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Telcos draw battle lines over ‘secret’ spectrum pooling

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 05 Jul 2024
Spectrum pooling is a strategy in which multiple radio spectrum users can co-exist within a single allocation of radio spectrum space.
Spectrum pooling is a strategy in which multiple radio spectrum users can co-exist within a single allocation of radio spectrum space.

The gloves are off in South Africa’s telecoms industry, with mobile network operators (MNOs) at each other’s throats over spectrum pooling arrangements.

On 13 August, the North Gauteng High Court in Pretoria will hear a case in which the country’s biggest mobile operator Vodacom takes on rival MTN and its pooling partners – Cell C and Liquid Intelligent Technologies – in a bid to interdict them from using spectrum they obtained from alleged “secret” and “illegal” spectrum pooling arrangements.

Spectrum pooling is a strategy in which multiple radio spectrum users can co-exist within a single allocation of radio spectrum space. One use of this technique is for primary users of a spectrum allocation to be able to rent out use of unused parts of their allocation to secondary users.

In its affidavit, seen by ITWeb, Vodacom cites telecoms regulator the Independent Communications Authority of South Africa (ICASA) as the first respondent.

It accuses ICASA of pooling high-demand spectrum (HDS) between MTN, Liquid and Cell C “in secret in a manner contrary to the Electronic Communications Act (ECA) and unlawfully in other respects”.

It adds: “The result is the unlawful favouring of MTN in respect of its available spectrum ‘bandwidth’ to the serious competitive prejudice of Vodacom (and Rain and Telkom).

“MTN and those with whom it ‘pools’ spectrum have unlawfully been allowed to pool and therefore transmit on significant blocks of HDS for which they are not licensed as required by the ECA and the regulatory framework.”

The spectrum in question is in the 900MHz, 1 800MHz and 2 100MHz bands.

MTN South Africa, Cell C and Liquid have opposed Vodacom’s request to the courts for an urgent interdict to halt their spectrum pooling arrangements.

In an e-mail to ITWeb, Nozipho Mngomezulu, group executive for regulatory and legal affairs at Telkom, says the telco is neutral in this matter and is not supporting any party.

ICASA did not respond to ITWeb’s specific questions, but says: “Please note the authority is currently defending the matter and has filed the answering affidavit, as per the court rules.”

Says Liquid Intelligent Technologies: “We confirm that Vodacom launched a semi-urgent interdict against MTN, Cell C and Liquid (including Rain and Telkom as interested parties). Liquid is opposing the granting of the interdict, and we filed our opposing papers on 26 June 2024. We are unable to provide any further substantive comments on the litigation at this point.”

Thorough consultation

According to Mngomezulu, spectrum pooling is not illegal, but pooling of HDS needs to be thoroughly considered and approved by ICASA to ensure it does not result in anti-competitive outcomes or a change of control of valuable spectrum, either from sole to joint control, or from one party to another.

She points out that such an assessment can only be done through a proper consultative process involving all mobile operators, not just those involved in the spectrum agreements.

“Telkom’s only concern is the issue of maintaining a pro-competitive environment. Telkom has always been of the view that, in the interests of ensuring a pro-competitive ICT sector, it is incumbent upon ICASA to thoroughly scrutinise all HDS arrangements, including pooling/sharing arrangements, to determine whether such arrangements result in the ability of the contracting parties to act in unison, or provide the larger operators with any unfair advantage over smaller rivals such as Telkom.”

Ultimately, she adds, Telkom wants to compete as freely and fairly as possible in order to provide customers with high-quality mobile services and choice.

“We would, therefore, like the case to provide clarity on the process to be followed when operators enter into pooling or sharing arrangements and the steps ICASA is required to take in its consideration of the arrangements.

“A critical issue in the consideration process is the assessment of whether the arrangement in question may have the effect of distorting competition. The process must also involve all relevant stakeholders in order to ensure the decision made by ICASA takes into account all relevant factors.”

Mngomezulu notes it is common knowledge that the larger operators have entered into various spectrum arrangements with the smaller licensees. She explains that these arrangements relate, for the most part, to the HDS licensed to the smaller licensees.

“Telkom has maintained, for several years now, including during the preparations for the 2022 spectrum auction, that the larger operators having indirect access to the HDS that is licensed to the smaller operators is something that needs to be properly investigated by ICASA. The reason being that HDS is a finite resource that is an essential part of the deployment of mobile networks for the provision of mobile services on a competitive basis.

“Accordingly, ICASA needs to always ensure it manages the assignment and use of spectrum in a manner that promotes competition in the ICT sector and does not create any barriers, especially for the smaller licensees.”

She points out that the need to assign HDS pro-competitively is an issue that was acknowledged by ICASA in its design of the spectrum auction process.

“Here ICASA adopted a process which placed a ceiling on the amount of spectrum that could be obtained in the auction by the different licensees. This measure was aimed at achieving a more level playing field, in which smaller operators like Telkom could compete more effectively. The spectrum caps imposed by ICASA took into account all existing HDS holdings of the licensees participating in the bidding process.

“However, what was not contemplated in this process was the ability of the larger operators to access additional HDS not assigned to them through the spectrum arrangements concluded with the smaller operators.

“Telkom remains of the view that these spectrum arrangements give a competitive advantage to the two larger operators through indirect access to spectrum and that these arrangements should be closely scrutinised by ICASA, so as to ensure they do not result in distorting the competitive landscape and undermine the ability of smaller operators, such as Telkom, to compete on equal terms to the benefit of all South Africans.”

Enhancing competition

MTN argues that the pooling arrangements work to enhance competition in any market and generate efficiencies for all parties involved.

MTN and its pooling partners applied to ICASA to pool spectrum in early 2022, leveraging off the positive impact of temporary spectrum pooling arrangements that were approved during the COVID-19 pandemic, says the telco.

While the COVID-19 regulations made provision for expedited approval processes for applications such as spectrum sharing/pooling, it says, the mechanisms for these types of arrangements are not new and are commonplace in other markets.

“The South African regulatory framework permits parties to apply for such arrangements, and MTN and its partners applied to ICASA in terms of the ECA and received approval. Pursuant to these approvals, MTN designed and deployed its network,” says Marina Madale, MTN South Africa acting chief sustainability and corporate affairs officer.

Vodacom alleges MTN, Cell C and Liquid applied in secret, and seemingly with ICASA’s co-operation, to implement an unlawful scheme purely for their own commercial benefit, the company adds.

MTN says it was open about its decision to pursue pooling arrangements with other MNOs, and followed the process set out in the ECA for ICASA’s approval.

“Spectrum pooling is an efficient technique to utilise spectrum which has benefits for both licensees and all customer segments. More efficient applications of spectrum advance the industry and benefit the broader public,” Madale adds.

According to MTN, should Vodacom’s application for an interdict succeed, MTN’s ability to utilise the pooled spectrum will degrade the quality, speed and capacity of MTN’s network, impacting a substantial portion of the population. Not only subscribers of MTN, but also subscribers of service providers such as wholesale internet service providers, mobile virtual network operators (MVNOs), MNOs that roam on the MTN network, its respective public and private sector customers, and members of the public who are reliant on these entities.

Additionally, the effect of Vodacom’s application could fundamentally result in an industry-wide shift in the spectrum landscape in South Africa, it argues, adding it could potentially also impact the use and transmission of radio frequency spectrum by any parties in the industry that share frequency.

“MTN is opposing Vodacom’s application. In its answering affidavit, we argue that Vodacom has failed to provide evidence to support an interdict of these pooling arrangements. Given the impact on MTN, its partners, roaming customers, MVNOs, subscribers and the public, MTN believes the request for interim relief should be dismissed,” Madale concludes.