERS
Picture: BLOOMBERG/WALDO SWIEGERS

Mobile telecommunications giant MTN has slammed proposed legislation to regulate infrastructure sharing in the telecoms sector, saying it is unconstitutional, will violate property rights, and discourage investment in the industry.

“The proposed bill is a dramatic and radical change to an industry that is critical to economic growth, jobs and bridging the digital divide. To impose blanket cost-based open access on a competitive market is draconian and irrational,” MTN said in its written submission to Parliament’s telecommunications and postal services committee.

The committee is holding public hearings on the controversial Electronic Communications Amendment Bill. One of the contentious proposals in the is the establishment of a wireless open-access network (Woan), which the government says is aimed at driving down communications costs by facilitating entry of more players.

The government says the bill is also intended to improve competition, regulation and infrastructure-sharing in the sector, amid a spectrum crunch.

The bill further proposes that a service provider with “significant market power”, or at least 25% of SA’s network infrastructure, has to share its infrastructure with competitors. According to the bill, communications regulator the Independent Communications Authority of SA (Icasa) will prescribe the “cost-oriented” rates service providers can charge their rivals.

“The cost-based open access remedies proposed in the bill would be unthinkable in any other industry. For example, consider forcing airlines to offer seats to their rivals at cost: which airlines would ever invest in aircraft on that basis?

“Consider forcing automobile manufacturers to construct automobiles for rivals at cost again: which automotive manufacturers would ever invest in a factory in SA again?” the network operator asked. .

“Why would MTN (or any other network player) continue to invest in its fixed and mobile network when it can get access to Telkom’s or Vodacom’s network at cost? In turn, why would Telkom and Vodacom continue to invest in network expansion and innovation if they get no competitive benefit from it, merely cost-based returns out of MTN (and other service providers)?”

The company said the bill is unconstitutional as it violates the property clause. Furthermore, it fails to meet the rationality requirement imposed by the constitution and it is "impermissibly" vague, MTN said.

“In effect, the bill envisages an expropriation of the property rights of the operators. It does so without the payment of compensation, and in a manner that does not reflect an equitable balance between the public interest and the interests of those affected. The bill is therefore unconstitutional.”

However, MTN said it supports the objectives of the bill in respect of economic transformation and meaningful participation in the economy, as well as expanding access to networks in rural and under-serviced areas.

“However, we believe that these objectives will not be achieved by a Woan, as currently contemplated in the bill. Such a Woan would destroy investment incentives, and eliminate infrastructure competition, which has been the engine behind quantum improvements in mobile coverage, quality and consumer value,” MTN said.

Cell C chief legal officer Graham Mackinnon said the company supports the bill.

“What’s surprising is that there has been so much criticism of the bill. It’s a fundamental change that is needed. The bill is trying to fundamentally change the industry,” said Mackinnon.

“Why would the dominant incumbents oppose this bill? I think the reason is they like the status quo. They are making lots of money and it works for them,” he said.

The public hearings continue on Friday.

phakathib@businesslive.co.za