More calls for spectrum for SMMEs

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 16 Jul 2019
Muzi Makhaye, chairman of the ICT SMME Chamber.
Muzi Makhaye, chairman of the ICT SMME Chamber.

South African small, medium and micro enterprises (SMMEs) are crying for inclusion across the country’s industries, but most importantly the ICT sector.

So says the ICT SMME Chamber, calling on communications and digital technologies minister Stella Ndabeni-Abrahams to not overlook SMMEs in the long-awaited policy directive for licensing unassigned high-demand spectrum.

In a statement responding to her department’s budget vote, the ICT Chamber indicates the minister said she “envisaged inclusive economy participation and emphasised the inclusive effort in turning around the economy”. Working together to grow the economy is what the ICT Chamber says it wants established business to understand.

New mechanisms are urgently required to save us all from the imminent inequality precipice we are faced with. We need to de-concentrate SA’s economy, it states.

Muzi Makhaye, ICT SMME Chamber chairman, comments: “We urge the minister to unflinchingly bring the ICT SMME development to reality. In her arsenal, the minister has the ICT SMME Development Strategy (Gazetted November 2017) which she may unleash without delay.

“By enforcing the implementation of this strategy, the minister shall have dealt with a plethora of issues affecting the ICT SMMEs, as well as those that delay inclusivity, which she so well-articulated in her budget vote address last Wednesday.”

Continued wait

It’s been almost a month since president Cyril Ramaphosa promised the much-anticipated policy crafting the path towards mobile spectrum allocation will be issued by the communications minister.

At the time, Ramaphosa said Ndabeni-Abrahams will issue the policy direction to ICASA to commence the spectrum licensing process “within the next month”.

Mobile operators have been waiting for years to get their hands on more spectrum.
Mobile operators have been waiting for years to get their hands on more spectrum.

The same rhetoric was repeated at the inaugural Digital Economy Summit earlier this month, with the communications minister acknowledging the long wait for the pathway forward around spectrum allocation.

“This directive will also provide a legal framework for the allocation of spectrum to the private sector and other industry stakeholders,” said Ndabeni-Abrahams.

The industry and mobile operators are still waiting.

The last big set of spectrum issued was in the 2.1GHz band, which helped the operators in their 3G network deployment. Vodacom and MTN were allocated such spectrum, respectively, in 2004 and 2005, while Cell C received such spectrum in 2011.

WOAN aspirations

The ICT Chamber believes a wholesale open access network (WOAN), proposed in the withdrawn Electronic Communications Amendment (ECA) Bill is the viable option for creating new business opportunities for ICT SMMEs, as well as new entrants to the sector.

They further state the WOAN is a tool that shall bring the country closer to our socio-economic objectives such as job creation. “SMMEs, more than most in the ICT sector, have steadfastly called for market restructuring and industry transformation during the processing of the integrated ICT White Paper and through all its stages up to the ECA Bill.

“The ICT Chamber does not waiver in its support for the establishment of a wireless open access network to be assigned the spectrum.

In August 2018, Cabinet approved the ECA Bill to give effect to the policy objectives set out in the National Integrated ICT Policy White Paper, published in late 2016. The Bill contained provisions on spectrum allocation, WOAN and rapid deployment policy, but it garnered widespread criticism from stakeholders in the sector.

However, earlier this year, Ndabeni-Abrahams decided to withdraw the ECA Bill for further consultations.

Sabelo Dlamini, senior research and consulting manager at IDC, highlights SMMEs are pushing for the WOAN because they expect to benefit, as the wholesale network will bridge the barriers to entry for SMMEs and level the playing fields with the incumbents.

“The ECA Bill was expected to foster SMME participation and market access,” says Dlamini. “The Bill covered areas that were suitable for the SMMEs in industry transformation, and the provision of services to the rural and under-serviced areas.”

Now that it has been withdrawn, Dlamini notes government may have to provide some alternative methods in addressing key issues that were supposed to be addressed by the ECA Bill.

Thecla Mbongue, senior research analyst for Middle East and Africa at Ovum, agrees the push for the WOAN to be assigned spectrum might be the only way for SMMEs to take part significantly in telecoms business. “The sector is so far dominated by four giants with financial means the SMMEs cannot match.

“The SMMEs would be able to access the network without investing heavily in network infrastructure. Also, if the network has a nationwide coverage, they may also pick specific regions where they’d want to operate.”

Siyathemba Magobiane, senior consultant for ICT in Middle East and Africa at Frost & Sullivan, points out the WOAN encourages a sharing model for spectrum allocation as opposed to auctioning the resource to the highest bidder.

“Acquiring spectrum via auction requires deep pockets and resources, which is an entry barrier for many SMMEs in SA who want to compete in this space. WOAN will enable the sector to move away from infrastructure-based to service-based competition.

“As a result, through a WOAN model, new players such as SMMEs would be able to enter the mobile market without the need to invest in the fixed costs associated with establishing a network.”

Best foot forward

While it remains to be seen how the government policy will pave a way for increased SMME participation in the telco industry, Dlamini advises government to be very careful in its spectrum allocation method.

There needs to be a well-executed market sizing exercise to be able to price the spectrum accordingly, he states. “We have seen in other countries where few or no operators pitched for spectrum bids as the spectrum was priced outside the operators’ budgeted pricing or affordability.”

He adds: “…There were some good components of the Bill that highlighted the levelling of playing fields for all the industry players and supporting the new entrants to compete fairly. So, we hope the minister in the new policy directive will have in a way some components to address the levelling of playing fields in the industry.”

The ICT Chamber notes government has done little to transform both the ICT sector and economy, but says it is confident Ndabeni-Abrahams “will alter the trajectory of a sector that has steadfastly resisted and frustrated transformation and inclusivity”.

While it may be hard to predict the outcome for the spectrum allocation policy, Magobiane says he expects the minister to carefully evaluate the concerns of the industry and the practical implementation a WOAN model requires to be successful.

“Taking into account SA’s hostile socio-economic environment and the need to get the economy going urgently, I expect the government to take a more conservative approach to spectrum allocation. I suspect the WOAN model may be a long-term play for now.

Mbongue is of the view the minister's policy directive could set aside spectrum for the WOAN.

However, she concludes, rather than setting up an open access network from scratch, it might be faster to impose on existing telecoms operators to share their networks.