Small ISPs must be 30% HDG-owned by 2028 or close, ICASA says

Internet service providers and network operators that are not at least 30% owned by historically disadvantaged groups will have to sell a stake or shut down when their licences come up for renewal in 2028. That is the word from ICASA chairperson Mothibi Ramusi, speaking to MyBroadband this week.

The rule is not new. What is new is that hundreds of licences issued in 2009 are reaching their first renewal, and ICASA says ownership will be checked when they do.

Who has to meet the 30% rule?

Holders of individual network licences (I-ECNS) and individual service licences (I-ECS). The network licence lets a company build and run physical infrastructure such as fibre, and the service licence lets it sell services over that infrastructure (MyBroadband).

The Electronic Communications Act requires these licensees to be 30% owned by historically disadvantaged groups (HDGs). That covers Black people (South African citizens who are black African, Coloured or Indian), as well as women, youth and people with disabilities (MyBroadband).

ICASA's 2021 ownership regulations say the 30% must be worked out using the flow-through principle, and they set a separate minimum of 30% equity held by Black people for individual licensees. Meeting the Black equity requirement also counts as meeting the HDG one (ICASA regulations).

Class licensees, the lighter licence many smaller operators hold, are not subject to the HDG equity rule, though they still need a B-BBEE level of four (ICASA regulations).

Will the big providers be affected?

ICASA does not expect so. Large operators and ISPs already meet the requirement, and the operators most at risk are small, owner-run businesses whose owners do not fall into an HDG category (MyBroadband).

Ramusi said he would be surprised if any such licensees were still trading, because ICASA asked all licence holders to align with the 30% threshold after the 2009 conversions and sent out a survey. When MyBroadband pointed to one-person ISPs that are still active, he said he would have to check those operators, and agreed their options were to sell a 30% stake to a partner or close (MyBroadband).

When do the licences expire?

A licence runs from the effective date printed on it, and the renewal application must be lodged between 12 and 6 months before it expires (ICASA). The earliest licences expire on 21 October 2028 (ICASA notice).

Sources: ICASA notice and ICASA. The window for the earliest licences is worked out from ICASA's 12 to 6 month rule.

If a renewal is lodged on time, the licence stays valid until ICASA decides on it (ICASA notice). ICASA has said it will publish a further notice setting out the process and what applications must include, and that notice has not been published yet (ICASA notice).

What proof will operators need?

Proof of the HDG ownership level must be submitted with any licence application, including renewals. Larger licensees use a B-BBEE verification certificate or an assurance report from a SANAS-accredited agency. Small businesses classed as EMEs or QSEs under the ICT Sector Code can use a sworn affidavit or a CIPC-issued certificate (ICASA regulations).

How the shareholding should be counted is still in dispute. ICASA councillor Charley Lewis said ICASA and Communications Minister Solly Malatsi hold different positions and the matter "is not a settled matter yet" (MyBroadband).

Why are so many operators in this position?

A legal blunder in 2009, now known as the Altech case, let many companies that did not meet the ownership rules receive licences during the conversion to the new licensing system. More than 500 operators were licensed almost overnight, according to the Internet Service Providers' Association, and that wave of competition helped push uncapped internet prices as low as R5 a day (MyBroadband).

Licences issued in that 2009 conversion are only now coming up for renewal, which is why the ownership question has resurfaced (MyBroadband).