Both MTN and Vodacom questioned what constitutes a "level playing field" in their industry at a conference which yesterday called for possible government interference with the telecommunications regulator.
In refusing the two companies access to the 1800MHz cellular spectrum, the Independent Communications Authority of SA (ICASA) cited competitive concerns as its primary reason. But explaining to attendees from the broad cellular industry why the refusal would hurt their business, both operators said there is no need to punish them for the benefit of a new entrant.
"In my discussions with the media and on the cocktail circuit, I have found that there is a debate raging," said MTN spokesman Jacques Sellschop. "Would it be fair to bring in a third operator without adjusting the playing field?"
He argues that a level playing field is not achieved by "tilting the court". He used a soccer game between experienced players and rookies as an example.
"Do you put a ball and chain on the legs of MTN and Vodacom to make them play badly? The public that is paying rental to MTN and Vodacom has a right to expect service." Compromising service levels to the advantage of a new player is not the way to go, he said.
Vodacom CEO Alan Knott-Craig used the example of his company`s move into Tanzania to illustrate the same point.
"In Tanzania, we were the fifth licensee. Tanzania, by the way, is the fourth poorest country in the world; this is not an European country we are talking about." In its bid for the licence "the government offered us no advantage whatsoever," he said. Yet Vodacom claims to have achieved 25% market share since starting operations in September, and expects to eventually be the biggest player in the country.
"Successful competition requires lots of other things than advantages," he said.
Both operators also argue that there is enough spectrum available for multiple new entrants, and that there is no reason to withhold an 1800MHz allocation to them.
A competitive tool
According to ICASA, third licence bidder Nextcom argued against allowing the incumbents access to 1800MHz, saying it is one of the only tools available to the regulator to assist the new licensee in wrestling market share from MTN and Vodacom.
Knott-Craig said recent surveys show the potential South African cellular market to be 21 million subscribers. The two operators currently have about seven-and-a-half million subscribers.
Sellschop agreed that spectrum use and competition need not be linked, pointing to international examples.
"We have actually shown in a presentation recently that out of 17 countries surveyed, 14 granted incumbents access to 1800MHz at the same time or prior to issuing new licences."
Rival bidder Cell C and the Internet Service Provider Association (ISPA), submitted that pro-competitive conditions should be imposed on MTN and Vodacom should they be granted access to the spectrum.
ISPA`s data worries
Myron Zlotnick, co-chairman of ISPA, said the association shares the operators` concerns on the regulatory environment. "There is too much uncertainty, the processes move too slowly, and there may be a negative impact of foreign investment and the growth in the industry."
But ISPA is even more concerned about the ability additional spectrum will give the operators in providing data services.
"We see [MTN and Vodacom] moving much more aggressively into enhanced data services," he said. "Giving those frequencies to them may well have an anti-competitive effect on ISPs."
ISPA would like to see regulation, similar to telecommunications interconnect agreements, attached to the spectrum. "We want conditions that would permit ISPs access to carry services over those frequencies on a non-preferential, non-discriminatory way."
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