Government’s pricey telecoms plan in limbo
The government has shelved the Electronic Communications Amendment Bill. But it’s unclear what that means for its plan for a shared national network, or the timing of the spectrum allocation auction
Mobile operators have been left in the dark as to whether the government will go ahead with a controversial plan to create a shared national network.
To the relief of some network operators, including local market giant Vodacom, communications minister Stella Ndabeni-Abrahams withdrew the contentious Electronic Communications Amendment (ECA) Bill in early February.
Among other things, the bill had called for the establishment of a wireless open- access network (Woan), which would sell capacity to operators and house some of the country’s highly sought-after spectrum or radio frequencies.
The aim was to boost black empowerment in the sector and increase competition by encouraging new entrants and giving smaller players a leg up. Ultimately, it was hoped the Woan would reduce the cost to communicate.
But because the project would require a new national tower network to be built, analysts estimated it would cost more than R100bn to get off the ground properly.
And for some it really wouldn’t be worth it, given the downside.
At one point, when plans for the Woan were even more unsettling to sector heavyweights — the Woan was initially meant to house all spectrum, rather than allocate some to private operators — Vodacom CEO Shameel Joosub said the ECA Bill was the industry’s equivalent of the investment-repelling mining charter.
Though compromises were reached to make it more palatable, the Woan is now in limbo. The entity was meant to be set up at the same time that the state auctioned off batches of 4G spectrum — a process supposed to happen by April this year.
With the bill now shelved, it’s not clear when the spectrum auction will take place, or whether the Woan will still be on the table at that point.
Mobile operators have said for years that their limited access to spectrum is hindering their ability to roll out services and reduce the cost to communicate
A department of telecommunications & postal services spokesperson says the ministry is consulting stakeholders, and an update will be provided when the talks are over.
Meanwhile, the Independent Communications Authority of SA (Icasa) "will commence the spectrum licensing process as soon as the policy direction is finalised by the department", the spokesperson says.
Mobile operators have said for years that their limited access to spectrum — partly the result of SA’s painfully slow migration from analogue to digital broadcasting — is hindering their ability to roll out services and reduce the cost of communication.
The dearth of spectrum has meant operators must densify their networks, or build more towers than would otherwise be needed.
Dobek Pater, director at Africa Analysis, says Icasa may have to set some spectrum aside for the Woan in case the state decides to go ahead with it at a later stage. That could push up auction prices, as it will limit the supply of spectrum available.
But Pater says there are other, more efficient ways in which the government can achieve the Woan’s objectives.
Duplicating tower infrastructure doesn’t make much sense and is at odds with the government’s strategy when it comes to fibre, he says.
With fibre, the government is trying to encourage infrastructure sharing between operators rather than duplication.
Instead of the Woan, Pater says the government could allow mobile operators to become more efficient by giving them as much spectrum as possible — a move that would ultimately drive down data and voice costs.
The government could then attach obligations to new spectrum licences. For example, it could tell operators they need to open up their networks to mobile virtual network operators. Cell C already does this — it rents its network out to Virgin Mobile and FNB Connect.
"The regulator could also define where the operators that get high-demand spectrum need to deploy sites as part of their spectrum licence obligations, so you don’t end up having duplicated infrastructure in rural areas where not much is needed at this time."
In this case, operators will have to allow other service providers to use that infrastructure.
What it means
At a cost of R100bn, it’s unclear if the wireless open-access network would be worth it
"Then you can regulate wholesale pricing to force operators to be more equitable in the prices they charge, including their own retail divisions," Pater says.
An irony of the ECA Bill, he says, is that the Woan would be free to sell capacity at high prices during its ramp-up phase — an unspecified amount of time — to cover its costs.
"That effectively defeats one of the key purposes of having the Woan, because prices may in fact be lower from the commercial, private sector networks."
Pater says another option is to get large mobile operators to separate their consumer-facing operations from their wholesale infrastructure arms to make the market "more equitable and competitive".
Mergence Investment Managers portfolio manager Peter Takaendesa says if the Woan does go ahead, its chances of success will depend on a competent management team that understands the sector well.
The Woan would also have to find an empowerment partner that could continually fund the entity’s capital expenditure, so that its stake is not diluted.
"That needs to be addressed upfront," says Takaendesa. When empowerment partners are not able to provide operational funding, things can get messy as their stakes must still be maintained.
But because market leaders Vodacom and MTN would be forced to rent a large chunk of the Woan’s capacity, "that de-risks the model" and gives the entity a decent shot at success, he says.