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SMMEs demand 30% spectrum for black-owned consortiums

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 10 Jul 2019
The lobby group notes there is no guarantee operators will drop data prices should spectrum be given to them.
The lobby group notes there is no guarantee operators will drop data prices should spectrum be given to them.

Black-owned South African small, medium and micro enterprises (SMMEs) demand that high-demand spectrum be allocated to them as well.

This after president Cyril Ramaphosa, in his State of the Nation Address last month, promised the long-awaited policy crafting the path towards mobile spectrum allocation will this month be issued by communications minister Stella Ndabeni-Abrahams.

Last year, the Independent Communications Authority of SA confirmed plans to license high-demand radio frequency spectrum by the end of March 2019 but that deadline has come and gone.

To ensure an inclusive approach, Ndabeni-Abrahams invited sector stakeholders to provide written submissions on their interpretation of the definition of the spectrum licensing process.

Clear recommendations

In a statement, the Progressive Blacks in ICT (PBICT) lobby group says: “We are calling for our government to set aside spectrum for black-owned SMMEs and co-operatives, especially those with black people, women, youth and those living with disabilities.

“The CSIR report made clear recommendations on the spectrum that should be set aside for our people. We request our government to honour that report and put our people first.”

The CSIR study found that a portion of spectrum could be reserved for a wholesale open access network, while excess capacity would be made available to network operators.

The lobby group alleges the four telcos – Vodacom, MTN, Cell C and Telkom – have made it impossible for smaller black-owned companies to enter the space, hence the high data cost today.

It notes there is no guarantee operators will drop data prices should spectrum be given to them.

“We are also calling on our government to ensure the high-demand spectrum that will be open for public auction and/or whatever method must have an element of 30% being set aside for majority black-owned consortiums. We believe it is time to start liberating our people economically and removing the chains of bondage that tie us down to poverty,” says PBICT president Leon Rolls.

He adds: “Our request will not only transform the data economy; it will guarantee the much-needed drop in data prices.”

According to Rolls, PBICT, Youth Economic Alliance, South African Black Internet Service Providers’ Association and Black IT Forum jointly have more than 500 SMMEs that are in the telco space ready to build community-based data networks in every district of the country, and all they need is spectrum and ECS/ECNS licences.

“For too long, our people have been left in the dark and out of opportunities before 1994 and post. Our hopes are now in the hands of our leaders – the president, minister and comrades – to ensure economic transformation of our people,” Rolls says.

“Our people are always left in the dark when it comes to knowledge that can free them economically. This is done deliberately to keep us excluded from opportunities like the spectrum that currently generates revenue of more than R200 billion from our people as they pay an arm and a leg for data.”

Leon Rolls, president of Progressive Blacks in ICT.
Leon Rolls, president of Progressive Blacks in ICT.

Insufficient resources

Meanwhile, World Wide Worx MD Arthur Goldstuck is of the view that it is not feasible to allocate significant blocks of high-demand spectrum to small entities that do not have the resources to roll out the necessary infrastructure to utilise the spectrum.

However, he points out that should spectrum be sliced up on a geographic basis, with segments available on a regional basis to local players, there may be a business case for it.

“The real problem is that the signal distribution needed to take advantage of high-demand spectrum is complex and expensive, as it needs high-end equipment and an extensive infrastructure rollout. Only the bigger players have the means to do so.

“If we had to wait for consortiums to be put together to bid against the big players, we would find ourselves in a second national operator debacle again, where the licensing of a second network operator to compete with Telkom was delayed for five years, and eventually meant Neotel was virtually powerless to mount effective competition,” says Goldstuck.

Nonetheless, he points out the big advantage for SMMEs getting spectrum, if it could be shown to be feasible, would be the introduction of greater competition.

“However, we have seen how Cell C has struggled to mount an effective competitive campaign against the established players, partly because it came into the game so much later, and partly because interconnect fees were structured in such a way to keep them out of the picture.

“The way to bring black-owned SMMEs and co-operatives into the spectrum environment would be to allocate a small proportion of the shares of the big players to such entities, in return for the big players being awarded spectrum, ensuring they can benefit from the rollout while not holding back the utilisation of spectrum.”

For Thecla Mbongue, senior research analyst for Middle East and Africa at Ovum, ideally, spectrum would be allocated to companies which comply with BEE requirements but also with a solid telecom track record or, if they are start-ups, with a solid telecoms project.

However, she notes the current big four already met such requirements and have access to more funding and resources than SMMEs.

They have also rolled out extensive networks and the spectrum to be issued is first and foremost expected to help them optimise existing networks, she adds.

“The government had issued licences in the past to smaller entities in underserved and rural areas. However, many could not roll out their networks or keep on running for a long time, mostly due to lack of funding. An open access whereby large telcos are forced to allow smaller players to access their networks might be more suitable to accommodate SMMEs. The latter would then no longer carry the cost of network deployment,” says Mbongue.

Priority attention

The Small Enterprise Development Agency (SEDA) says the number of SMMEs in SA increased by 13.6% year-on-year from 2.25 million in Q3 2017 to 2.56 million in Q3 2018.

It notes the growth and development of SA’s ICT sector will be key in opening the way for the country’s participation in the fourth industrial revolution.

“The industry is encouraged that the matter of licensing high-demand spectrum is receiving priority attention at the top level, with it being one of the economic stimulus measures emphasised by both president Ramaphosa and minister of finance Tito Mboweni, in his 2019 budget speech,” says SEDA.

It points out the lack of spectrum and delays in allocating additional spectrum have been a frustrating and cost-raising issue for the industry.

“The result has been that mobile operators invested heavily in infrastructure to meet the growing data volume demand and to connect rural areas, resulting in dense networks, which raised data unit costs. With the licensing of additional spectrum, it will be easier and cheaper to roll out 4G and 5G technologies, enabling operators to pass cost-savings onto consumers.”