Dimension Data division Internet Solutions (IS) wants incumbent operators such as Vodacom, MTN and Telkom barred from participating in an upcoming auction for radio frequency spectrum.

IS has expressed worries that the planned auction for spectrum that can be used to provide wireless broadband services won’t have the desired outcome of stimulating competition in SA’s telecommunications industry.

Regulatory director Siyabonga Madyibi says the auction, for spectrum in the 2,6GHz and 3,5GHz bands, could fail in its purpose if the Independent Communications Authority of SA (Icasa) doesn’t provide clarity on whether operators that already have spectrum will be allowed to bid.

“It has always been communicated that if an organisation already has access to last mile spectrum, it should be precluded from participating in this process,” Madyibi says.

“Icasa’s invitation to apply (ITA) is, however, not clear on this. Organisations that already have spectrum in these two bands are definitely excluded, but the ITA does not clearly state that those who have access to other last-mile spectrum will be allowed to bid or not.”

Incumbent operators, including MTN and Vodacom, have stated clearly that they are interested in bidding for the spectrum, particularly in the 2,6GHz band where they can roll out next-generation wireless broadband services using “long-term evolution”.

But Madyibi is not convinced these players will be allowed to participate in the spectrum auction. It’s not even clear, he says, whether incumbent operators will be able to use other vehicles to bid for the spectrum.

“Our question is whether an entity that is a subsidiary of another entity that already has access to spectrum will be allowed to bid.”

The transfer of spectrum, either through sale or sub-lease is another gap in the ITA, Madyibi says. “If a company is successful in its bid, is it allowed to transfer that spectrum to an entity that did not bid, either through sale or sub-lease?”

His concern is it will create the opportunity for successful bidders to sell the spectrum to other parties at exorbitant prices, he says.

Madyibi says there is also uncertainty over how the auction will work. “We are not sure whether it will be a closed auction or not,” he says.

“What is clear is that the auction will end when the highest bid is recorded, but does that mean that the highest bid becomes the price across all four licences, or will the other licensees then pay what they bid?”

There’s also a risk that bidders will overpay for the spectrum, as happened in auctions for 3G spectrum in Europe. He says this will not happen if companies that already have spectrum are not allowed to participate.

If the incumbent players are allowed to participate in the auction process, they will eliminate the chance of new entrants or smaller players acquiring spectrum, he says. “They will use this process to reinforce their positions of dominance … marginalising licensees that have not previously had any access to last-mile spectrum.”

As a result, the market will continue to be “heavily tilted in favour of the incumbent operators”.

“If the cost of acquiring the spectrum is too high, the smaller players do not stand a chance,” he says. — Staff reporter, TechCentral