I noted, with an element of morbid curiosity, the following exchange in the UK’s house of commons two days ago:
The government has not carried out any impact assessments of leaving the EU on the UK economy, Brexit secretary David Davis has told MPs.” In 2016, Davis had said: “We are in the midst of carrying out about 57 sets of analyses, each of which has implications for individual parts of 85% of the economy…” — BBC, 6 December 2017
Is South Africa’s ICT industry facing its Brexit moment? I think so.
We all remember the Brexit process. David Cameron, the British prime minister at the time, elected for a referendum on whether to stay “in” or get “out” of the European Union. The decision divided a proud country.
Of course, they would vote to stay in, I believed — and so did many others. How wrong we were! The issue gripped the island nation and rapidly polarised its citizens. Friend turned against friend, partner against partner, young against old — rapidly, deep polarisation and distrust set in.
The result was shocking. Recently, analysts have shown that both sides conjured up untested research or fake news to bolster their own arguments.
The thing is, such enormous decisions have unintended consequences, both good and bad, and it will probably take at least 15 years before a post-Brexit review is able to conclude whether it was a good decision or not.
Those with some life experience know all too well that plans often go awry.
South Africa’s draft Electronic Communications Amendment Bill has now been gazetted and the ICT industry and various stakeholders are working overtime to get the comments in by the deadline, which has been extended slightly from 17 December 2017 to 31 January 2018.
Decisions made in the coming months will impact significantly on South Africa’s ICT industry for decades to come. Most of those involved in the decision-making processes now, both in government and industry, will have moved on by then and others will have deal with the consequences.
Areas of concern
I am not going to deal with every revision proposed in the amendment bill, but would like to pick out a few matters of concern. These are:
- Can we fundamentally restructure the industry and reconfigure the communications regulator, Icasa, at the same time? As with Brexit, have we fully understood the complexities and sheer volume of work that needs to be done and how long it will take?
- Is services competition the way to go? Consider how infrastructure competition has driven down prices in the fibre-to-the-home market. One operator is even proposing to take fibre into the townships. Of course, it seems rational not to duplicate infrastructure, especially when roads are being dug up repeatedly to make way for fibre. The rapid deployment guidelines (more on this below) are desperately needed by the industry to help with this issue. The fact is that an oversupply of infrastructure “wastage” left to the market results in consolidation when competitors fail and assets are snapped up for a bargain. Prices consequently come down. International bandwidth prices are incredibly low because there was a crazy period when many companies criss-crossed the world’s oceans with cables, paid for them at their own financial risk and then went bust, allowing more astute players to snap up hundreds of thousands of kilometres of cables for next to nothing and were able, because of this, to drop their prices dramatically.
- Government, and others, want to break the duopoly of MTN and Vodacom. What I can’t understand is how replacing a duopoly with a monopoly in the form of a government-initiated wholesale open-access network, or Woan, makes things better. Have we fully examined more practical alternatives?
- Enforcing wholesale separation on an “open-access” basis makes sense and I wonder why MTN and Vodacom, in particular, did not suggest this proactively earlier as an alternative approach to the planned Woan. Throw in an auction, which makes some money for our deeply indebted national fiscus, impose significant and extensive roll-out obligations on those allocated spectrum, and use the existing provisions of the Electronic Communications Act to moderate price gouging, and you have a solution. It’s not perfect, but it’s practical and a lot faster to implement, thus saving the consumers years of delay before prices come down. Access on a cost basis to wholesale services does not make economic sense at it does not allow for capital replenishment and investment in newer technologies.
- Mandating that operators “may” get some “leftover” high-demand spectrum (if any) and then specifying that this will only happen when the Woan is “functional” does not generate investor confidence and will disincentivise the industry. “May” get some unspecified spectrum — or perhaps none at all — does not encourage new investment today for the benefit of tomorrow. And what does “functional” mean, anyway? When it goes Ebitda positive? When it has repaid its debt? Insisting that each licensee commit to taking up 30% capacity (it’s undefined what this is) is a good idea as the Woan will only survive if the existing networks roam on it. But do all licensees pay the same amount or commit the same amount of traffic? What happens if six operators are involved? Do they commit to procure 180% of the “capacity”? How long will this all take and what are the opportunity-cost benefits of a speedier solution?
- The rapid deployment guidelines in the bill are welcomed and have been sought after by the industry for many years. But having worked in the geographic information system and data management game for a long time, I can vouch for the fact that the suggested processes and requirements are far too ambitious. The suggested amendments need to be simplified significantly and a more pragmatic approach adopted.
- Where is the socioeconomic impact study or regulatory impact study that formed the basis of the proposed amendments to the act? Are we, like the UK with Brexit, flying blind with inadequate analysis? These are major decisions government plans to make and the citizens require that that best minds have been applied and a rigorous analysis done.
- Is it really a good idea to reduce the independence of Icasa and make government a player, judge and jury all at the same time? How will investors react to this?
Are we doing brain surgery on the ill patient when a strong antibiotic would suffice?
There is an African saying: “When the elephants fight, the grass gets trampled”. In this instance, the “grass” is the unfortunate consumer, mostly poor, who will suffer the consequences of the industry and government not making the best decisions for the sector.
I am sure many readers have their own views on this bill. Can I suggest that we use the hashtag #ICTrexit on social media to air these views and share these widely to ensure that as many people as possible are informed about these changes and stimulate more public awareness and debate?
- Denis Smit is consulting director at BMIT
