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Cell C concerned about ICASA spectrum auction

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 18 Jul 2016
MTN and Vodacom welcome ICASA's spectrum auction announcement, while Cell C says it has concerns.
MTN and Vodacom welcome ICASA's spectrum auction announcement, while Cell C says it has concerns.

Cell C is concerned the Independent Communications Authority of SA's (ICASA's) move to auction much sought-after radio frequency spectrum may have come without "a clear policy directive from government".

"We know for a fact the Department of Telecommunications and Postal Services is in the process of finalising its policy in this regard and so by issuing the ITA [invitation to apply] before this is finalised, may create unnecessary tension," Cell C's chief legal officer, Graham Mackinnon, told ITWeb.

On Friday, ICASA invited operators to apply for radio frequency spectrum in the 700MHz, 800MHz and 2 600MHz bands. These bands are in high demand from mobile and wireless operators that need them to provide next-generation technologies and high-speed broadband services.

Mackinnon says the ITA is an "interesting development" and despite its worries, Cell C believes the allocation of spectrum is "very important" to the telecoms sector.

"Operators cannot effectively roll out next-generation technologies without this spectrum. However, it needs to be done with the buy-in of all stakeholders, obviously including government as spectrum is a national resource," adds Mackinnon.

Peers welcome ITA

Vodacom, on the other hand, has welcomed the announcement, calling it a "major progressive step for the economy, South Africa's telecommunications industry and the country as a whole".

"The allocation of spectrum will be transformative from a broadband access perspective and is expected to make reaching the goals set out by government's SA Connect policy more achievable," according to Vodacom CEO Shameel Joosub.

In 2013, government's broadband policy, SA Connect, was published with plans to provide broadband services to all South Africans. The project aims to deliver 100% connectivity for all schools, health and government facilities by 2020, and deliver widespread broadband access to 90% of the country's population by 2020, and 100% by 2030.

ICASA says it believes mobile telecommunication technologies are a critical component in achieving the goal of 'broadband for all citizens' in SA, and licensing the 700MHz, 800MHz and 2 600MHz bands will help ensure this access becomes a reality.

MTN has similarly welcomed the ITA, saying it "supports the regulator in its efforts to make frequency spectrum available" and agrees it will support the broadband rollout needed to achieve the SA Connect targets.

"Adequate frequency spectrum is often considered the life-blood of a mobile communications company and equally the availability of frequency spectrum is a very important factor in rolling out a national mobile network," MTN SA CEO Mteto Nyati told ITWeb.

"In a very competitive market, spectrum auctions are a viable mechanism to ensure spectrum is used as effectively and efficiently as possible," Nyati says.

"Ultimately, the licensing of frequency spectrum will benefit consumers who are demanding better quality and higher speeds, as it will allow operators to more rapidly roll out advanced broadband services and further stimulate broadband connectivity in South Africa."

The MTN SA leader has in the past been open about the fact that he believes consumers' wallets are taking strain because of telecoms operators' lack of access to spectrum.

Joosub agrees greater access to spectrum will give South Africans faster speeds, wider access to LTE coverage and, inevitably, lower data pricing.

"As we have indicated previously, data demand continues to grow exponentially, while technology is advancing well beyond what we can viably deliver with the available spectrum that we currently have," adds Joosub.

Cost and schedule

The spectrum will be auctioned with the minimum bidding price set at R3 billion and successful licensees will receive a licence for 15 years.

The spectrum has been divided into five separate lots, with each containing different combinations of the three spectrum bands. An applicant will qualify to bid on one of the lots between Lot B and Lot E, while Lot A will be awarded through a separate process. ICASA says the applicants will be free to switch between the four lots during the auction stage.

"We are still studying the ITA to assess its terms. On an initial reading, the time-table seems quite rushed and the reserve price for the spectrum lots appears high, especially as the spectrum lots are not equally valuable," according to Mackinnon.

In terms of the time-table, the whole process should take around eight months for spectrum licences to be issued.

The ITA was published in the Government Gazette on Friday, 15 July. Public enquiries need to be made by 4 August and ICASA will then respond to these by 24 August. Telecoms operators can apply for the spectrum lots between 09h00 and 15h00 on 3 October. A list of the applicants will be published on 21 October.

Qualified bidders will be announced by 30 November. The auction process has been estimated to take place from 17 January 2017, with the results of successful bidders likely announced on 31 January. The licences will then be issued by the end of March 2017.

Conditions

ICASA says licensees will be required to provide data services across the country "with an average uplink of 15Mbps and the downlink user experience throughput of at least 30Mbps to 100% of the population of South Africa by 2020".

Along with a number of other technical conditions, successful licensees will be required to provide open access to a minimum of three mobile virtual network operators (MVNO). The MVNOs must have more than 51% of ownership held by persons from historically disadvantaged groups. A licensee will have a maximum of three years from the date the 700MHz/800MHz spectrum becomes available to provide services in line with the obligations.

Each applicant must also pay a non-refundable application fee of R3 million.

Joosub says Vodacom is still considering the contents of the ITA but at first sight it "includes some tough asks in terms of speeds that need to be attained across SA by 2020. Having said that, it is clear the smart intent on this front is to drive continuous investment into infrastructure."

Mackinnon says Cell C is busy studying the gazetted document to assess its terms but "in principle we would apply if the terms are fair".

Nyati says MTN is evaluating the ITA to fully understand the requirements and conditions, and will raise its questions with the regulator within the stipulated timelines.

Telkom did not respond to queries as to its reaction to the ITA by the time of publication.

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