Why the spectrum auction delay hurts the pocket of every South African

ICASA recently announced that the auction for high demand spectrum will be completed no later than 31 March 2021.

Previously, it had said that this auction would take place by the end of 2020.

ICASA said the delay is because of three main reasons:

  • The prioritisation of COVID-19 emergency spectrum.
  • The fact that it was unable to function properly for nearly three months during the national lockdown.
  • Additional considerations regarding the viability of the national WOAN.

How this affects South Africans

Various mobile network providers have noted that the efficient allocation of spectrum will result in cheaper data prices for South Africans.

“To be clear, prices have been coming down. They will come down faster if we get access to the right spectrum at reasonable market-related terms,” said Vodacom last year.

“We believe that the release of spectrum will contribute to the reduction of the cost to communicate,” agreed MTN.

Rain also recently told MyBroadband that the best part of permanent spectrum allocation is the lower prices that customers will access.

“One of the benefits of a permanent allocation of spectrum will be aggressive infrastructure spending in building networks which will bring some relief to certain sections of the economy,” CMO Khaya Dlanga said.

Liquid Telecom agreed with this, noting that the availability of the appropriate additional spectrum, along with “robust rules on spectrum utilisation” will mean networks will have higher capacity and will be more reliable and efficient.

“In due course, that efficiency should translate into better and cheaper services, subject to the spectrum acquisition cost being affordable,” said Liquid Telecom.

The Competition Commission’s drive to lower data prices

The Competition Commission has been committed to driving lower data prices in South Africa.

This included its Data Service Market Inquiry, which determined that Vodacom and MTN had to drop their prices significantly.

As a result of this determination, both Vodacom and MTN reached agreements with the Competition Commission to lower their prices accordingly.

However, the Competition Commission has also noted that spectrum, when received by South African mobile networks, must be used to reduce data prices in South Africa.

“At a time when public finances are under such pressure, it is tempting to try to maximise revenues by simply auctioning spectrum to the highest bidder,” said the Competition Commission.

“However, as the Data Market Inquiry provisional recommendations counselled, such short-term thinking would deny South Africa a unique opportunity to bring about lower data costs both now and in the future.”

Launch spectrum timeously

The GSMA’s 5G Spectrum Positions document makes it clear that governments should not inflate spectrum prices, as this risks limiting network investment and ultimately driving up the cost of services for customers.

While the document specifically references 5G spectrum, the same premises are true for mobile spectrum in general.

“Governments and regulators should assign 5G spectrum to support their digital connectivity goals rather than as a means of maximising state revenues,” said the report.

“The causes of very high prices are typically policy decisions that appear to prioritise maximising short-term state revenues over long-term socio-economic benefits.”

It recommends the following measures be taken by governments and regulators:

  • Set modest reserve prices and annual fees, and rely on the market to determine spectrum prices.
  • Avoid limiting the supply of 5G spectrum as scarcity can lead to excessive prices. A particular concern is set-asides for verticals or new entrants in core 5G bands (i.e. 3.5 GHz and 26/28 GHz).
  • Carefully consider the auction design to avoid unnecessary risks for bidders (e.g. avoiding mismatched lot sizes, which create artificial scarcity, and first-price, sealed bid auctions).
  • Develop and publish a 5G spectrum roadmap with the input of stakeholders to help operators plan for future availability.
  • Consult with stakeholders on the award rules as well as the licence terms and conditions take them into account when setting prices.

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Why the spectrum auction delay hurts the pocket of every South African