Icasa’s scrambled signal
The Independent Communications Authority of SA (Icasa) is meant to promote competition, innovation and investment in the telecommunications sector. But its latest pronouncements on radio frequency spectrum won’t benefit the industry or consumers.
Icasa sent a wave of dismay through the telecom sector last month when it published a draft of the rules it plans to use when allocating scarce radio frequency spectrum for wireless broadband. The spectrum in question, the 2,6GHz and 3,5GHz bands, is being freed up worldwide to provide services using WiMax, a promising new technology that telecom analysts believe will have a particularly important role to play in providing high-speed Internet access in developing countries, including SA, where fixed-line broadband is not well developed.
Some holders of value-added network service licences, issued under the old Telecommunications Act, have expressed strong interest in taking on the incumbent operators at their own game by building their own networks using WiMax and other wireless technologies. Until now these players have not been allowed to build their own networks and have had to lease network capacity from the likes of Telkom at high cost.
Now they hope Icasa will convert their licences under the new Electronic Communications Act to allow them to bypass the incumbent operators and provide services more cheaply to consumers over their own infrastructure. Because laying fibre is expensive and disruptive, most of these players want to build wireless networks.
The challenge is that radio frequency spectrum is scarce. The number of services that can be provided in a particular block of spectrum is limited by the indomitable laws of nature. And so Icasa has the difficult job of deciding who will get access to that spectrum.
In the chapter dealing with spectrum, the Electronic Communications Act requires the authority to provide for the “rapid and efficient introduction of new technologies” and for the introduction of the “widest range of services and the maximum number of users thereof as is practically feasible”.
But Icasa’s proposed rules for the 2,6GHz and 3,5GHz bands won’t achieve this. Instead, the rules will drive away investors and subdue competition unnecessarily.
First, Icasa says the highly prized 2,6GHz band should have been divided into 20MHz blocks. That would allow more companies access to spectrum. But industry players want at least 28MHz. They argue that the smaller allocation will make it more expensive to build their networks as they’ll have to erect more base stations. That means it will be more difficult for them to compete on price with the incumbent operators. How is that in the interest of consumers?
The authority also propose s that for companies to get access to the spectrum, at least 51% of their equity must be in black hands. Industry executives have slammed this provision, pointing out that most of the companies with the financial wherewithal to build networks of national scale do not meet the proposed equity requirements.
The empowerment rule doesn’t make sense for other reasons. Icasa itself moots a less onerous 30% black equity requirement for these same companies to be issued with the licences they need to build their own networks. They will have to have these licences issued to them before they can apply for access to spectrum.
One has to wonder where the 51% figure came from and why it differs from the requirements under another of Icasa’s processes. It makes no sense for the authority to impose apparently arbitrary rules on the sector. It has already said the 51% is not open to debate. One hopes it comes to its senses and starts to regulate with the interests of consumers and the industry at heart.
First published as the column Technology & You in the Financial Mail of July 11 2008
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