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Vodacom urges ICT policy 'middle ground'

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 21 Nov 2016
A spectrum compromise is needed in the White Paper but "we should be careful of throwing the baby out with the bath water", says Vodacom CEO Shameel Joosub.
A spectrum compromise is needed in the White Paper but "we should be careful of throwing the baby out with the bath water", says Vodacom CEO Shameel Joosub.

Vodacom CEO Shameel Joosub believes government and mobile operators need to engage to find some middle ground when it comes to spectrum allocation and new policies proposed in the Integrated ICT Policy White Paper.

"The [wireless open access network] model that has been proposed is an untested model, so what we should do is reserve some spectrum for it and allow the smaller players to pursue it ? so that they do have access to spectrum ? but at the same time take advantage of the big networks that you have created so that they can build out coverage faster and to the rural areas," Joosub told ITWeb in an interview.

"I think what you can do is either auction the spectrum, allocate it or charge for it ? but take the money and use it to bolster the industry and rural coverage," he adds.

Mobile operators and analysts have raised concerns over the ICT White Paper, published in October, and its radical changes to spectrum allocation by calling for an "open access regime" through the deployment of a wireless open access network (WOAN).

The suggested WOAN will be "a public-private sector-owned and -managed consortium", but operators and analysts have criticised the lack of clarity on how it will actually work. Another key area of concern for telcos is that the policy document signals they will not have access to any exclusive spectrum frequencies in future and may even have to hand back spectrum already allocated to them.

Vodacom said in its interim financial results statement published last week that it supports the objectives of the White Paper, to make broadband more accessible and affordable for all. However, "as it now stands, we do not believe the White Paper will achieve these objectives".

"From a White Paper perspective, I think we need to find a middle ground and I think what we should be careful of is throwing the baby out with the bath water," Joosub told ITWeb.

Investment battle

Richard Hurst, director of enterprise research at Africa Analysis, believes the concerns of all the network operators need to be addressed because "they already have significant investments in the network infrastructure of South Africa and are likely to be the major players that will continue to invest in network infrastructure".

Joosub explains that local mobile operators don't only compete on price, product and service but also on infrastructure and capital investment.

"Because we put so much money into our network, it forces our competition to up their investment as well. They have to compete against us, so by us putting in R26 billion over the last three years, MTN has also had to up its level of investment. So, overall, the investment in the country has been more than R25 billion a year [in total]. And just on our spend we create about 27 000 jobs a year, so you can imagine that is 50 000 or 60 000 jobs a year that has been created from the build of the different manufacturers," he adds.

"I think the real issue for South Africa is that this is a relatively unknown concept, with very few working examples around the world. Some states such as Russia and Kenya have abandoned their WOAN plans, while countries such as Mexico are struggling to license and launch their WOAN. Rwanda has a WOAN, but in that country the wholesale rates are found to be more expensive than the retail rates," explains Hurst.

He also stresses the importance of remembering that "spectrum is a vital asset for the network operator and without it, the investment case begins to crumble".

Visible desperation

"I think that finding the middle ground will be key to enable all parties to gain what they want from the ICT White Paper. The ability to negotiate and comprise on key issues such as spectrum and open access will enable us to create certainty surrounding the ICT sector, and will solidify and strengthen investment in the sector," says Hurst.

"The concept of the WOAN will place South Africa on the bleeding-edge of mobile broadband development. The question is, can we afford to bleed in terms of funding and timelines if this concept fails? The middle ground approach will see portions of the spectrum given over to the WOAN, which will enable a range of new players and services to enter the market and boost competition, while at the same time, the operators with the skills and resources can concentrate on developing network and service using their own spectrum," he adds.

BMI-TechKnowledge MD Denis Smit agrees Vodacom's middle ground approach is sensible. However, "unless there is some fundamental caveats on the large mobile network operators (MNOs) to invest and roam on the smaller WOAN and give it 'base-load', this smaller WOAN would be stillborn".

"The big MNOs have to fundamentally realise the current industry structure is too concentrated and that new thinking is required. Vodacom and MTN as the largest networks cannot have their cake and eat it. Some form of sharing - and there are many alternatives, such as a possible regional approach - need to be considered," Smit adds.

He says that "simply setting aside 'some' spectrum for a smaller-sized WOAN run by 'smaller operators' without fundamental and tangible commitments by the large MNOs to ensure this WOAN succeeds simply won't cut it".

"In my opinion, the ball is in the MNOs' court now.

"The government has made its desperation visible in a fatally flawed ICT White Paper - and to ignore it and it's simply business as usual for the 'big guys' - is self-serving and not in the best interests of the country. Some pragmatic network-sharing options that encourages new players in the market is really required, and quite frankly, the large MNOs must now propose viable and pragmatic solutions that save our sector from pursuing each other in the courts," according to Smit.

Engagement ahead

There remain a few challenges ahead for the industry, including a court case between the Department of Telecommunications and Postal Services (DTPS) and the Independent Communications Authority of South Africa (ICASA) over a spectrum auction planned for next May. In September, the DTPS managed to get an interdict to halt ICASA's progress on the auction but the two will be back in court early next year to try settle the matter for good.

Joosub says the ICASA auction process and the ideas set out in the White Paper "are basically opposite views" and even if ICASA wins the court case and the spectrum auction goes ahead, "that doesn't mean the White Paper goes away, it just means that future spectrum could be subject to it".

Going forward, Joosub says Vodacom hopes to be able to negotiate with government about the terms of the White paper.

"I think it is early days and the government has indicated they are willing to discuss - so from that perspective it's positive. But we need to engage and try to find a resolution."

Vodacom believes that for the White Paper to have legal effect, a number of new laws would need to be promulgated and/or existing laws amended, and more consultation with stakeholders will be required for this.

"The trend of increasing polarisation between some operators and the minister and DTPS is a cause for great concern to me and many in the industry," according to Smit.

"I fear that if this trend accelerates and various parties dig in deeper, we may become 'stuck' in our industry and those that can least afford this - the poor, rural and the underserved communities - will continue to suffer. What we need now, more than ever, is leadership - from both government and the industry - and both sides need to come to the party," Smit adds.

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