Remarks by Minister of Communications, Ms. A.F. Muthambi (MP) on the occasion of a Joint-Committees’ Digital Migration state of readiness meeting, Cape Town
Honourable Chairpersons,
Members of both Committees the Portfolio Committee on Communications and Portfolio Committee on Telecommunications and Postal Services respectively,
Chairpersons and Members of Boards of our entities,
Acting Director General of the DoC and CEO of entities,
On Policy Matters
Honourable Chairpersons,
When it comes to digital migration or the digital terrestrial television project, it is a universal norm that the Minister of Communications, has the final right to make policy, even if the department does not directly implement all sections
In other words, Government through the Ministry of Communications, has the greatest role to play in actualising the migration. It is the role of Ministry to lead the movement by fashioning out appropriate policy on methodology and pace of migration, and generally giving direction to the industry in the interest of the nation.
Against this backdrop, digital migration is the process by which broadcasting around the world today are switching from inefficient analogue signals to more efficient digital ones.
This is primarily in the distribution (transmission) of broadcasting. In fact, without digital transmission, you don’t have digital migration, even if production and reception are digital. Digital distribution, however, has a major bearing on both the production and consumption dimensions of broadcasting.
The resolution on this deadline was adopted in 2006 at a meeting referred to as the Regional Radiocommunications Conference (RRC-06), and agreed by 101 nations in Europe, Africa and the Middle East.
Backing the ITU decision on a timetable (June 2015) for digital migration is the accompanying decision that, after the defined cut-off date, the ITU will no longer intervene to protect a country’s TV broadcast signals in any instances where these are being swamped by a neighbour’s, unless those signals have been switched to digital.
DTT implementation achievements to date
Honourable Chairpersons
It is important to indicate that the primary objective of broadcasting digital migration is to release the scarce national radio frequency spectrum to enable the provision of broadband and other interactive services. The released radio frequency spectrum is sometimes referred to as the digital dividend.
The Presidential Proclamation of 02 December 2014 gave the Department of Communications the responsibility to accelerate the implementation of the digital terrestrial television (DTT) programme in the country.
I must indicate that the DTT project was only handed over to us by the Department of Telecommunications and Postal Services on 31 January 2015. DTT is a flagship project for the Ministry and the Department of Communications. To demonstrate our capabilities in this regard, in the period between March 2015 and February 2016, the Department achieved a number of key milestones which amongst others include:
- The gazetting of Cabinet-approved Broadcasting Digital Migration Policy 2015 which enabled the provision of Set-Top-Boxes and accessories to five(5) million indigent television-owning households
- We commenced with the phased in approach of Set-Top-Boxes (STBs) Registration in four provinces namely, Northern Cape in the Square Kilometre Array area and neighbouring towns, Free State, Mpumalanga and Limpopo;
- We also announced 1 February 2016, as the commencement period for dual illumination;
- We conducted bilateral engagements with our Southern African Development Community (SADC) neighbouring countries and signed agreements to eliminate possible issues of TV broadcast frequency interferences post the ceasing of analogue protection after 17 June 2015. We did this guided by the SADC Protocol on Transport, Communication and Meteorology signed in 1996, by former President Nelson Mandela. Articles 22 and 23 of the SADC provides for Member States to expand and deepen their co-operation and harmonisation in the areas of infrastructure and services;
- Since the commencement of the rollout process in December 2015, SABC has made four channels on the DTT Platform and all 18 radio stations available with eTV making six (6) channels available
- As of 31 August 2016, the average overall installation target of 90.7% was recorded in all the SKA towns, namely Carnavon (91.9%), Brandvlei(90.3%), Williston(85.2%) and Vanwyksvlei (96.8%)in the Northern Cape.
- As an assurance, the Project Management Office (PMO) conducted two mock switch off of high power analogue transmitters in Carnavon on the 23rd and 24th of June 2016, a second mock switch off was successfully carried out on the low power transmitters on Thursday and Friday 7 and 8 July 2016. Only one additional customer was registered during the period of the switch off, showing a strong indication that all households in the area have been successfully migrated to digital.
- An analogue transmitter switch off public event is being planned by the department. In terms of the BDM Policy, the switch-on and switch-off dates of the digital and analogue broadcasting digital terrestrial television signals will respectively be determined by the Minister of Communications in consultation with Cabinet.
Challenges and solutions to inadequate funds
Honourable Chairpersons
The DTT project is being rolled-out despite minor challenges. As we announced during the department’s Budget Vote in May this year, we were hoping to complete the Northern Cape SKA area on or before the June 2016 deadline, which has subsequently not materialized, although we are close to achieving this feat.
Other challenges relate to lack of funding for public awareness campaign, dual illumination for the establishment of contact center. On SAPO, there are also risk issues which are awaiting National Treasury regarding the additional funding the entity requires.
We must indicate that as we highlight these issues, some of them could be addressed in the Ministers Management Committee on Budget (MinComBud) which is sitting today.
Investigation in the STBs Awarding Process
The issues around the current USAF budget must be treated with the sensitivity it deserves as the investigation report is being studied by ourselves and the Department of Telecommunications and Postal Services.
Furthermore, the issue of public awareness campaign tender has resulted into President Jacob Zuma issuing a proclamation instructing SIU to investigate into the role of the Media Corner, a company that was meant to conduct campaigns as well as the officials involved in the former DoC now DTPS.
To this effect, we are informed that my colleague Minister Cwele has previously had a meeting with PC on Telecommunications and Postal Services on the status of the investigations.
On the issue of the Court decision
The Court decision never said that the DoC must stop the Digital Migration Programme, the Court limited itself only on certain sections of the Policy, which we are challenging. The Court invalided a clause or section of the BDM Policy.
With your permission Chairpersons, I will allow the team led by the Acting Director General to proceed with the presentation.
Additional information in case the matter comes up during the meeting
Background to Court Cases on DTT
It must be said though that in 2009, the erstwhile DoC took a decision to review the standards adopted for the set-top-boxes. This decision unfortunately invited other stakeholders to start lobbying for the removal of other sections in the policy in particular a section that speaks to the specifications on the set-top-boxes. It must be said though that the discussions around these matters were closed in 2008. This led to the approval of the amendments to the 2008 BDM Policy in 2012.
Following the challenge by eTV regarding the powers of the Minister of Communications to designate SENTECH as the STB Control System vendor, the Court ruled in favour of eTV. In this regard, the DoC began a process to find a compromise position to resolve the impasse.
As a result the Department of Communications on 4 December 2013, presented to Cabinet amendments to the BDM Policy making the use of encryption non-mandatory. It was for the first time that the encryption of this level was introduced in the policy. All along the policy referred to a control system as envisaged in the original policy and what was presented to Cabinet. The amended policy was gazetted to solicit public comments on the proposed amendments.
It must be said though that in 2009, the erstwhile DoC took a decision to review the standards adopted for the set-top-boxes. This decision unfortunately invited other stakeholders to start lobbying for the removal of other sections in the policy in particular a section that speaks to the specifications on the set-top-boxes.
It must be said though that the discussions around this matters were closed in 2008. This led to the approval of the amendments to the 2008 BDM Policy in 2012.
As a result the Department of Communications on 4 December 2013, presented to Cabinet amendments to the BDM Policy making the use of encryption non-mandatory. It was for the first time that the encryption of this level was introduced in the policy. All along the policy referred to a control system as envisaged in the original policy and what was presented to Cabinet. The amended policy was gazetted to solicit public comments on the proposed amendments.
Summary of the Supreme Court of Apeal (SCA)
The Department of Communications noted the judgement of the Supreme Court of Appeal (SCA), delivered on 31 May 2016. The judgement confirmed the decision of government that the encryption of set box boxes should be optional and remain a commercial option for all broadcasters.
The judgement, in the matter between ETV and Minister of Communications and others, provided much needed clarity with regard to the inclusion of an encryption clause in the 2015 amendments of the Broadcasting Digital Migration Policy as approved by Cabinet in March 2015.
This policy has enjoyed industry-wide deliberations first being published in 2008, amended in 2012 and 2015 respectively.
It must be emphasized that the SCA did not order the reversal of the broadcasting digital migration process. The SCA clarified some technical issues in the 2015 amended policy.
It was never the intention of the Minister or the Department to prohibit other broadcasters who may want to encrypt their broadcast signal in order to service their customers. The intention was to provide broadcasters with an option to decide whether to encrypt any signal, this still remains a commercial strategy option of individual broadcasters.
This is so because the Digital Terrestrial Television (DTT) Set-Top-Box (STB) standard published by the South African Bureau of Standards provides that “manufacturers can obtain the security requirements from the free-to-air individual broadcasting service licensees in South Africa”.
This is further confirmed by clause 5.1.2(C) of the 2015 amendments that made a provision indicating that “Depending on the kind of broadcasting service broadcasters may want to provide to their customers, individual broadcasters may at their own cost make decisions regarding encryption of content”.
This does not translate into government having to acquire at its own cost the systems to encrypt the signal on behalf of individual broadcasters nor does government intend determining broadcaster’s route to encrypted services. This remains the prerogative of individual broadcasters as determined by their respective market and technology strategies as has been the position of government since 2008.
The Department is committed to work with all key role players to ensure that the Broadcasting Digital Migration process is successfully implemented. This will ensure that the country is able to quickly release the much needed spectrum currently occupied by broadcasters to enable the provision of broadband services to the majority of the population, thus ensuring the competitiveness of the country.
We are of the firm view that DTT has the potential to radically transform the value chain of the broadcasting systems, thereby creating a new industry trajectory that will assist in addressing the triple challenges of poverty, unemployment and inequality.
The Department has since petitioned the Constitutional Court regarding the SCA judgement since it believed that the judgement raises constitutional issues.
Forensic Investigation by the National Treasury
In October 2015, the Department of Communications solicited the assistance of National Treasury to conduct investigation regarding the USAASA set-top-boxes (STBs) tender process. National Treasury subsequently conducted an investigation to establish the appropriateness of USAASA tenders on the following:
- Terms and conditions for the use of National Treasury allocation of R2.5 billion for the DTT Project;
- The SCM procedure followed in the appointment of USAASA to appoint EY for the delegation of procurement processes specific to DTT Project;
- The SCM procedures followed in the appointment by USAASA of 27service providers for the supply of DTT Outdoor antennas and related accessories; Direct to Home (DTH) Satellite Dishes and Related accessories; DTT STBs and Related Accessories and DTH Satellite STBs and related accessories; and
- Confirmation of receipt of the R2.5 billion that was allocated by National Treasury to USAASA and the determination of how the funds have been utilised to date.
Findings
Ernst and Young (EY) was appointed by USAASA contravening its own Supply Chain Management Policy which stipulates that all procurement exceeding R500, 000 must be subjected to competitive bid. However the appointment of EY did not follow a competitive bid.
Other three companies appointed to form part of a Bid Evaluation Committee (BEC) namely, LS Telkom, Bowman Gilfillan and Indyebo Consulting. USAASA claims that companies were appointed to provide technical expertise and as a result the fourth company, Rain Chartered Accountants was appointed to audit the process. Again, the process of appointing these companies did not follow the procurement process. It was initiated by an email sent to 17 companies requesting for proposals. Even though EY’s quotation was the highest, it was appointed with a cost of over R849, 000.
The other four companies were also appointed with their quotations above the threshold of R500, 000 as dictated by USAASA SCM Policy. The establishment of BEC comprised of Bowman Gilfillan, LS Telcom and Indyebo Consulting was in contravention of USAASA SCM Policy and National Treasury circulars and instructions.
Four of USAASA tenders to supply DTT STBs; DTH STB; DTT Antennae and Satellite Dishes advertised in November 2014 to close in December 2014 experienced changes in the process. Closing dates of tenders were extended from December 2014 to January 2015. The extension led to the escalation of EY management costs from the original cost of R849 000 to over R2.8 million.
The process of evaluation and adjudication of bids was not in line with USAASA SCM policy and National Treasury regulations. The Bid Evaluation Committee (BEC) evaluated bids in accordance with the criteria specified in the bid documents and recommended not to award any company for the supply of DTT Antennae and accessories and for the tender to be re-advertised. Instead, USAASA introduced a different evaluation and adjudication processes against the initial criterion. The process led to:
- Non-qualifying companies in terms of scores allocation; and
- Establishment of the panel of 27 manufacturers instead of appointing qualifying companies.
The consequence of the above appointments and establishment of a panel did not take into account the price negotiation process. When allocating supply volumes by USAASA, companies that quoted lowest prices were not granted volumes. Instead prices were negotiated upwards and not downwards leaving the cost of Set-Top-Boxes procured at 37% above the market price at retail. This is in contravention of the SCM and PFMA provisions for “Value for Money”.
The National Treasury revealed that USAASA had already received an amount of R1.6 billion in their bank account. USAASA has earned interest amounting to R127 million. The report further reveal that USAASA spent R10.2 million out of the interest earned which National Treasury indicates that it is prohibited to spend interest earned from Subsidy Funding without obtaining its permission which USAASA did not obtain.
The report recommended that the production process of STBs be stopped with immediate effect and a process that will lead to the integrity and value for money be initiated. The recommendation is based on that continuation of the process may be faced with the legal challenge and that with the current situation, the programme will not realise its objective of providing 5) million STB in consideration of the current funding.
The DoC and USAASA to urgently find a process that will enable the government to realise the goals and objectives of the nine point plan and value for money.
The office of the Chief Procurement Officer (CPO) is being engaged regarding the findings with the intent to solicit assistance regarding implementation of the National Treasury recommendations. The CPO committed to study the findings and provide recommendations about the appropriate legal process to be followed.
