The Department of Communications published its policy on high-demand spectrum in July, an act which paves the way for this valuable resource to be given to operators.
While it is encouraging that the spectrum assignment process can now progress, there are good reasons for big operators to be concerned.
The spectrum policy demands that a large portion of the high-demand spectrum is assigned to the Wholesale Open Access Network (WOAN).
While the policy does not dictate how much spectrum the WOAN should get, it states that it will receive preferential treatment for spectrum in the 700MHz, 800MHz, and 2,600MHz bands.
Further delays expected
Ellipsis Regulatory Solutions owner and regulatory expert Dominic Cull said that while a spectrum auction can now go ahead, further delays can be expected.
“The problem is that the implementation of the WOAN, and getting applications in for licenses could delay the actual spectrum auction by another year or two,” said Cull.
He explained that businesses will need to apply for licenses to be part of the WOAN, and only then will spectrum be assigned to them with reduced fees.
World Wide Worx MD Arthur Goldstuck echoed these views, saying this policy adds further processes before spectrum can be assigned.
Goldstuck told Rapport that a service provider has to determine the value of spectrum, which can delay matters.
He added that he would have been very frustrated if he was a mobile operator which needed additional spectrum to serve its customers.
Competition Commission gets involved
The Competition Commission said high demand spectrum is a scarce resource and its assignment should be done in a manner which ultimately benefits the citizens of the country.
“At a time when public finances are under such pressure, it is tempting to try maximise revenues by simply auctioning spectrum to the highest bidder.”
“However, short-term thinking would deny South Africa a unique opportunity to bring about lower data costs both now and in the future,” it said.
The Competition Commission said it would be involved in the assignment of spectrum to ensure that the process allows for coverage in addition to improved access.
The winners and losers
The anticipated delay in handing out spectrum, and the policy’s focus on helping smaller operators to compete against the big players, results in clearly-defined winners and losers.
Vodacom and MTN, for example, will have to wait much longer to get their hands on spectrum and serve the growing demand for data on their networks.
Rain and Liquid Telecom, in turn, will benefit by using their spectrum in lucrative roaming agreements with Vodacom and MTN.
Here are the biggest winners and losers.
Rain – Winner
Rain has valuable spectrum and monetises this resource through a lucrative roaming agreement with Vodacom.
Vodacom relies on Rain’s spectrum to serve the growing demand for data on its network, especially during peak times.
Subsequently, Rain will continue to make money from Vodacom through its roaming agreement until Vodacom receives additional spectrum.
Liquid Telecom – Winner
Liquid Telecom has even more high demand spectrum than Rain and recently signed up MTN as a 4G roaming customer across its network nationwide.
Liquid Telecom is still pondering what to do with some of its other spectrum assets and the longer the spectrum assignment process drags on, the better for Liquid Telecom.
Small operators – Winner
The spectrum policy tries to help smaller operators without much money to compete against bigger players which can always outspend their smaller counterparts.
The Wholesale Open Access Network, if it materialises, is good news for telecoms players which do not have money to roll out their own networks but still want to launch mobile services.
Vodacom – Loser
Vodacom has been begging for additional spectrum for years to increase its network capacity and reduce the cost to offer data services.
Because of the delay in getting more spectrum, Vodacom has to invest far more in network infrastructure and pay Rain to roam on its network.
Any further delays are therefore bad news for South Africa’s largest mobile operator.
MTN – Loser
Just like Vodacom, MTN has been investing large amounts of money to ensure it can satisfy the growing demand for data on its network.
It has also recently signed an LTE roaming agreement with Liquid Telecom because of the lack of additional spectrum.
All of this is costing the company money, and the spectrum delay is therefore bad news for the operator.
South African consumers – Loser
The biggest loser in the delay in giving spectrum to both new and established operators is South African consumers.
Spectrum is a great resource to increase competition and lower the cost to provide data, which in turn translates into lower data prices to consumers.
This valuable resource has been wasted for over a decade, which means South Africans have been paying far more for mobile data than what was necessary.