BRIEFING TO THE SELECT COMMITTEE ON COMMUNICATIONS AND PUBLIC ENTERPRISES

Transcription

1 BRIEFING TO THE SELECT COMMITTEE ON COMMUNICATIONS AND PUBLIC ENTERPRISES BRIEFING ON SPECTRUM LICENSING PROCESS UPDATE ON LABOUR RELATIONS MATTERS Rubben Mohlaloga Acting Chairperson 26 October 2016

2 Organisational Mandate ICASA is established pursuant to section 192 of the Constitution and in terms of the ICASA Act of 2000 ICASA s mandate is derived from: ICASA is mandated to - Regulate electronic communications, broadcasting and postal sectors in the public interest Ensure affordable services of high quality for all South Africans The Constitution, 1996 ICASA Act, 2000 EC Act, 2005 Broadcasting Act, 1999 Postal Services Act, 1998 ECT Act,

3 Strategic Goals: Universal Access to Broadband Services Access to communications services at affordable prices SOOGs Improvement of organisational service delivery Foster national common identity and social cohesion 3

4 Spectrum Policy & Legislative Framework NDP A seamless information infrastructure that meets the needs of citizens, business and public sector; and provides access to the Chief Operations Officer wide range of services required for effective economic and social (Regulatory Projects Office) participation by 2030 SA Connect Policy EC Act, % broadband access to all Citizens by Universal download speed of 100 Mbps by 2030 Establish a technology-neutral licensing framework Promote efficient use of spectrum Promote open, fair and non-discriminatory access to services Facilitate competitive market, ensure sustainability of the sector Ensure universal provision of affordable + quality services Integrated ICT Policy White Paper The Authority has noted the release of the White Paper The Authority is obliged to consider the Policy in executing its mandate 4

5 Spectrum Licensing Regulatory Framework Time-line of Frequency Planning Regulations Radio Frequency Spectrum Regulations 2011 National Radio Frequency Plan 2013 Frequency Migration Plan 2013 IMT Roadmap 2014 Terrestrial Broadcasting Frequency Plan 2013 GG Update - Terrestrial Broadcasting Frequency Plan 2014 GG Radio Frequency Spectrum Assignment Plans for IMT

6 Spectrum Licensing Regulatory Framework RFS Regulations, 2015 National Radio Frequency Plan, 2013 Radio Frequency Migration Plan, 2013 Terrestrial Broadcasting Regulations, Establish a framework to allocate and assign radio frequency spectrum Sets out standard terms and conditions for spectrum licences Establish transparent, fair and efficient procedures and processes for spectrum licence applications. Outlines procedure and criteria for awarding spectrum licenses for competing applications ICASA is required in terms of Section 34 of the ECA to update the plan The updated plan included, amongst others, implementation of resolution 232 (WRC12) which allocated spectrum in the band MHz to Mobile and Broadcasting on a coprimary basis which make implementation IMT 700 possible. Sets out a review of migration plans since 1996 to 2012 and documented decision of WRC12. Provide for significant amount of spectrum that could be released for broadband and the need for advanced planning 649 MHz of spectrum was made available for International Mobile Telecommunication Makes provision for three (3) DTT Multiplexes during Analogue to Digital Migration per ITU deadline - 17/06/2015 Provide for Digital to Digital Terrestrial Television for the post migration process to be implemented after 17 June 2015 as per GE06. Makes provision for the seven (7) DTT Multiplexes in the UHF Band in the frequency range 470 to 694 MHz 6

7 Process - IMT Roadmap to ITA Draft IMT Road Map Final IMT Road Map 2015 Radio Frequency Spectrum Plans Information Memorandum Deliberations and consideration of representations 2016 Invitations to Apply 2016/17 Court Interdict against the Licensing Process o Considers a range of technical options and feasibility studies for IMT usage and migration per band o Outlines technical solutions for each IMT band o Outlines detailed technical parameters for each band o Consultation process providing information to prospective applicants intending to apply for the radio frequency spectrum licenses within the designated ranges o Sets out options / consider best fit model for licensing of IMT bands o ITAs for licensing / assignment of specific spectrum bands published in line with sec 31(3) of the ECA o The Northern Gauteng High Court granted an interdict against the licensing process 7

8 Spectrum award mechanisms Beauty contest (Advantages) Allows non-financial aspects to be taken into account Auction (Advantages) Assign spectrum in a transparent manner and treat bidders equally Auction encourage bidders to bid their true value of spectrum (Knowing the other bidders values) Maximize economic, social benefits and promote competition Beauty contest (Disadvantages) Beauty contests are not transparent Open to claims of favoritism Prone to legal challenge Auctions (Disadvantages) Can be complex to administer depends on the design May lead to concentrations of spectrum to those with the most money but this issue can be addressed through spectrum caps/reservations Auctions have the risk of over-valuing the spectrum (Higher Reserve Prices) 8

9 Spectrum valuation methodologies Cost reduction valuation methodology o Infrastructure costs savings associated with having more spectrum o Costs savings arise in the form of both Capex and Opex o Modelling infrastructure costs with and without additional spectrum o Vary based on scale of a licensee & nature of spectrum o Low value relative to Full Enterprise value Network deployment costs Without additional spectrum Cost reduction value With additional spectrum

10 Spectrum valuation methodologies cont. Full Enterprise Valuation methodology o Discounted cash flow or expected net present value o Incremental free cash flow over the period of the licence discounted to present value using weighted average cost of capital o Revenue less network costs (Capex) and non-network costs (Opex) o Entail a lot of projections and assumptions o Value higher than cost reduction valuation methodology Subscribers Traffic Annual revenue - Core Network SAC RAN network Admin Network Costs + Non-network Costs = NPV WACC

11 International benchmarking Benchmark against previous auction results from other jurisdictions Cannot be used to estimate spectrum value or reserve price Used as sense check of the value of spectrum due to its inherent risks

12 Economic benefits of broadband Using data from 22 OECD countries from 1996 to 2007 a University of Munich study found that a 10% increase in broadband penetration raises per-capita GDP growth by 0.9 to 1.5 percentage points Using data from 1980 to 2002 a World Bank study found that an increase in broadband penetration of 10% in low and middle-income countries yielded an additional 1.38% increase in GDP growth Other studies found: o 1000 more broadband subscribers create 50 more jobs o A doubling of broadband speed can lead to 0.3% growth in GDP

13 Benefits for South African Economy According to a study by Deloitte (2012, Sub-Saharan Mobile Observatory Report) the benefits of releasing additional IMT spectrum (including DD1 and DD2) for the South African economy over the period is quantified as follows: o An increase of over 10 million mobile broadband subscribers o More than 21% increase in mobile broadband penetration o More than US$ 15,9 billion increase in GDP o An increase of US$ 30 billion in tax revenue o Creation of an additional 1,4 million jobs This data excludes the revenue that could potentially be raised by an auction, the billions of ZAR in infrastructure investment thus illustrating the annualised opportunity cost of not licensing the available IMT Spectrum.

14 Guiding objectives for spectrum assignment Ensure universal broadband coverage Chief Operations Officer (Regulatory Projects Office) Facilitate entry by new players into the market Encourage Transformation in the Sector Create a stable and sustainable environment for future investment THE PROCESS WILL BE INFORMED BY GOVERNMENT POLICY OBJECTIVES AS OUTLINED IN TERMS OF THE NATIONAL INTEGRATED ICT POLICY WHITE PAPER 14

15 State of Labour Relations within ICASA 15

16 Table of Contents 1. Introduction 2. Background 3. Disputes 4. Strike Management Plan 5. Mediation 6. Dispute Consideration 7. Post Strike 8. New Union and Wayfoward 16

17 Introduction Historically, ICASA employees belonged to the Communications Workers Union (CWU), where matters of collective bargaining, such as salaries, policies, terms and conditions of employment etc. were negotiated between the Union and the Authority; Over a period of 5 years, since 2010, negotiated salaries were unmitigated, inordinate to norms in the labour market and the ICT Industry. Unfortunately, this created squeeze between Managers and Senior Managers, who were part of the bargaining council, as well as internal anomalies and remuneration inequalities within the Authority, and The uncoordinated organisational structure led to the duplication of resources/positions, wherein a detailed study on Organisational Development by Adam Smith International was conducted which triggered restructuring or structural realignment that started in 2009, but never executed.

18 Background ICASA embarked on an organisational re-alignment process during As per section 189 of the Labour Relations Act, ICASA consulted CWU from the commencement of the process. A Steering Committee (SteerCo) comprising of 2 CWU representatives, HR, PE Corporate Services (Service Provider) and 2 General Managers was established (this SteerCo met on a weekly basis). There were also CEO s staff meetings to update all employees on the realignment process. All documentation pertaining to the process was placed on ICASA s intranet for easy access by all. A special communication platform was also created to allow employees to send queries, questions, comments etc. directly to the SteerCo on any aspect of the realignment process.

19 Background In 2014, ICASA also embarked on a process to revise old policies and formulate new ones. As per the provisions of ICASA / Communication Workers Union Recognition Agreement, all the HR policies were subject to consultation. The consultations took the form of monthly meetings or and special meetings as arranged by the Human Resources Division. The meetings were attended by the Authority s shop stewards and the National Union Office Bearers. The policies that were updated are: o Performance Management; o Disciplinary Code; o Grievance; and o Overtime policies. Remuneration, Job Evaluation and Probation policies were newly developed policies. All the above mentioned policies were subsequently approved by Council on 31 March 2015.

20 Background From September 2015, employees started resigning from the Communication Workers Union. As a result, the union s membership threshold fell below 30%. In line with the provisions of the Recognition Agreement, the union was notified of the decline in membership and was given 90 days to correct the situation. By November 2015, the situation did not change and the union was given a month s termination of the agreement notice. In December 2015, the Recognition Agreement with CWU came to an end by operation of law.

21 Background On 16 November 2015, the Authority received a group grievance in line with the provisions of ICASA s Grievance Policy. On 27 November 2015, employees representative were invited for a meeting with the CEO (scheduled for 30 November 2015), to discuss the raised grievances. The employee representatives failed to attend the scheduled meeting, without tendering any apology nor an explanation. On 03 December 2015, a letter was sent to the employee representatives in response to the grievance. Upon reaching the last stage of the Grievance process, the employees referred the matter to the CCMA for a dispute resolution in accordance with the grievance policy.

22 Disputes On 1 April 2016, ICASA received a letter from a Labour Consultant (acting on behalf of ICASA employees) listing the below demands: i. Performance Bonus backdated for FY; ii. Backdated salary increases from 1 April 2015; iii. Restructuring / re-alignment of the organisation to be reversed; iv. All policies that were approved after 31 March 2015 to be discarded; and v. Unilateral change to terms and conditions of employment to be reversed. The letter was duly responded to on 18 April Subsequent to that, ICASA received a CCMA referral regarding the same demands. Both parties then met at the CCMA for Conciliation on 31 May No agreement could be reached and accordingly, a certificate of non-resolution was issued by the CCMA. On 22 June 2016, a notice of intention to embark on a protected strike was received from the Labour Consultant. The strike commenced on 4 July 2016 with 39% (139/356) of the workforce participating in strike.

23 Strike Management Plan The Strike Management Committee was established to ensure the effective management of the strike by putting contingency measures in place to mitigate the impact of the strike action, and ensure that service delivery is affected as little as possible. Communication was distributed to employees on 30 June 2016, outlining the application of the following principles during the strike action: o No Work No Pay o No form of intimidation will be allowed o No picketing allowed inside the ICASA Offices Employees not participating in the strike were religiously signing attendance registers twice a day, at 9h00 and 15h00. From those registers, daily statistical reports were compiled of percentages of striking versus non-striking employees. At the beginning of the strike, there was 39% (139/356) strike participating rate. The number gradually reduced to 37% (129/356) as at 08 August 2016 when the strike ended. The strike was fairly peaceful, with no major incidents reported.

24 Mediation The Management Task Team was appointed to engage with the representatives of the striking employees; The parties mutually agreed to the appointment of the Mediator; Mediation process commenced on 29 July and proceeded on 4, 5 and was concluded on 8 August 2016; Management committed to consider all the remuneration related disputes in accordance with the relevant Governance structures (REMCO), and approval from Council, and Striking employees returned and commenced duties on 10 August 2016.

25 Dispute Considerations Deliberations on the presented disputes were held with the Management Team, and the following was unpacked: Disputed Issues Findings 1. Performance Bonus backdated for FY. A decision was taken in 2015 not to pay any bonuses, due to the dismal overall 29% performance of the Authority. 2. Backdated salary increases from 1 April All employees did receive 5.5% salary increase effective from 01 April 2015, in Restructuring / re-alignment of the organisation to be reversed. 4. All policies that were approved after 31 March 2015 to be discarded. 5. Unilateral change to terms and conditions of employment to be reversed (Claw-back on salaries) Management requested the striking employees representatives to engage them further on the specifics of these disputes, before 31 March

26 Post Strike The Management Team made the following recommendations that were supported by REMCO and approved by Council: i. The payment of Performance Bonuses, in recognition of the drastic improvement to the Authority s 76.7% audited performance results; ii. iii. 7% salary increase across the board, and a merit escalation as guided by the Performance Management and Development Policy; and Explore different options pertaining to the Claw-back strategy, for consideration by Council. REMCO Remuneration Committee 26

27 New Union and Wayforward Post the Strike, 163 employees joined the National Trade Union Congress(NTUC). First Meeting was held with NTUC on 14 September 2016 to discuss Organisational Rights of the Union in accordance with Section 21 of the LRA; Second Meeting is being arranged for 24 October to discuss matters of a collective agreement. 27

28 Thank You!! 28