No spectrum decision yet

Communications minister Roy Padayachie has yet to issue a policy directive that will indicate which operators gain access to sought-after spectrum.

Padayachie previously indicated he wants spectrum in the 2.6GHz and 3.5GHz ranges to be split between the mobile giants and smaller players because it is a national resource.

The minister's special advisor, Robert Nkuna, says Padayachie has not issued a formal directive to the regulator. However, he says licencing the spectrum should endeavour to meet policy goals such as introducing “green field” entrants into the space.

Industry insiders warn this concept will fail because small companies do not have enough cash to make the best use of the frequency. The minister has yet to issue a directive to the Independent Communications Authority of SA (ICASA) to kick-start a process that has been five years in the making.

Nkuna says allocation of spectrum should also be used to achieve government's goal of universal coverage. The department previously indicated it wants 100% broadband coverage by 2020.

Padayachie is considering a policy direction on the digital dividend and, if necessary, he may suggest a common framework for all high demand bands, says Nkuna. However, this will require consultation with ICASA and the public, he adds.

The digital dividend is the white space that will become available once SA has moved to digital television, a process that is expected to be completed by the end of 2013. The frequency can be used to ramp up broadband rollout, especially in rural areas.

Spectrum is a valuable natural resource that cannot just be allocated to companies with deep pockets, says Padayachie. However, building a network is costly exercise, and only large players have access to the required billions.

Operators have been waiting for at least five years for the Independent Communications Authority of SA (ICASA) to auction spectrum in the valuable 2.6GHz and 3.5GHz bands. The frequency is vital to roll out the latest technology because there is not enough space in current allocations.

Vodacom, MTN and Cell C, which have been testing LTE, have argued the upgrade cannot be rolled out countrywide without more spectrum, such as in the higher ranges. However, Padayachie says: “They may want it; it doesn't mean they will get it.”

Government must find a way of allocating spectrum so that the frequency is democratised, Padayachie says. “It's like the gold in the ground, it belongs to the people. It should not be ransomed.”

Paseka Maleka, ICASA spokesman, says Padayachie has informed the regulator that a directive dealing with spectrum allocation in the high frequency bands will shortly be issued. However, the regulator is still working out how the process will unfold.

Padayachie's letter stated that auctions should only be used as a last resort when there are competing applications that meet the policy directive's objectives, notes Maleka.

Maleka, referring to the minister's letter, says “reserve prices for auctions should not constitute barriers” by making it difficult for empowered companies and small rural licensees to take part in the licensing process.

“ICASA will ensure the licence will go to applicants who value the spectrum and are able to use it...and not hoard it for a short time only to sell it later at a premium,” says Maleka. He points out the authority's regulations prohibit spectrum hoarding.

The regulator has a mandate to promote competition and will take this into account when looking at how to allocate the frequency, says Maleka. Companies will have to explain how they will use spectrum before it is awarded, he points out.

Maleka adds Padayachie has indicated auctions should be the last resort when spectrum is allocated. ICASA will also consider how the frequency will benefit rural areas, and take empowerment credentials into account.

MTN SA MD Karel Pienaar says dividing the spectrum into smaller blocks will not meet government's aim of achieving universal access by 2020. “It's doomed to fail.”

Pienaar says the entire sector would have to spend about R100 billion in the next eight years to get broadband to everyone. MTN alone has spent about R16 billion in the last two-and-a-half years on upgrading its network, he adds.

There are only a handful of players with the sort of cash flows that would make such an investment possible, says Pienaar. Starting a network from scratch would require at least R30 billion, he adds. “The business case is just not there.”

Pienaar says the end result is that the spectrum allocated to smaller players would simply be resold, adding cost and delays to government's plan to achieve universal access.

Portia Maurice, Vodacom's chief officer of corporate affairs, says: “Mobile data growth in the network is phenomenal, and operators need to continuously provide coverage and capacity to address this.”

Spectrum is a valuable national resource that needs to be effectively managed to facilitate access to broadband across the country, she adds.

Dominic Cull, regulatory advisor for the Internet Service Providers' Association of SA, adds the failure to assign frequency has impacted negatively on service coverage, competition, pricing, quality of service and the economic welfare of SA.

Telecoms companies have been waiting for space in the 2.6GHz and 3.5GHz spaces since 2006, when ICASA published a discussion document soliciting comment on how to go about granting licences in the ranges.

Steven Ambrose, MD of WWW Strategy, warns government runs the risk of creating a “whole range of spectrum tenderpreneurs”. There is “no way” a small company has the scale or resources to efficiently use the frequency, he adds.

The danger is that smaller companies will not have the scale to use spectrum in a cost-effective way and will on-sell the frequency to larger companies, which will push up prices for the end-user, explains Ambrose.