About two weeks ago President Cyril Ramaphosa met Elon Musk in New York. The topic that must have been touched on in their talks was how Musk’s satellite-based Starlink broadband service might be able to obtain a licence to roll out its service in SA.
Over two years ago, Starlink, owned by Elon Musk’s SpaceX, said it would launch its service in SA, but there has been no roll-out here. Starlink has said it has not even applied for regulatory approval.
Starlink is a satellite constellation that provides global mobile broadband. Its key advantage is that it allows high speed broadband access in remote areas as well as on boats and planes, that cannot be effectively served by land-based systems. For much of Africa, which experiences no or poor-quality broadband access in vast areas, the case for using Starlink is compelling.
While it has not said as much, it is pretty evident that the reason Starlink has not applied for a licence is because it does not want to meet the empowerment requirements for a national broadband service provider. These requirements include providing a 30 percent stake in the local venture for historically disadvantaged people, including blacks, women, youth and the disabled.
As is probably the case with many companies, Starlink may not want to dilute its shareholding in a local subsidiary company and is not prepared to compromise on this. That is something the ANC must still fully take on board. Some companies are simply not prepared to dilute their control to do business here or elsewhere. For many reasons, including confidentiality and control issues, having external shareholders of closely held companies does not work for them.
Stand-off
Starlink has been in a stand-off with our government on this issue, and might now get its way. But it has received operating licences across the continent, showing up SA regulation as outdated and restricting growth. So far, Starlink has been licensed to provide a broadband service in 20 of Africa’s 54 countries. A number of countries have changed their regulations to allow Starlink to be licensed.
Kenya had a law which required that any foreign investment in an information technology venture in the country required locals to own 30 percent. This was scrapped last year, paving the way for Starlink and other telecommunications to enter the market.
As one of the largest and most developed economies in Africa, the delay in licensing Starlink should be pretty embarrassing for us. There are endless speeches from Ministers and the President declaring SA’s openness to do business, yet here we are with a regulatory bar to a service which would meet an important need.
At last, our government has woken up to the embarrassment about Starlink not even wanting to apply for a licence.
Just days after the meeting between Ramaphosa and Musk, the Minister of Communications, Solly Malatsi, said he would issue a policy directive to change the empowerment requirements for national internet service providers. Without so much as a mention of Starlink, Malatsi said his policy directive to the sector regulator, the Independent Communications Authority of South Africa (ICASA), would be to drop the empowerment ownership requirement and replace this with an “equity equivalent programme.”
Alternatives
That would mean that instead of an empowerment ownership requirement, alternatives like training programmes and various other contributions might be allowed. It would also mean that ICASA would not implement the previously proposed tightened empowerment ownership requirement of 30 percent black ownership on its own, in addition to a stake for youth, women and people with disabilities, according to MyBroadband.
Other sectors like the motor industry use the “equity equivalent” formula, so it does have precedent and cannot be challenged as a hollow substitute.
Starlink has shown that the state is almost powerless in the face of a technology with a global footprint. Try as they might with the law on their side, the state cannot totally crackdown on the use of Starlink by SA residents.
In SA, many have been dodging the law to use the Starlink service. To show it still has power, ICASA has in recent months set the cops on illegal users, but it is doubtful that all have been caught. And to show it wants to abide by local law and put itself in a good position to obtain a licence when and if it submits its application, Starlink has been blocking reception in South Africa. But it is likely that there are still ways to get around the system.
Ramaphosa must have given Malatsi the go-ahead to issue a policy directive to ICASA. Having a DA minister water down empowerment regulations makes things a lot easier for Ramaphosa with his own party, the ANC. Empowerment is sacred to the ANC cause and the radicals in the party who want to wreck the Government of National Unity (GNU) are on the defensive against DA moves to undo this in any way.
Using the DA for reform
This change is a surprise blessing of the GNU. It would have been a lot more difficult for the ANC to do this on its own. Here we have Ramaphosa effectively using the DA for reform.
But just as these empowerment regulations can be changed for the good by ministerial edict, they could also be tightened up and reversed by ministerial edict. That calls into question the durability of the arrangement that might pave the way for the licensing of Starlink’s service. But let us be grateful for the moment.
The move to “equity equivalents” could still require a tricky bit of political manoeuvring. Service providers granted licences prior to the introduction of the “equity equivalent” solution might object to this on the basis that they too should be granted this option. And empowerment groups with large stakes in MTN and Vodacom might also object to the new proposed arrangement, although Starlink would not provide direct competition.
When ICASA adopts the ministerial directive, the path could also be open to a number of other satellite-based broadband service providers applying for licences to provide a service in South Africa. Through Project Kuiper, Amazon has plans to deliver what it says is a low-cost internet service to communities in remote areas. That should mean a lot more competition, lower prices as well as greater access to a far faster internet.
Other industries
This change is significant, as it could play out in a similar way in other industries. The ANC must be increasingly aware that as they seek to divide the pie, they are not growing the pie. They have found an ‘out’ for themselves in the form of “equity equivalents”, and could use this in other industries.
Regulation often becomes outmoded and even irrelevant with a change in technology. Getting governments to wake up to these sorts of changes can take ages. It could have taken a lot longer to change the rules in SA had many African countries not rushed ahead of us and paved the way.
[Image: A batch of 60 Starlink test satellites stacked atop a Falcon 9 rocket, close to being put in orbit https://commons.wikimedia.org/wiki/File:Starlink_Mission_(47926144123).jpg]
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