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The Internet Service Providers’ Association (ISPA) has welcomed a recent ruling by the National Consumer Tribunal that have cancelled a compliance notice served on Multichoice by the National Consumer Commission under the Consumer Protection Act.

“The ruling by the National Consumer Tribunal demonstrates that proper compliance with the Act is being enforced,” says Jaap Scholten ISPA co-chairperson. “ISPA commends the Tribunal for its rulings, and urges the Internet service provider industry to take note.”

In this case, the Commission served a compliance notice for various alleged infringements of the Act on Multichoice, an entity licenced and governed by the Independent Communications Authority of South Africa (ICASA).

Section 100(2) of the Act states that the Commission must consult with ICASA before serving a compliance notice on an entity regulated by ICASA. The Tribunal found that the Commission did not properly consult with ICASA before it issued the compliance notice and therefore ruled the compliance notices invalid.

The Tribunal further ruled that the Commission had not fulfilled the requirements of section 100(2) in that it did not consult with ICASA about the specific company alleged to be in non-compliance with the CPA and did not provide information about these alleged contraventions.  They also did not provide ICASA with the outcome of the investigation it had conducted about the alleged non-compliance.

“The Act places considerable onus on the Commission in this section, and I wonder whether most of the compliance notices already served actually met this standard,” Scholten says. “It’s particularly important because of the compliance notices issued to ISPs relating to the Commission’s application of Section 63 of the CPA.”

The issue revolves around the Commission’s apparent desire to apply Section 63 to the payment in advance for data and other electronic services. Section 63 of the CPA refers specifically to transactions in which some form of actual prepayment device (“prepaid certificate, card, credit, voucher or similar device”) is issued by the supplier. ISPA contends that payment in advance for bandwidth does not fall under Section 63 because there is no prepayment device which “holds” the value to be exchanged for services in the future. Rather, it is a simple payment in advance for future access to services, which is specifically excluded by section 63(1).

If applied to data and electronic services, Section 63 would force providers to allow customers to roll over unused bandwidth until it is used up, or three years have passed. ISPA advises that this would materially change the business model of ISPs and cause prices to be driven upwards.

“Clearly, ADSL services that are uncapped would not be affected if Section 63 were to be applied to data services. What concerns is the application of Section 63 to contracts where the consumer buys the option to consume ‘up to’ a fixed amount of bandwidth per month,” says Scholten.

In this case, Scholten argues, the business model for the Internet service provider would have to change quite considerably, with the net effect of driving up prices. It will further become impossible for Internet service providers to manage their networks effectively. Internet service providersmanage the capacity of their networks based on the anticipated amount of bandwidth usage in a particular month, sourcing capacity from upstream providers based on this forecast. If data starts to roll over every month, Internet service providers will have no idea how much bandwidth would roll-over at the end of the month and would have to purchase extra capacity for possible roll-overs.

It would also be difficult for them to manage their networks to avoid congestion and deliver acceptable performance.

“If Section 63 were to be applied to data services it would not only drive up prices as Internet service providers has to provide for potential roll-over, it would also affect the effective management of networks,” says Scholten. “ISPA therefore urges the Commission to apply the law in the manner it was clearly intended and not to strain its interpretation in a manner that would ultimately be to the consumer’s disadvantage.”

ISPA advises its members who are served with a compliance notice in terms of the CPA first to ascertain whether the National Consumer Commission has properly consulted with ICASA.