SIPHO MASEKO: Icasa should consider digital future and get spectrum licensing right
Telkom does not not celebrate halting the process, but cheap telecoms services cannot happen in market dominated by a powerful duopoly
The decision by the high court in Johannesburg to bring a halt to the two invitations to apply (ITAs) for radio frequency spectrum issued in October 2020 by the Independent Communications Authority of SA (Icasa), pending a judicial review of the process, should be cause for reflection.
Telkom was the first to bring a court application for review after months of submissions to the regulator expressing our concerns about substantial flaws with Icasa’s approach. Our action was subsequently joined by broadcaster e.tv and cellular group MTN.
Despite this, we do not celebrate halting the process, nor take any joy in delaying the much-needed licensing of high-demand spectrum. As an information & communications technology (ICT) company fully engaged with the possibilities and opportunities of the fourth industrial revolution (4IR), we recognise the importance of the availability of high-demand spectrum to this economy.
The presidential commission on 4IR released its recommendations for SA’s participation in the 4IR a year ago, as we moved into a state of national lockdown to contain the Covid-19 pandemic. The commission’s report asserted — and the lockdown confirmed — the need for a coherent 4IR and digital economy strategy that places a premium on creating the most conducive conditions to spur innovation and shared growth.
SA has great potential. As a country, we also have a unique opportunity to leapfrog developmental challenges. To use the commission’s words, to “catalyse dramatic socio-economic improvement”. Importantly, the report recognised the need for regulatory reform and modernised network industries to address “distorted patterns of ownership through increased competition”.
Alas, the release of the two ITAs told a different story. First, the process followed by the regulator was deeply flawed in that it ensured no room for substantive and meaningful consultation. The decisions taken by Telkom, e.tv and MTN independently to challenge the regulator on various elements of the ITAs suggests a failure of meaningful engagement on the side of the regulator, with the stakeholders most directly affected.
There is no dispute that digital enablement is the foundation of an inclusive market economy and democracy. Against this background, it is imperative that telecommunications services are affordable for all. This cannot happen in the context of a highly concentrated market dominated by a powerful duopoly that is immune to competitor pressure from smaller challengers.
Thus what needs to be at the centre of policy and regulation is the need to use the spectrum licensing process to address market failures and enhance competition in the mobile sector, to achieve the goal of affordable communications for all.
This also includes the need to address the competition effects of the various spectrum arrangements that Vodacom and MTN, the market duopoly, have entered into with the smaller operators, namely Cell C, Liquid and Rain.
The spectrum licensing process is undertaken in the context of existing sector policy, as contained in the 2012 National Development Plan, SA Connect, the 2016 ICT policy white paper and the 2019 ministerial policy and policy direction. A central theme in these policy documents is the promotion of competition as a critical objective.
In addition, the success of digital inclusion depends heavily on the urgent and successful completion of the broadcasting migration process to make the critical sub-1 GHz spectrum available for mobile services on a national basis. This is a point argued by e.tv — one of the broadcasters that uses these spectrum bands to broadcast TV analogue signals — in its challenge. By seeking to auction sub-1 GHz spectrum, Icasa is in effect selling real estate it does not own or control.
Spectrum design will determine market outcomes for the foreseeable future. Yes, spectrum must be made available promptly, but it must also be made available fairly and equitably. While we may be able to afford a few months’ delays, no matter how undesirable, we will not be able to afford the potentially decades-long effects of a mishandled spectrum licensing process.
Icasa was directed by the Competition Commission to use the spectrum auction to resolve the market distortions and increase competition in the market. The published ITAs fail to do so. In fact, based on some submissions, they will choke existing businesses. More worryingly, Icasa fails to provide reasons that will enable meaningful engagement and collective problem solving.
Three key actions
So, what should the regulator do in our view? First, remove 700MHz & 800MHz from the auction process. As said before, the principle is simple: you cannot sell what you don’t own. With the current auction, ITA is likely to render the buyer a squatter, despite having paid for the spectrum.
Second, to balance free market principle and the need to enable fair competition, caps should be placed on individual spectrum bands, and not on total spectrum ownership. The structuring of the bands must consider future requirements for meaningful global competition. Deployment of 5G, which is the basis of the next tech revolution, requires 80-100MHz of contiguous spectrum. If this structure is not right, our national ambitions to catalyse innovation and meaningful socio-economic improvement is unlikely to be realised.
Lastly, if SA is to have a wireless open-access network, at least give it a fighting chance. This judgment presents an opportunity for all of us to “fail forward”, by using this moment to rapidly correct course and find a sustainable and reasonable way out of the self-imposed impasse. We must all work to avoid a protracted fight and ensure we can continue with the right auction process with the required haste.
Businesses, communications, cities and even political systems are being altered in ways beyond the control of nations and our own imagination. Covid-19 has shown that we need more communications infrastructure; the digital realm is now the real architecture and foundation of modern society. Regulators must use tools for today’s and tomorrow’s technology challenges, not yesterday’s.
At this point Icasa has a choice. It could dig in its heels and spend an inordinate amount of time in court, or we could spend it finding solutions that will enable the achievement of SA’s ambitions as a country and people. At Telkom, our preference is the latter.
• Maseko is Telkom CEO.
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