New policy environment for the South African telecommunications sector Department of Communications 03 APRIL 2001

Policy and Regulatory Instruments Legislation Policy direction Invitation to Apply (ITA) Regulation Licence and licence conditions

Government Objectives Promoting a competitive and modern telecoms environment Favouring construction of new infrastructure and improving teledensity Gradual move to allow non-infrastructure based competition Fair terms of interconnect Ownership guidelines to include local investors, and specifically investors from historically disadvantaged groups Domestic and foreign investment Increase access and reduction of input costs Human resource development and empowerment

Liberalisation Matrix Current May 2002 International 1 3 Long Distance 1 2 Local Access 1 2 Rural Access / VoIP (below 1%) 1 L Data and Internet Service (no voice) L L Cellular licences 3 3 Fixed-mobile licences 0 2 L - Liberalised Market assessment to determine feasibility of introducing additional operators to be completed by May 2005 Minister to issue ITA for at least one services-based licence to commence provision of services in Q4 2005

Timeline to Liberalisation Policy directions ITA for SNO licence ICASA regulations SNO licence switch on Sentech licence switch on 3G licences 1800MHz spectrum Review for new licensing round 1st services-based licence 23 March 2001 July 2001 End July 2001 7 May 2002 To be decided September 2001 May 2005 Last quarter 2005

Second National Operator Role Full service fixed-mobile licence Roll-out obligations 3 years to complete infrastructure Resale allowed in first 3 years Ownership Majority domestic ownership ESI~TEL (Eskom) and Transtel to participate HDP equity participation

Sentech Licence International services only direct to customers From 7 May 2002 Interconnection with other operators Carrier pre-selection rights Multi-media services provided via digital terrestrial broadcasting platform

Promotion of Competition ICASA to develop carrier pre-selection and number portability arrangements to promote competition ICASA to develop interconnect guidelines At least one service-based licence in Q4 2005 VANs allowed to provide full spectrum of end-to-end electronic commerce and right to operate VPNs to provide data services

Mobile Telkom and SNO to provide fixed-mobile services 1800 MHz spectrum to be allocated to all mobile and fixed-mobile licencees on terms to be determined by ICASA 1800 licence awards to be completed by September 2001 3G licences to be offered to all mobile and fixed-mobile licencees on terms to be determined by the Ministry - timetable not yet fixed

Universal Access - bridging the digital divide New licences to include universal service obligations All licensees will pay levy (subject to maximum 0.5% of revenue) in favour of the Universal Service Fund from April 2003 Universal Service Agency (USA) to continue to oversee the Fund Objectives of Fund will include provision of internet services, special services to differently abled persons and communications services to high-priority areas Special E-rate available for public schools for internet access (excluding voice) at 50% discount ICASA will grant licences to cooperatives and small, medium and micro-enterprises to promote universal access in areas with teledensity below 1% (including VoIP)

Historically Disadvantaged Persons and/or Groups Government re-iterates support for Historically Disadvantaged Persons and/or Groups Up to 30% of all new major telecommunication licences for Historically Disadvantaged Persons and/or Groups ICASA to develop criteria to give priority to Historically Disadvantaged Persons and/or Groups and small, medium and micro-enterprises Encouragement of broad-based retail offering to Historically Disadvantaged Persons

Other Numbering system to ensure neutrality of number allocation number allocation, maintenance and management of routing - based systems to be administered by ICASA based on cost allocation carrier pre-selection and number portability will be introduced subject to regulatory framework (to be developed by ICASA) Directories single consolidated directory for all telecommunications information must be available, free of charge, to each fixed line subscriber privacy: subscribers can elect not to have their information included

Other (continued) Directory enquiry services provision of information contained in directories to be available throughout South Africa and free of charge from payphones network operators can sub-contract service Public emergency communications single public emergency toll-free number - 112 governance by new institution funded by Government Sentech to establish common digital public safety radio communication service

Other (continued) Human resource development Government and private sector will develop strategy on ICT education to promote ICT literacy at early stage in education system and to support and empower women and the differently abled persons