ICASA sets the ball rolling for spectrum auction
The Independent Communications Authority of South Africa (ICASA) will from tomorrow start receiving applications for the much-awaited spectrum licences.
The regulator has also set reserve prices per spectrum band as high as a billion rand.
ICASA announced yesterday that the invitation to apply (ITA) for the licensing of International Mobile Telecommunications (IMT) spectrum, also known as high-demand spectrum, and that of the wholesale open access network (WOAN) will be published on Friday, 2 October.
It notes the closing date for IMT applications is 28 December 2020, while that of the WOAN is 30 March 2021.
Last month, the telecoms regulator pushed back the auctioning of the much-needed spectrum to the end of March next year, instead of December as earlier indicated.
As a result of the pushback, emergency spectrum issued to telcos in April, due to the national COVID-19 lockdown, will be extended to the end of March next year, when the spectrum auction process is expected to take place.
The mobile operators have so far used the emergency spectrum to rollout next-generation 5G networks in some parts of SA.
ICASA promised to amend the ICT COVID-19 National State of Disaster Regulations in order to be able to extend the period.
In its announcement yesterday, ICASA revealed the reserve prices for the spectrum ranging from R10 million to R1 billion, saying: “All good spectrum auction designs are also a balance between price discovery and the risk of collusion in the auction amongst the bidders, and setting the reserve prices provides a realistic starting point for price discovery.”
The cheapest is the 3 500MHz lot, with a reserve price per lot of R9.8 million, and the highest lot is 800MHz, with a reserve price of R1.1 billion per lot.
This development is a breakthrough for the telecoms sector, which has, for years, been battling with ICASA over the allocation of these licences.
Mobile network operators Vodacom, MTN, Telkom and Cell C have been readying themselves to take advantage of the spectrum to strengthen and develop new services, such as 5G.
Spectrum allocation is also critical to SA in regards to the reduction of data prices which resulted in the #DataMustFall campaigns. Since 2016, South Africans have been complaining about the high price of data through the #DataMustFall social media banner, and both the Competition Commission and ICASA initiated inquiries into data pricing.
Furthermore, for government, a spectrum auction will boost the fiscus.
The publication of the ITA by ICASA comes just a week after a new report urged the regulator to carefully manage spectrum allocation.
The report – “5G prospects for SA in 2021: The Operators”, by World Wide Worx – among other recommendations, cautions against high bidding prices, saying this will have a direct impact on the quality of service.
ICASA chairman Dr Keabetswe Modimoeng says the regulator has factored in the important aspect of establishing reasonable reserve prices by considering lessons from the failure of auctions or spectrum sales historically.
“This includes instances in which reserve prices have been set too high, or when other requirements result in the failure of the auction process.”
Furthermore, ICASA says it considered and analysed all representations received in response to the information memorandum (IM) for IMT spectrum assignment published in November 2019.
Modimoeng comments: “The key considerations emanating from the representations into the IM include the following: the development of various empowerment obligations to be imposed on the successful bidders in the auction process, including a requirement to support mobile virtual network operators; the requirement for successful bidders to support the WOAN through procurement of a minimum 30% national capacity; and the imposition of empowerment obligations on the WOAN in order to ensure it is a credible empowerment tool that will assist ICASA to achieve the sector’s transformation agenda.”
Moreover, the regulator says it factored in competition matters within the industry and did an assessment pre and post the auction to inform this licensing process.
It says it conducted an intensive spectrum fair valuation study “using the avoided cost modelling and international benchmarking on the bands to be licensed (IMT700, IMT800, IMT2600 and IMT3500)”.
ICASA says it will make available 406MHz of spectrum for the provision of mobile broadband services in South Africa.
“Given the scarcity of spectrum, this has the potential to shape future competition in mobile markets in South Africa and the extent to which individual national and/or sub-national wholesalers are able to credibly compete with each other,” says Modimoeng.
“The main objective from the competition assessment is that the authority, through the awarding of this spectrum, is to ensure the authority expands the market. This means the national and sub-national wholesalers are taken into consideration in terms of the spectrum to be awarded and the new players are able to partake in this process.
“This licensing process is not expected to solve the wholesale and retail competition concerns. The authority is keenly aware of the need to prevent the spectrum award from worsening the competition concerns in mobile markets identified by the authority through other processes. This will be done by imposing appropriate obligations and spectrum caps.”
Accordingly, ICASA says, it is imposing spectrum floors for the new players to ensure they become credible players in the market. “The spectrum cap of 2x21MHz (including existing sub-1GHz spectrum holdings) has been imposed on the sub-1GHz spectrum bands and the overall spectrum cap of 184MHz (including existing assigned spectrum holdings) has been imposed.”
Reacting to ICASA’s announcement, communications and digital technologies minister Stella Ndabeni-Abrahams says the issuance of these two invitations to apply are in line with the ministerial policy directions and Section 3(4) of the Electronic Communications Act.