How SA can reduce data costs for the poor
Mobile operators can be obliged to ‘sponsor’ connectivity in certain areas, Ashburton Investments says
Instead of having a wholesale open-access network (Woan), SA should consider new spectrum-allocation models that require mobile operators to provide cheap or even free internet to the poor a fund manager says.
In an effort to boost competition and drive down data prices, regulators have proposed the creation of a centralised network that would pool operators’ network infrastructure and spectrum assets, or radio waves.
But some in the industry have argued that this would remove competitive advantages and disincentivise operators from investing in new cell towers or spectrum. This approach would hamper SA’s move towards capital-intensive 5G connectivity, they say.
Ashburton Investments fund manager Nick Crail said on Tuesday the money manager did not favour a Woan “because we don’t think it’s a sustainable business model”. This approach would probably result in SA having “sub-par” and irrelevant networks in 20 years, he said.
Because of regulatory uncertainty, Ashburton, like many other fund houses, recommends reduced exposure to the telecommunications sector, which has been one of the worst performers on the JSE so far in 2018.
Crail said that instead of a Woan, and rather than auctioning off spectrum at high prices, the state could allocate spectrum to operators for no upfront cost if they committed to rolling out “best-of-breed infrastructure” in all areas of the country, even in non-commercially viable areas.
Under this model, operators would be required to effectively “sponsor” data in certain areas by making it far cheaper or even free. Schools and civic organisations could, for instance, get access to zero-rated data, he said.
That would mean hefty once-off costs for spectrum would be offset by increased investments in less profitable areas. Under this model, there would be no need for a Woan as “disenfranchised citizens will get access to cheap and or free fast internet”.
“The result would be that large operators with the balance sheets to roll out significant infrastructure would access the best spectrum but would also commit to universal coverage, and in specific areas at much reduced consumer data prices.”
While it could be costly at first for operators to set up systems that enabled them to charge different rates “on a tower-by-tower basis”, this approach would benefit SA in the long term, he said.
Dobek Pater, director at Africa Analysis, said in September that the industry is still in the dark about the wholesale network’s shareholding, funding, decision-making and operating model.
But it appeared as though the state wants to allocate most of the “high-demand” spectrum to the network, Pater said.
Companies that wanted to apply for leftover spectrum not reserved for the Woan would first have to make large commitments to the wholesale network.
Meanwhile, regulators have also said they want Vodacom and MTN to open up their networks to competitors.
The contentious Electronic Communications Amendment Bill says a service provider with “significant market power”, or at least 25% of SA’s network infrastructure, must share its infrastructure with competitors. The Independent Communications Authority of SA is to prescribe the “cost-oriented” rates these operators can charge their rivals, according to the bill.
JPMorgan said in a recent research report on MTN that the government’s open-access agenda “may undermine MTN’s historical investment”.