Government has finally published the long-awaited policy direction on so-called high-demand spectrum. Released five years after Icasa tried to license access to the spectrum for broadband services — only to be stopped in its tracks by government — the final policy is not dissimilar to what the communications regulator originally intended.
That’s according to Dobek Pater, director of business development at ICT consultancy Africa Analysis, who said the policy direction leaves many aspects of the licensing process to Icasa’s discretion rather than being prescriptive over how the process should be structured.
“This policy/policy direction is based more on what Icasa originally intended in 2014 when it wanted to auction and license the high-demand spectrum in question,” Pater said.
In short, communications minister Stella Ndabeni-Abrahams has asked Icasa to ensure that preferential access to spectrum and additional support is given to a new wholesale open-access network (Woan) to try to increase competition in South Africa’s mobile telecommunications market. (Read: Minister publishes spectrum policy direction: all the details.)
At the same time, commercial operators such as Vodacom and MTN will be able to apply for access to their own exclusive-use spectrum – something government had previously resisted – provided they meet various roll-out conditions, including agreeing to purchase capacity from the Woan and deploying infrastructure in rural areas first.
Dominic Cull, an ICT regulatory expert and lawyer at Ellipsis Regulatory Solutions, agreed with Pater that the policy direction is “not overly prescriptive”. This, he said, affords Icasa the space to exercise its independence in the process of licensing the spectrum.
The policy direction, Cull said, is consistent with a draft released last year for comment and clears up some of the questions lingering over the accommodation reached between the previous minister, Siyabonga Cwele, and incumbent operators around how much capacity they will need to take up on the Woan once operational.
Pater said the fact that government wants to create a Woan is “not surprising”.
“It has been government’s intention for the past several years and I don’t think it would completely abandon the idea. However, the idea of the Woan has evolved and is not as rigid as it was previously. Nonetheless, important questions remain,” he said.
“I suspect Icasa will take its cue from the CSIR report regarding the high-demand spectrum necessary for a Woan. Whatever is left, it will then see how best to structure a number of spectrum blocks to assign to other operators. This may be (and probably will be) done in the form of an auction.”
Ndabeni-Abrahams hasn’t made any recommendations to Icasa about how much spectrum should be assigned to the Woan. However, the policy direction references the CSIR report, commissioned by Cwele, which recommended that the Woan be granted the following spectrum (based on a 20% market share estimate): 2x25MHz blocks in the 800MHz band, 2x20MHz blocks in the 2.6GHz band (for so-called FDD technology) and 25MHz, also in the 2.6GHz band (for so-called TDD).
To help the Woan, operators that secure their own high-demand spectrum will be required to acquire 30% of their national capacity from the Woan for at least five years.
“The 30% (collective) offtake requirement is the same as before. However, licensed operators will be required to make their infrastructure available to the Woan on a wholesale basis as soon as the Woan has been constituted,” Pater said. “This is to ensure that it will be able to operate fairly quickly (through roaming) while it builds out its own infrastructure. The irony is that operators who are required to a) make their network facilities available to the Woan on a wholesale basis and b) buy a portion of the 30% off-take may, in fact, end up buying back access to/use of their own infrastructure, which the Woan will use to provide wholesale services.
“This will also force Icasa to develop wholesale regulations simultaneously, so that this market can be regulated once the Woan becomes operational. I imagine the government/Icasa would want to have wholesale pricing regulated rather than unregulated in relation to Woan’s access to the infrastructure of other operators,” Pater said.
Operators will also need to decide strategically whether they want to apply for high-demand spectrum of their own or use only the Woan’s capacity, he said. “I suspect the large operators would rather (also) have their own high-demand spectrum.”
Big question marks remain over how the Woan will work in practice — how it will be structured, for example, to avoid the risk of dysfunction.
Pater said there are several entities that have the means to bid for the Woan licence and form part of a consortium. But it will be like constituting a new operator, since existing operators cannot bid for the licence (unless “functional separation” is implemented), he explained.
“There are a lot of skilled individuals floating around but they would still need to be gathered into a cohesive ‘telco’ structure. It will be interesting to see how such an entity will manage a national network and operations. I suppose, if an existing operator decides to participate by forming a separate entity for this purpose, it could place some of its staff in that entity and form the core of management.
“Also, a very broad consortium may present problems if the various entities on the board are not able to agree on a number of key strategy and management matters. It would probably be preferable to have an entity such as a Woan controlled by a single legal person (or a small consortium – two to three legal persons) and be tightly regulated to ensure non-discrimination in the market.
“The objective would be to promote distribution of communication services more broadly at lower cost and high quality, rather than also trying to realise financial gain for a broad consortium of entities as shareholders in the Woan.”
Government’s decision to ask Icasa to reduce or waive spectrum licence fees for the Woan could provide the entity with a competitive advantage in terms of input costs and allow it to be more competitive on price, depending how costly spectrum fees are to other operators, Pater said. Spectrum will be given to the Woan, whereas other operators may need to pay relatively high fees in an auction, he said. However, waiving of the Woan’s fees could be challenged by other operators in court.
For Cull, a major concern is that spectrum licencing for the Woan and the licensing process for other operators must “commence simultaneously”, according to the policy direction.
“I understand the reasons for this, but we should be clear about how this will impact on timelines: my understanding is that the Woan service licensing process will need to be concluded before any spectrum can be assigned. Once Icasa has had an opportunity to study the policy direction, it will hopefully publish a plan detailing the steps to be taken before spectrum is finally released together with indicative timelines.” — © 2019 NewsCentral Media