State urged to make spectrum tradable
Think-tank the Free Market Foundation has called for departure from the statecontrolled auction system used to issue new spectrum, saying the radio frequencies should be freely tradable. The high cost of electronic communication in SA has largely been blamed on a lack of competition and the “spectrum crunch”.
A libertarian think-tank has called for a departure from the state-controlled auction system used to issue new spectrum, saying the radio frequencies should be freely tradable,
The high cost of electronic communication in SA has largely been blamed on a lack of competition and the “spectrum crunch”. Fixing this issue has become a key part of President Cyril Ramaphosa’s economic recovery plan, but its implementation has been delayed a number of times.
The Independent Communications Authority of SA (Icasa) had planned to auction about R8bn worth of broadband spectrum — radio waves by which information is transmitted.
However, legal battles over the auction process meant the March deadline could not be met. Last month, the regulator told MPs that court challenges by telecoms operators, Telkom and MTN, had hampered the process that was scheduled to be concluded at the end of March.
MISSED DEADLINE
The Free Market Foundation says part of the problem is that the sale of spectrum is solely controlled by the state and through an auction system.
That means licence holders cannot freely trade these assets and the price for spectrum is not truly determined by the market, said Christoph Klein, the principle researcher and author of the think-tank’s new study of the socioeconomic impact assessment of ICT and spectrum policy.
Klein was speaking on Tuesday at a media briefing as the Free Market Foundation announced the findings of its study that focused on the government’s spectrum policy and
its affect on consumers. Klein is the CEO of dotadvisors, a Cape Town-based ICT research and consulting firm.
Outside the legal challenges mounted by operators, part of the delay for issuing new spectrum has been the slow pace of implementing other policies such as digital migration — the move from analogue to digital broadcast services — which has been looming for 15 years.
SA missed an international deadline to carry out the switch by 2015. Icasa now expects to complete the process in 2021, though there are hurdles to clear before that can happen.
Much of the spectrum in the 700MHz and 800Mhz bands — good for covering wide areas and long distances — has been held back from mobile network companies because it is occupied by broadcast services.
FOLLY
Klein argues that a large part of the problem could have been avoided if television players had been allowed to sell their spectrum holdings on to mobile operators, a move that could have also helped cash-strapped broadcasters to earn high revenues for the valuable assets.
“The first step is to get the
digital migration done,” Klein said. “This is the perfect example why spectrum should be tradable. Until approximately the early 2010s, spectrum was subject to technology specific regulation. For instance, you could only use broadcast specific spectrum for broadcasting. But this is a folly because it can be used for both TV broadcast and mobile services.”
“So if the analogue broadcasters could have traded off their spectrum to the mobile carriers, they would have earned a hundred-fold of their company’s worth,” he said, adding that the deadlock between digital migration and issuing new spectrum shows “that the command and control spectrum policy is against common sense. It imposes enormous socioeconomic costs and it destroys incentives because the broadcasters do not have the resources as they are simply not profitable”.
Recently, 600 people from the SABC joined the ranks of the unemployed as the loss-making national broadcaster looks to restructure its business.
Klein highlighted that in the US and Brazil amounts from spectrum auctions had been set aside to help analogue broadcasters invest in equipment for digital services.
REGULATORY FAILURE AND OUTMODED IDEOLOGY HAVE DEPRIVED SA OF BETTER MOBILE COVERAGE AND LOWER PRICES
Leon Louw Free Market Foundation president
As part of its findings, the Free Market Foundation said the lack of spectrum has hurt ordinary South Africans the most, having to pay high prices for mobile internet access — the primary medium for many consumers. This has also left many consumers unable to exploit the full benefits of the internet, such as faster download speeds, which have become a necessity in a world of remote working and learning.
“Regulatory failure and outmoded ideology have deprived South African consumers of better mobile coverage and lower prices,” Free Market Foundation president Leon Louw said. “That is the key message of this study.”