High data prices here to stay if spectrum auction goes ahead as planned – Telkom

With Telkom’s court challenge and threats of legal action from MTN, the timing of ICASA’s auction for high-demand spectrum is in jeopardy.

The Authority is due to hold the auction for the licencing of 406MHz of IMT spectrum in the 700MHz, 800MHz, 2,600MHz, and 3,500MHz bands by 31 March 2021.

This spectrum is being made available to operators that can provide mobile broadband services in South Africa.

Its licencing will play a significant role in the quality of mobile networks and the prices of mobile data in future.

With less congestion on the available spectrum, mobile operators will be able to carry more users and expand their infrastructure in a more cost-effective manner, reducing the cost-per-GB of carrying data.

Six applicants have responded to ICASA’s Invitation to Apply (ITA) for the spectrum, including the country’s three biggest mobile operators – Vodacom, MTN, and Telkom.

The latter, however, has launched a court challenge to the auction on two key points:

  1. Several important spectrum bands in the 700MHz and 800MHz regions are not commercially viable as they are still in use by broadcasters. Telkom wants assurances from the Court that government will be forced to migrate broadcasters out of those bands, as it will have no incentive to do so once it has the money from the auction in its pocket.
  2. ICASA went ahead with its Invitation to Apply without first finishing its Mobile Broadband Service Market Inquiry. Telkom contends that this is unlawful and irrational. The root of this argument is that Telkom does not believe ICASA is doing enough to break the dominance of Vodacom and MTN in the market.

Telkom responds

MyBroadband asked Telkom whether its action may delay the decrease in mobile data prices that may follow the spectrum auction.

Telkom Group Executive for Regulatory Affairs and Government Relations Siyabonga Mahlangu reiterated once again that the operator believes the spectrum auction can rather be delayed than conducted in its current form.

“When spectrum is licensed, it is licensed for 20 years, so it is necessary for us that whatever happens now, happens properly,” Mahlangu said.

He explained that Telkom’s application not only asks that the ITA be reviewed and set aside but also requests that the court direct that “certain things” must happen, which would help spur the process along.

“We should be able to still have the spectrum released this year. But the terms of that release must be the focus,” Mahlangu stated.

“Mobile data prices will remain high if the spectrum is released on these terms, because it is not the technical benefit that you get that will determine the prices, but it will be the level and extent of competition and market structure that will determine the retail prices,” he said.

According to Mahlangu, the Competition Commission’s Data Services Market Inquiry showed the cause of high mobile data prices to be the lack of effective competition and the duopolistic structure of the market.

“If you’re going to license spectrum in the ITA as they are, you’re going to perpetuate that distance again,” Mahlangu said.

Stalling tactics

Another view of Telkom’s tactics is that the company is pushing hard to prevent Vodacom and MTN from getting more spectrum.

These two biggest operators have at various occasions said that access to more spectrum would allow them to bring down data prices.

This would be to the detriment of Telkom, with its key distinguisher over the two heavyweights currently being its lower mobile data prices.

Mahlangu rejected these claims and said that the operator was not seeking any policy favours.

He said that while interventions like interconnect call termination rates – which has favoured Vodacom and MTN – were necessary to break Telkom’s monopoly in the phone market, these policies had not been adapted for the current situation.

He stated that Telkom wished for ICASA to “democratise and level the playing field in mobile” since there are players like Vodacom and MTN who have had “policy and regulative rapport beyond the terms that are necessary”.

Vodacom and MTN responds

Vodacom spokesperson Byron Kennedy said the operator remained supportive for the spectrum auction to proceed as scheduled by ICASA.

“Further delays in this process will likely have a negative impact on consumers. As we have said previously, the award of new spectrum remains a critical part of reducing input costs and – by extension – the cost of data,” Kennedy said.

“The allocation of high-demand spectrum is vital to expanding broadband services and promoting digital inclusion in South Africa,” Kennedy added.

MTN did not comment on whether the possible delay of the spectrum auction would have an impact on its mobile data prices.

Now read: How Cell C’s network migration will impact MTN and Vodacom customers

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High data prices here to stay if spectrum auction goes ahead as planned – Telkom