Experts unpack potential impact of Draft Amendment Bill on MVNOs

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 19 Dec 2023
The Draft Electronic Communications Amendment Bill will introduce competitive benefits for mobile virtual network operators.
The Draft Electronic Communications Amendment Bill will introduce competitive benefits for mobile virtual network operators.

The Draft Electronic Communications Amendment Bill 2023, if enacted into law, is expected to create a favourable environment for mobile virtual network operators (MVNOs) and enable them to compete at the retail level with the mobile operators.

This was the word from telecoms and legal industry pundits, commenting on the proposed changes under the Draft Electronic Communications Amendment Bill and its implications on South Africa’s MVNO market.

On 23 June 2023, the Department of Communications and Digital Technologies (DCDT) published the Draft Electronic Communications Amendment Bill, 2023 (Draft Amendment Bill), which is intended to amend certain aspects of the Electronic Communications Act 36 of 2005 (ECA).

One of the most significant changes that the Draft Amendment Bill seeks to bring about is the proposed introduction of a new licence category for electronic communications facilities services which aims to bring electronic communications service providers (currently exempt from licensing requirements) within the existing licensing framework of the ECA, according to law firm Bowmans,

Among other objectives, the Draft Amendment Bill seeks to enable spectrum sharing subject to the oversight of the Independent Communications Authority of South Africa (ICASA) and introduce a new regulatory framework for roaming and MVNOs.

This, after the Competition Commission investigated the local telecommunications market and recommended that the DCDT should take further steps to open the mobile market to greater wholesale competition.

The Bill effectively instructs ICASA to create a specific regulatory framework to promote and protect MVNOs. Under the proposed regulations, mobile operators would need to develop a reference offer for MVNO access, together with model terms and conditions.

Christopher Geerdts, MD of technology industry research and advisory firm BMIT, tells ITWeb currently existing MVNOs lack specific regulation to provide them with formal protection from their host mobile operators.

Among other changes, the Amendment Bill is expected to open up the market to new players and lower costs of MVNO offerings, he adds.

“The Bill stipulates that ICASA's regulations will need to determine maximum average wholesale rates. This is important because MVNOs need to be able to compete at the retail level with the mobile operators, which they cannot do if their wholesale costs are unreasonably high,” explains Geerdts.

“They also need the pricing principles to be transparent to provide a level of certainty for their investors that they can sustain their business over the long-term. Opening the wholesale market to more players, with a basic protective framework, should increase the level of competition and consumers will probably not only see lower fees, but also better service levels and also the more rapid introduction of new and innovative services.”

An MVNO is a wireless communications services provider that does not own the wireless network infrastructure over which it provides services to its customers.

Typically, an MVNO enters into a business agreement with a mobile network operator to obtain bulk access to network services at wholesale rates, then sets retail prices independently.

According to a report by BMIT, the collective market share of MVNOs will double in the next two to three years and account for 10-12% of mobile subscribers in five years.

Christopher Geerdts, managing director of BMIT.
Christopher Geerdts, managing director of BMIT.

Draconian approach

According to Geerdts, when the Electronic Communications Act was promulgated in 2008, there was no specific framework provided to enable MVNOs, in spite of the fact that the MVNO market was established in global terms.

The Draft Amendment Bill will enable MVNOs to choose which mobile operators they wished to engage with, and enable them to enter into more equitable commercial arrangements.

“This could result in the retail market potentially becoming more competitive, more innovative and more service oriented, to the benefit of the consumers. Our smartphones have become central to so many aspects of our lives, and there are exciting times ahead as new types of converged services emerge,” states Geerdts.

Ahmore Burger-Smidt, director and head of Regulatory Practice at legal firm Werksmans Attorneys.
Ahmore Burger-Smidt, director and head of Regulatory Practice at legal firm Werksmans Attorneys.

Ahmore Burger-Smidt, director and head of Regulatory Practice at legal firm Werksmans, is of the view that the amendment in relation to MVNOs is based on the belief that MVNOs are not well developed in South Africa.

“The aim of the Bill is to remove barriers to MVNO operations and to introduce competitive benefits. What the Bill does is to provide for a strict and some would say a draconian approach when it comes to access requests by MVNOs. As such, the Bill requires mobile networks to conclude an agreement within 30 days should they receive a request from a MVNO for access,” comments Burger-Smidt.

An important aspect of the Bill is that it stipulates that should an agreement not be reached between a MVNO and a mobile operator, ICASA can put in place the terms and conditions that will apply to the agreement.

“A robust and appropriate regulatory framework would definitely be required to regulate the relationship that the Bill aims to establish between the two parties.”

According to Bowmans, since June, there has been no indication from the DCDT on the next steps it will take (if any), including any timeline for the proposed legislative amendment process.

It is likely that the DCDT has received numerous submissions from interested parties, including mobile operators and MVNOs, whose views will require a significant amount of time to be considered.

Dr John Paul Ongeso, senior associate in the Technology, Media & Telecommunications sector group at Bowmans, points out: “Whereas the Draft Bill proposes that ICASA be empowered to conduct market inquiries to address pricing, contractual terms, or business practices which in its view 'impede, restrict or distort competition', it is not conclusive that this would ultimately mean that consumers would be expected to pay higher or lower fees. It would be necessary to evaluate this on a case-by-case basis with reference to the terms of the relevant market inquiry and its findings and recommendations.”