Telecommunications & postal services minister Siyabonga Cwele has come to the defence of government’s upcoming policy on allocating so-called “high-demand spectrum” for 4G/LTE wireless broadband, saying creating a single national wholesale open-access network will encourage competition and drive down broadband prices.
The minister, who was speaking to TechCentral in George in the Western Cape on Monday, said the upcoming integrated ICT policy white paper, which will deal with spectrum allocation – among many other policy issues – is meant to allow smaller players to get access to spectrum so that it isn’t hogged by the big incumbent operators like Vodacom and MTN.
But, he said, it is not government’s intention to destroy any company, and in fact he would like Vodacom and MTN – which together control more than 80% of the mobile market when measured by revenue – to be the lead investors in the new open-access network.
The idea, he explained, is that there’ll be a single national network and that anyone who wants to make use of radio frequency spectrum to provide services to end users will be able to buy services from the infrastructure provider.
Cwele’s remarks come as the telecoms ministry prepares for a court showdown with communications regulator Icasa over the latter’s decision to push ahead with a plan to auction off access to the spectrum to the highest bidders. Cwele has asked the courts to stop that process until government has issued the white paper, which has been tied up in cabinet processes.
Read on for a slightly shortened and edited transcript of TechCentral’s interview with Cwele.
TechCentral: How did we end up in the situation we are in now? In other countries, the regulator works closely with the policy maker when formulating regulation. That’s clearly not happened here. Why?
Siyabonga Cwele: To be honest, I really don’t know. It is our view that we should work closely with the regulator and it is our belief that the regulator should stay in tune with the policy.
Unfortunately, the policy has taken a long time to develop, but it was right to take a long time, to consult with the industry. Now at least we have a document that is before cabinet. We even shared the confidential draft with Icasa. The aim was to take them on board in terms of the thinking [taking place] in the policy-making space.
TechCentral: Do you think Icasa read the draft white paper that you sent them and didn’t like what was in it, prompting them to pull the trigger on a spectrum auction?
Cwele: I really don’t know. Even before we shared the document with them [they voiced their concern in parliament]. It was agreed that we should wait for the policy process. And we had this policy delay primarily because we were also awaiting the outcome of the World Radiocommunication Conference in December 2015.
I wish we (Icasa and the ministry) could have found each other. If they say “let’s come tomorrow and resolve the issue” there would be no point in continuing [with the court action]. We don’t want to resolve this through the courts when we have the mechanism within our reach [to resolve it].
TechCentral: Does this point to a difference in opinion or even in a major split in the ANC over how spectrum allocation should take place? (Icasa in the past has never done anything without political backing.)
Cwele: There is no difference [of opinion] in the ANC. In any democratic organisation, there may be divergent views, but that ultimately leads to a collective view. That has been done, so I don’t think there is any policy difference inside the ANC. Anyone arguing something else would be doing so for their own narrow personal or commercial interests.
TechCentral: Is there buy-in from national treasury on the chosen route? A spectrum auction would raise billions for the national fiscus — at least R12bn under the Icasa proposal.
Cwele: We are in a national downturn, so I’m sure national treasury would welcome any money that might come. But national treasury is just one of the government departments and our government process, before you take anything to cabinet, has to be taken to a cluster. On this matter, we didn’t take this to just one cluster. We received written inputs, including from national treasury.
You must remember, for us as government, the primary objective is not just to get money. Our intention is to allow industry to have its role to play so we can have inclusive economic growth in South Africa, with job creation. In the ICT sector, we have targets, we have to contribute to [government’s] 5% national growth [target] by 2020.
As a government, we are not a service provider. But we want a system which will allow as many stakeholders to participate in a beneficial way when we allocate spectrum.
The intention is for the industry to work together, to find the best mechanism [for them] to join hands.
TechCentral: What still has to be done? When will we see the white paper?
Cwele: We are working with some departments to make amendments here and there. That is what is holding it up at the moment. We’ll then send it back to cabinet [for approval]. It is the ANC government’s priority to finalise this, because industry is waiting.
TechCentral: For some operators, including Vodacom and MTN, the concern is that government’s plan will turn the model that has worked very well for this industry on its head. They say we have connected most of the population with exclusive-use spectrum, and now government wants to try a new model that hasn’t really tested anywhere in the world.
Cwele: Remember that these companies are the creation of the democratic government. We created these super-giants in our sector, through government policy. Without government policy, they would not have been able to enter this market. It cannot be correct now, that after 22 years, we must just remain with what we adopted then.
There is no intention for us to destroy any company. I have had meetings with Vodacom, MTN and Cell C, on a private basis, to understand what their fears are and to clarify the position of government.
I understand very well that if I am in an advantageous position and am able to maximise my profits, I wouldn’t want to try another system that will bring in other players.
Fortunately, one of the things [the industry was worried about] was a misconception. There was confusion about this thing called a “lead agency” for broadband roll-out. There was a worry that we wanted all the spectrum to go to the lead agency, which is not the position of the government. They say, we are hearing these things in the corridors. But I am the corridor… I’d like to reassure them that this is not the approach we are taking.
Telkom fought and screamed when competition was introduced. With data services and the Internet of things, we need many players in this field.
TechCentral: There’s a worry that not only will all the high-demand spectrum be reserved for the open-access wholesale network, but that some of the operators’ existing 3G and 4G spectrum assets will be reclaimed and pooled into the new wholesale network. Is that the case?
Cwele: I don’t know, because that’s before cabinet. What I know is that the approach to high-demand spectrum is fundamentally different [to what happened before]. The principle governing it is this: we should give as many stakeholders as possible access to that spectrum and move away from this exclusive allocation [model].
The key thing is, it’s not that government wants to control [the new network]. What is the problem with [companies] working together? They say they like infrastructure competition. That’s a challenge we have to overcome.
TechCentral: But in the past, we had only one infrastructure provider in the form of Telkom. That led to high prices. Are we not just creating another Telkom, another monopoly, through this process?
Cwele: We are not. We are saying they must share the infrastructure. It’s not about monopolising it. But the current operators say, “No, give it to just a few of us.” It’s like saying from here, where we are in George, let’s build a highway to Durban. And then you, you also build a highway. But we can all share one highway, instead of building five highways.
TechCentral: Right now, the operators compete head-on when it comes to infrastructure. They’re trying to out-compete each other with the technologies they use and the way they deploy it and where they deploy it. Ultimately, that’s probably good for consumers because consumers get to choose the infrastructure that works for them.
Cwele: Our suggestion is that people must compete on services rather than infrastructure. In the broadcasting environment, could you imagine if everyone put in their own towers. Is that a wise investment?
TechCentral: Surely the industry should be left to decide that for itself, though?
Cwele: To do that, they then each need their own spectrum. And spectrum is a finite resource.
TechCentral: But isn’t there enough spectrum to give it to everyone, or at least to the big players who have the balance sheets to fund investment in these networks?
Cwele: We have over 400 licensees.
TechCentral: But most of those don’t have the money to build a network.
Cwele: Yes, but some do. Some of them run networks outside South Africa, but they don’t have access to this spectrum.
TechCentral: Isn’t the most equitable way of providing access to that spectrum to make it available to the highest bidder, through an auction, as Icasa has proposed?
Cwele: No. It’s like saying, I’m taking all the land and I’m allocating it to four farmers. Any newcomer must go and negotiate with those four farmers. The reality is that we have some licensees that want access to this spectrum and they’ve been asking for it. They operate [networks] in other countries, but they don’t have access here.
TechCentral: There are suggestions that the government is keen on the Mexican telecoms model? Are you borrowing ideas from Mexico for the model you’ve developed in the draft white paper?
Cwele: I have not been to Mexico. I was meant to go now, but unfortunately our programme is too tight. But I have been to Rwanda, for the World Economic Forum. We engaged extensively looking at Rwanda’s model. It’s not exactly the same, but we can learn some things from it.
What was interesting in Rwanda’s case was government there took a strategic decision to allocate spectrum to one [operator] and all of [the other operators] are now benefiting. It’s working. The network provider is making money and the operators are making more profits because they don’t have to run the same infrastructure.
We need to put measures to make sure there is competition in this sector. — © 2016 NewsCentral Media