The applicant has been in the business of providing
internet services since 1997. It is suing the first respondent, the Postal and
Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) as a body
corporate and authority responsible for the licensing and regulation of
telecommunication service providers in terms of section 30 of the Postal and
Telecommunications Act ...
The applicant has been in the business of providing
internet services since 1997. It is suing the first respondent, the Postal and
Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) as a body
corporate and authority responsible for the licensing and regulation of
telecommunication service providers in terms of section 30 of the Postal and
Telecommunications Act [Chapter 12:05]. The second respondent, the Minister of
Information, is being sued as the authority responsible for the administration
of the Postal and Telecommunications Act. The third respondent, the Minister of
Transport, is being sued as the Minister who was responsible for the
administration of the Postal and Telecommunications Act when the Regulations
under Statutory Instrument 122 of 2013 were promulgated.
The third respondent did not file any papers in response to
the application.
The facts of the matter are as follows. From 1997 to 2005,
the applicant was providing internet access services under a Franchise License
from Tel One. On 19 July 2005, it started operating on its own and was
issued with a class B license which was
valid up to 18 July 2015, but was later extended to 30 June 2016, and then to
30 August 2016.
The applicant stated that in 2014 it approached the first
respondent in relation to issues to do with its Class B licence terms and its
duration. There was also an issue to do with the upgrade and convergence of all
internet access licences to Class A licenses. The applicant said that it wanted
clarification on these issues. The parties failed to reach a consensus on the
issues and this resulted in the applicant appealing to the second respondent,
the Minister of Information in terms of section 96 of the Postal and
Telecommunications Act [Chapter 12:05]. The second respondent called for a
hearing, and, resultantly, issued a Ministerial order on 30 June 2015 which was
to the following effect.
“It is ordered that:
1. The commencement date for Telecontract (Pvt) Ltd Class B
licence Number 1APB 200507002 is the 19th July 2005 and shall
subsist for a period of ten (10) years expiring on 18th July 2015.
2. POTRAZ issue to Telecontract, by the 10th
July 2015, a draft 1AP Class A licence for consideration.
3. POTRAZ issue to Telecontract (Pvt) Ltd an Internet Access
Provider Class A Licence subject to fulfilment of all statutory requirements.
4. POTRAZ complies with all its statutory obligations
provided for under the Postal and Telecommunications Act [Chapter 12:05], and,
in particular, the enforcement of the provisions of section 37(5) regarding
publication of licences by licencees.
5. POTRAZ publishes
all Internet Access Provider licences in accordance with section 5(5) of
Statutory Instrument 262/2001 by the 1st of August 2015.”
In compliance with clause 2 of the Ministerial order, the
first respondent duly issued the applicant with the draft IAP Class A licence.
So the applicant was given an opportunity to apply for a class A licence. In
terms of S.I.122 of 2013, the fees for a class 'A' licence are US$5,500,000=
(five million and five hundred thousand United Sates dollars) and US$2,750,000=
(two million and seven hundred and fifty thousand United States dollars) is for
a Class B licence. These fees are for a period of fourteen (14) years. In terms
of these Regulations and the Postal and Telecommunications Act, the licence
fees should be paid on or before issuance or renewal of a licence. These Regulations
were promulgated by the third respondent in consultation with the first
respondent.
The applicant was unable to raise the fees that are
required for the Class A licence it wanted.
Having faced challenges in raising the fees for a Class 'A'
licence, the applicant wrote several correspondences to the first respondent
making proposals that it be allowed to make payments based on a payment plan it
submitted. The applicant proposed to pay at least 30% of the fees initially and
the balance over a period 10 years. The applicant outlined the challenges it
was facing in raising the whole amount at once but the first respondent did not
find this acceptable. On 10 June 2016, the first respondent issued a circular
rejecting any requests for proposals to pay the licence fees by way of
instalments. It stated that all the fees must be paid before or at the time
that the licence is issued or renewed. Before the issuance of this circular,
the applicant had been advised of this position in a letter addressed to it on
1 April 2016.
The refusal by the first respondent to accept payment plans
prompted the applicant to make the present application seeking the following
order.
“1. The decision by the 3rd respondent, in
consultation with the 1st respondent, setting the Class “A” license fees
at US$5,500,000= be and is hereby set aside.
2. The Postal and Telecommunications (License Registration
and Certification) (Amendment) Regulations, 2013 (No.6) (S.I.122 of 2013)
prescribing license fees for Internet Access Provider licences be and are
hereby declared ultra vires the Postal and Telecommunications Act [Chapter 12:05]
and therefore invalid, null and void.
3. The 1st respondent be and is hereby ordered
to publish all Internet Access Provider licences in accordance with section
5(a) of statutory Instrument 262 of 2001 within thirty (30) days of the date of
this order.
4. The 1st respondent be and is hereby ordered
to comply with its statutory obligations provided for under the Postal and
Telecommunications Act [Chapter 12:05], and, in particular, the enforcement of
the provisions of section 37(5) regarding publication of licenses by
licensees.”
The applicant stated in its application that;
“This is an application for an order declaring that the
Telecommunications License Renewal Fees set out in the Postal and
Telecommunications (Licensing, Registration and Certification) (Amendment)
Regulations, 2013 (Statutory Instrument 122 of 2013) ('the 2013 Licensing
Regulations') are grossly unreasonable and that the 2013 Licensing Regulations
are invalid, ultra vires the Postal and Telecommunications Act [Chapter 12:05] and therefore null and void.
The applicant further seeks an order in terms of s 4 of the
Administrative Justice Act [Chapter 10:28] directing the first respondent to
publish all Internet Access Provider licenses and ensure that all licenses
comply with the provisions of s 37(5) of the Postal and Telecommunications Act
[Chapter 12:05].”
The applicant averred that the first respondent has taken
the position that all licence fees must be paid upfront despite the amount
being outrageously high and arbitrary. It averred that the refusal by the first
respondent to accept payment plans has resulted in it being unable to pay the
licence fees of US$5.5 million which amount is arbitrary, grossly unreasonable,
unfair and prohibitive with no justification in this current economy. The applicant
averred that in setting the licence fees, the Minister did not exercise his
powers in a reasonable, non-arbitrary, and justifiable manner. It averred that
such fees must be set in a reasonable manner on the basis of necessity and in
line with international standards of practice. It averred that any deviations
must be justifiable taking into account the macro and micro economic
environment in Zimbabwe. It further averred that Zimbabwe, being a member of
the International Telecommunications Union (ITU), it should be guided by the
ITU guidelines in setting the licence fees so as to avoid setting fees that are
arbitrary. It further stated that whilst different considerations will apply in
different jurisdictions, the fee structure should, however, be transparent. The
applicant averred that there are three main guidelines or methods for
telecommunications licencing according to the International Telecommunications
Union which are;
(i) A fee that is paid as a premium or 'rent' to a Government
or licencing authority for the right to operate a network or provide a service;
(ii) Administrative charges to compensate the Regulator for
its costs in managing and supervising use of spectrum; and
(iii) Administrative charges to compensate for costs
incurred in performing other regulatory functions such as licencing operators,
ensuring compliance with licence terms, resolving interconnection disputes,
establishment and supervision of other aspects of regulatory work.
The applicant averred that using the International
Telecommunications Union guidelines, the initial fee that is charged should be
to cover and reimburse the first respondent, the Postal and Telecommunications
Regulatory Authority of Zimbabwe, for costs related to and incidental to
issuance of the licence. The cost must be apportioned between the current and
prospective licensees. It averred that it was challenging the first respondent
to show its costs of administration in regard to the eight (8) Class 'A' licensees
that it (the applicant) believes are currently licenced. The applicant further
stated that it wants the first respondent to disclose whether or not any of
these eight (8) licensees have previously been given terms of payment in regard
to licence application or renewal fee. The applicant averred that in the
absence of a clearly ascertainable and justifiable methodology for setting the
licence fees at US$5.5 million, the only inference that can be drawn is that the
licencing regulations under S.I.122 of 2013 are arbitrary and grossly unreasonable.
It further averred that the fees of US$ 5.5 million are not justifiable and
proportionate to any administrative charges meant to compensate the first
respondent for its costs of administration.
The applicant averred that over and above the initial or
renewal licence fees, all Class 'A' Internet Access Provider licensees are
still required to pay annual licence fees in the sum of US$100,000= or 2% of
the gross annual turnover, whichever is higher. The applicant averred that this
must be factored in in setting the initial or renewal fees. The applicant
further averred that the licence fees, as they are, cannot be afforded by the
ordinary telecommunications licensee. The applicant stated that the only
reasonable inference is that the object in setting such high fees is to
prohibit or hinder businesses from providing such services. The applicant said
that it does not have the financial capacity to pay the US$5.5 million licence
fees upfront and will have to close down at the expiry of its Class 'B' licence
despite having been in business for almost 20 years to the prejudice of the
fiscus, its 100 permanent employees and 40 weekly contract employees who all
will be rendered jobless. It further averred that it is a 100% indigenous
company with no external funding; which privilege some of the bigger
telecommunications providers may have. It said that as such it can only pay the
licence fees from the revenue that it generates.
The applicant also averred that the first respondent, in
terms of section 4 of the Postal and Telecommunications Act [Chapter 12:05],
has a duty to ensure a level playing field and to promote competition between
persons engaged in the provision of postal and telecommunications services. The
applicant averred that the second respondent should have set the licence fees
with this duty in mind. It further averred that the exorbitant fees and the
insistence of an up front payment restrict competition in the industry. It
stated that it confines the provision of services to a small number of market
players who are already established in the industry thereby creating economic
discrimination of the smaller and newer entrants into the market yet, in terms
of sectiion 64 of the Constitution of Zimbabwe Amendment (No.20) Act 2013,
every person has a right to choose and carry on any trade of their choice. The
applicant averred that it is now being denied the right to carry on a trade of
its choice by reason of the unreasonable and grossly exorbitant licence fees.
The applicant averred that the right to choose and carry on a trade of one's
choice includes the right to a fair and reasonable licence fees that permit any
market entrant to participate in the telecommunications industry and the right
to fees that do not form indirect barriers to entry or expansion in the
industry.
The applicant further averred that the licence fees were
set without any consultations of the affected and interested parties. It stated
that as a Class 'B' licence holder then, it was never consulted prior to the
revision of the licence fees. It submitted that although section 99 of the
Postal and Telecommunications Act [Chapter 12:05] does not provide for a duty
to consult with stakeholders and licensees, the Minster, as an administrator
and legislator, in line with the general principles of natural justice, ought
to have consulted prior to promulgating the Postal and Telecommunications
(Licensing, Registration and Certification) (Amendment) Regulations, 2013
(Statutory Instrument 122 of 2013).
The applicant averred that it had that legitimate
expectation. It said that it could not have been the intention of the
legislature to create barriers through grossly unreasonable and exorbitant
fees. It said that, as such, the Regulations setting the fees ought to be
struck down by being declared invalid and ultra vires the Postal and
Telecommunications Act….,.
The first respondent averred, in its opposing affidavit,
that it is averse to the issue of payment plans because, in terms of the law,
the licence fees should be paid upfront. It said that paying by way of
instalments can only be an exception rather than the rule. It averred that it
has since learnt a lesson from prospective licensees without financial
resources that obtain licences for speculation purposes. It said that such
licensees then either fold, to its prejudice (the first respondent), to the
prejudice of the consumers, and the fiscus or they end up involving the first
respondent in litigation in a bid to keep the licences alive with the hope that
one day they will find the financial resources to pay the fees.
The first respondent further averred that the licence fees
are not arbitrary, unreasonable, unfair, prohibitive and ultra vires the Postal
and Telecommunications Act. It submitted that if this was a genuinely held
belief, the applicant ought to have challenged the fees at the time when they
were set in 2013. It said that the applicant would not have challenged the fees
simply because its attempts to pay in instalments were rejected as having no
basis in law. The first respondent averred that there is a Parliamentary Legal
Committee on Legislation whose duty is to hear the views of the public in view
of any proposed legislation. It said that when there are views against a
proposed legislation, the Committee issues an adverse report, but S.I.122 of 2013
never received such a report when the necessary consultations were conducted.
The first respondent stated that the applicant correctly outlined the International
Telecommunications Union guidelines that should be followed in setting the
fees. It stated that these were followed when S.I.122 of 2013 was promulgated.
The first respondent submitted that there is no evidence to show that the eight
(8) Class 'A' licensees that the applicant believes to be there, share the
applicant's views that the licence fees are exorbitant and unreasonable. The
first respondent averred that the licence fees are reasonable considering that
they are meant to cover a period of fourteen (14) years. The first respondent
also averred that the fact that one prospective applicant has problems raising
the fees does not make the position one of general application. It averred that
the applicant has been advised to present its business plans and cash flow
projections to a financier and get funding which is repayable over a period of
time just like other licensees do.
The first respondent averred that a view that the licence
fees are grossly unreasonable must, of necessity, be informed by much more than
the inability of one person to pay. It said that in proposing a payment plan,
the applicant had agreed to pay the very same fees - albeit in instalments. The
first respondent averred that it has no reason to want to restrict the number
of operators since the greater the number of licensees, the greater the revenue
inflow to its coffers. It said that consultations with stakeholders were done
hence there was no challenge of the Regulations since August 2013 up to 29 June
2016 when the applicant made this application. The first respondent averred
that it has not done anything to infringe the applicant's right to carry on a
trade of its choice under section 64 of the Constitution. It said that the fact
that the applicant proposed to pay the licence fees over a period of time (10
years) does not mean that such must simply be accepted. It said that this must
have a foundation in law. The first respondent averred that it is not feasible
to consult each and every stakeholder but consultations were made before the
fees were set. It said that if the fees were exorbitant, as the applicant says,
there would have been an outcry back then in 2013. It stated that the complaint
by the applicant, three (3) years down the line, is nothing but failure to plan
on the part of the applicant. It stated that since 2013, a number of licences
have expired and have been renewed under S.I.122/2013 and new entrants have
also been licensed under the same Regulations. It averred that to now change
the set fees just to accommodate a single person who has been aware of the Regulations
since their promulgation will result in unfairness and chaos. The first
respondent averred that the order, as sought by the applicant, would be
incompetent and irregular as it will result in a gap in the law. The first
respondent averred that the mere fact that the applicant says it cannot afford
the licence fees does not make the Regulations ultra vires the Postal and
Telecommunications Act….,.
In response to the averment that the licence fees are
exorbitant, the second respondent said that by its own admission the applicant
is unable to pay the licence fees, so it does not meet the requirements of the
business it desires. He said that the business is meant for entities that meet
the requirements. The second respondent averred that some averments that were
made by the applicant can be best responded to by the third respondent. The
second respondent averred that the fees are reasonable and justified. He said
that whilst there are guidelines which should guide the setting of fees they
remain as such, and they have no legal effect. He said that consultations were
done before the promulgation of the statutory instrument. He said that the Regulations
cannot be said to be ultra vires the the Postal and Telecommunications Act
simply because the applicant has failed to raise the required fees.
In the answering affidavit, and in response to the first
respondent, the applicant averred that the first respondent had made no effort
to give evidence which justifies the quantum of the licence fees. The applicant
averred that from the onset it never accepted the set fees as reasonable and it
sought payment terms as a way of easing the exorbitant fees. The applicant said
that other Class 'A' licensees must have been granted payment terms which is a
sign that the licence fees are exorbitant and grossly unreasonable. The
applicant further said that the first respondent did not adduce evidence to
show that consultations were carried out with the relevant stakeholders. It
also stated that the first respondent did not indicate which licensees were
consulted or when the consultative process took place. The applicant went on to
attach an annexure showing licence fees regimes in other countries in the Region
and said that, comparatively, our licence fees are exorbitant.
The applicant averred that this court should simply declare
the Regulations to be ultra vires the Postal and Telecommunications Act. It
said that it is not the duty of this court to replace the Regulations or to
worry about the gap that will be created when it declares the Regulations to be
ultra vires the Postal and Telecommunications Act.
The applicant stated that the first respondent had not
attached a report it received from the Parliamentary Legal Committee in support
of the averments it made that it received no adverse report.
The applicant averred that any averments made by
the second respondent with regards to the procedures that were taken by the
third respondent before the promulgation of the Regulations in 2013 are of no
use because he was not involved then as he only took over the administration of
the Postal and Telecommunications Act in 2014 under Statutory Instrument 25 of
2014.
