‘Network nationalisation’ plan slammed as huge risk
THE government’s radical plan to shake up the way radio frequency spectrum is allocated in South Africa has been met with universal derision by ICT analysts and experts, who say it takes huge and unnecessary risks that could cause irreparable harm to the sector.
Telecommunications Minister Siyabonga Cwele this week took the wraps off the long-awaited national integrated ICT policy white paper, which proposes sweeping changes to the way the sector is regulated.
Although some aspects of the policy have been welcomed — such as a chapter that will make it quicker for operators to deploy infrastructure by removing red tape — the government’s plan for a wireless wholesale open-access network, to which all new spectrum will be allocated, has drawn intense fire.
Not only does the government not want to license any more “exclusiveuse” spectrum to the mobile operators, it is also threatening to take away the existing spectrum assignments they’ve used to make tens of billions of rands’ worth of investments in 2G, 3G and 4G networks.
The government has said it plans to reserve large tracts of spectrum exclusively for the wholesale openaccess network in which telecoms companies, including the mobile operators, will, in effect, be forced to participate. MTN and Vodacom, which this year will spend a record combined R20-billion on their networks, are livid.
Publication of the white paper comes in the week that Cwele secured an urgent interdict preventing communications regulator Icasa from going ahead with a plan to auction off access to three spectrum bands that mobile operators need to expand their 4G/LTE networks. The operators are running out of spectrum, the lifeblood of their businesses, and say this is preventing them from expanding access and cutting data prices.
DA MP Marian Shinn this week described the white paper as “socialist” and “monopolistic on a fundamental level”.
The most radical component of the policy was to have a “monopolistic, price-regulated wholesale mobile network consortium with exclusive access to all the nation’s spectrum”, she said.
Dobek Pater, MD of consultancy Africa Analysis, said the government wanted to attempt something that “hasn’t really been tested anywhere”. Although Mexico and Rwanda have embarked on similar strategies, the success of those projects has not yet been ascertained.
“We are going to be at the bleeding edge in testing this concept in a country where we don’t have the resources and where we cannot afford the risk,” Pater said.
Also, neither Mexico nor Rwanda has reserved all unlicensed “highdemand” spectrum (spectrum where demand is greater than supply) for a wholesale network, as South Africa is proposing.
The few other markets that are toying with the idea, including Russia, appear to have put their plans on the back burner.
Richard Majoor, an equity analyst at Macquarie Group, said the government was wrong to attempt to emulate the Mexican model.
“América Móvil has 70% mobile market share, and its fixed-line subsidiary Telmex has 80%,” Majoor said. “After the failure of 14 mobile virtual network operators, Mexico’s wholesale open-access network is seen as a radical measure to attempt to break the market dominance of Carlos Slim’s companies.”
Also, unlike the proposal in South Africa, Mexico is not reserving all future spectrum for the network, but only spectrum in the 700MHz band.
“The mobile industry will continue to operate as normal. It is incorrect to draw parallels with Mexico, and indeed what is proposed in South Africa is a world first,” Majoor said.
“Neither Icasa nor the Department of Telecommunications has ever shown concern with economic investment or the economic contribution of the telecoms sector. Instead, the common focus has been lowering of prices and provision of universal service as opposed to finding a fair balance between profit and social benefit,” he said.
“Over the past few years, only two of the four or five mobile operators in South Africa have been profitable, and it appears that the focus of the policy is to redistribute that earnings flow.
“Government’s new policy not only leaves no options available to MTN and Vodacom to acquire more spectrum, it also seeks to, when convenient, expropriate their spectrum through the nonrenewal of their licences. This would either force the incorporation of their radio network assets into the wholesale open-access network, or leave them impaired. This goes against all international best practice where there is a reasonable expectation of SPECTRUM: Critics say government plans threaten private investment in telecommunications infrastructure
MTN and Vodacom, which this year will spend R20billion on their networks, are livid
spectrum renewal.
“The fact that spectrum is treated as private property is the precise reason the operators are prepared to make investments, and without such assurances, it would be expected that future investment would cease,” Majoor said.
He predicted that the white paper was headed to the courts and that operators would prevail, at least until the law is changed. “As long as the legal status quo prevails, it is not a time to panic. However, if changes to legislation are made, as proposed in the white paper, which removes Icasa’s constitutional protection and transforms it into an implementer of government decree, a reassessment of investment risks would be in order.”
Research ICT Africa has also condemned the white paper, warning that implementing a mandatory open-access wireless network would threaten investment.