Privatise broadcasting and mobile network spectrum now — FMF

All frequency spectrum used for telecommunications services by mobile network operators and broadcasters in South Africa should be permanently sold for ownership instead of being leased on licence for a limited time.

This is the view of the economic think-tank Free Market Foundation (FMF), which maintains that doing so would be to the benefit of both service providers and their customers.

This is included in its submission made earlier this month to ICASA, in response to the authority’s call for feedback on the issues which the regulator should consider with regards to its review of the ICT COVID-19 national disaster regulations.

These regulations have allowed for the assignment of temporary emergency radio frequency spectrum to mobile network operators to deal with the influx of data traffic as more people sought information, worked, learned, and were entertained online.

ICASA has repeatedly extended the deadline for using this spectrum due to Telkom, E-tv, and MTN’s court challenge delaying the spectrum auction, which was originally set to take place in March 2021.

However, its chairperson Keabetswe Modimoeng has warned that eventually it will not be able to extend the temporary spectrum assignments when a more permanent route for spectrum licensing was struck in litigation.

Modimoeng argued the industry could not perpetuate a temporary pandemic-specific spectrum arrangement to a point where it amounted to a “backdoor spectrum licensing regime”.

“High-demand spectrum ought to be licensed in a transparent and competitive manner, hence any other way is unjustifiable in the long run,” Modimoeng said.

Dr.Keabetswe-Modimoeng
ICASA Chairperson Keabetswe Modimoeng

The FMF, however, maintains that the current approach to licensing spectrum in South Africa was flawed.

“It has been 15 years since the two biggest network operators, Vodacom and MTN, who together provide 75% of data coverage, were allocated more spectrum,” FMF said.

“The industry has been starved of this essential resource due to policy delays including the failed digital migration and battles between ICASA and various ICT ministers.”

It stated that spectrum was the lifeblood of the data industry, and said campaigns like #datamustfall should have called for #providemorespectrum instead.

“Only by doing this will prices come down and service improve,” the FMF stated.

The FMF came to four main conclusions in its submission to ICASA:

  1. The current design of the spectrum auction would mean that Vodacom and MTN face the possibility of not gaining access to the vital band of 3.5MHz for at least 10 years and this will have a significant impact on consumers.
  2. The temporary spectrum allocated demonstrated sound judgement and a good sense of proportion from ICASA in that it is the best available reflection of the true spectrum needs of South Africa’s mobile carriers.
  3. The incorrect notion that market failure exists [the view of Telkom] is based on a false understanding of economics. The mobile telecoms market is contestable – the test of competition and market operability.
  4. Constitutional and legal obligations govern ICASA’s actions and withdrawing temporary spectrum would violate these and may lead to protracted litigation.

The FMF criticised ICASA for its apparent view that mobile network operators were utilising the emergency spectrum while not paying license fees to just make more money.

This stance, it said, forgets that the networks had to rapidly invest in infrastructure to accommodate the new spectrum and that they have surpassed all expectations in keeping consumers and business linked into the economy via mobile networks.

“ICASA should not penalise MNOs but the opposite, applaud the valiant effort in keeping the economy going in the crisis of the pandemic,” the FMF said.

In addition, the FMF has argued revoking the temporary spectrum would give Vodacom and MTN a strong case that ICASA would be expropriating resources and property from Vodacom and MTN by not respecting the security of their investment.

“The regulatory act of temporarily assigning rights of resource use to alleviate network capacity constraints, which require tailored investments in technology that amortises over five or ten years amounts to an economic contradiction if subsequent regulatory policies terminate or repeal such rights before the end of the period known to be required until amortisation,” the FMF stated.

It not only called for the temporary emergency spectrum allocated to mobile network operators to be permanently assigned, but said that all spectrum currently assigned on a temporary and fixed basis must be converted into privately owned and fully-tradeable spectrum to its current users.

“This would ensure that the SA regulator’s protracted process of concluding the digital migration — a dismal failure that has been inflicting great harm on SA’s consumers — would be entrusted to market reason,” the FMF maintained.

“In a free trading regime, the marginal price bid for a spectrum unit will reflect the consumer value reaped for the unit’s employment.”

“For those spectrum resources that are employed by public or private entities to provide critical public services such as airtraffic control, police radio or military communications, the regulator shall exercise its sovereign primacy in the best interest of the public,” it added.

The FMF further argued that broadcasters such as the SABC stood to gain significantly from commodifying spectrum, particularly in the digital dividend which is being opened up by the shutting down of analogue transmissions in the country.

“The beneficial side effect of such a policy would be that broadcasters, in particular the technically bankrupt public broadcasters, could recapitalise and use the proceeds for the technical equipment needed to migrate to digital broadcasting channels,” the organisation said.

“Since the 700/800MHz spectrum is used for broadcasting services that render a fraction of the value that its employment for mobile telecommunication services would render, the current spectrum holders would have a great incentive to trade it off against cheaper spectrum in the lower, more efficient digital broadcasting frequency bands below 600 MHz.”

SABC logo on old tv

FMF founder and President Leon Louw said also slammed ICASA’s decision to hold back spectrum for the wireless open access network (WOAN), which ICASA has maintained is aimed at increasing competition and providing better services to customers.

“A market with 6 operators sharing spectrum through voluntary roaming agreements, which meant they avoided a spectrum crunch during the past 16 years and during the COVID-19 crisis, means the free market has been in action.”

“The industry has already created a WOAN and there is no need for an artificial structure which creates the opportunity for rent seeking and inefficient allocation of resources.”

The FMF further said that the requirement of licencees to notify ICASA of new installations of electronic communication facilities on their networks within seven days was an onerous and costly undertaking that was ultimately paid for the consumer.

“Unless the regulator presents valid reasons for reporting certain communications equipment to government authorities, for example, because it poses or may pose a threat to public safety, public health, the environment, or the like, such red tape should be eliminated not only in the interest of consumers but also to taxpayers’ benefit from the resulting streamlining of authorities,” it added.

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Privatise broadcasting and mobile network spectrum now — FMF