Greed and corruption blocked cheaper data prices in South Africa

The release of essential radio frequency spectrum in South Africa has been delayed by greed and corruption, Finance Minister Tito Mboweni told the SABC.

According to SABC’s programme “The Watchdog”, the Minister said the corruption that had delayed the release of spectrum is an issue that government must still deal with.

Radio frequency spectrum is the raw network capacity needed by mobile carriers to offer cellular services.

Much like traditional radio stations given specific frequencies to broadcast on, mobile operators are assigned blocks of radio frequencies to use in their cellular networks.

Mobile network providers like Vodacom and MTN have been pleading with the South African government to release this precious bandwidth for over a decade.

If government put spectrum into the hands of mobile operators, they said they could reduce prices substantially.

This is because they are currently spending a lot of money on building out the capacity of their networks by constructing new cellular base stations.

With additional spectrum, the cost of adding capacity drops, which the networks said will allow them to reduce their prices.

According to Vodacom and MTN, they are starved for spectrum in South Africa compared to elsewhere in the world.

In addition to bringing down the price of cellular services, a spectrum auction scheduled to take place this year was also expected to raise a significant sum of money for South Africa’s battered fiscus.

The Independent Communications Authority of South Africa (Icasa) published its latest invitation to apply (ITA) for high-demand spectrum in October 2020.

This ITA contained rules for an auction of the precious radio frequency spectrum.

Since it is expected that many network operators will be applying for access to the same frequencies, it is common practice for sector regulators around the world to use an auction to settle who gets which spectrum.

The reserve prices for all the frequency bands being auctioned in Icasa’s ITA come to R2.6 billion.

Bidding between operators is expected to drive the final prices much higher.

All the funds Icasa raises through the auction will go to National Treasury.

Therefore, the spectrum auction represents a way for Mboweni’s department to raise a substantial sum of money for South Africa’s fiscus, which is reeling from the effects of the Covid–19 pandemic and a shrinking tax base.

Plans to release highly sought-after spectrum had languished since at least 2006 when Icasa published a notice to get public comment on the awarding of spectrum.

Icasa issued draft regulations for the licensing of scarce spectrum in 2009, but in July 2010, it withdrew an invitation to apply for high-demand spectrum.

In 2016 Icasa published another ITA, but the Minister of Communications at the time, Siyabonga Cwele, approached the High Court to interdict the regulator.

Cwele was granted the interdict, stopping the process dead in its tracks.

In October 2020, Icasa issued a new ITA, which Telkom and MTN have challenged in court.

Icasa announced in June that it expects to have a settlement agreement in place with Telkom and MTN by the end of August 2021 and get its long-overdue spectrum auction back on track.

Telkom’s major complaint is that South African television broadcasters still occupy the spectrum it is interested in. E-tv later joined Telkom’s case against Icasa.

Telkom complained that South Africa is yet to complete its migration from analogue to digital terrestrial television broadcasting, a process originally set to be completed in 2011.

One of the benefits of this digital migration is the release of the “digital dividend” — substantial portions of the radio frequency spectrum that have been earmarked for use in 4G and 5G networks.

Some of the spectrum Icasa has included in its auction is on these digital dividend bands, and Telkom argued that it could not bid on this spectrum it sorely needs knowing that it is still occupied.

After government gets its money from the auction, there is no further incentive to expedite the digital migration, and it could end up paying for a spectrum resource it can’t use, Telkom said.

Telkom also raised procedural issues around Icasa’s spectrum auction and complained that the regulator isn’t doing enough to break the “duopoly” of Vodacom and MTN with the opportunity.

MTN, on the other hand, has taken issue with the fact that it and Vodacom are being excluded from the first round of the auction.

According to MTN, there has been a lack of clarity from Icasa about which blocks of radio frequency spectrum will be auctioned off in this exclusive round. It is concerned about being locked out of bidding on the spectrum that it wants.

It should be noted that Telkom and MTN are fighting with the regulator over two different blocks of radio frequency spectrum.

The digital dividend spectrum that Telkom is interested in is 800MHz or lower, while MTN is arguing over spectrum in the 3,500MHz range.

The two operators want these specific blocks of spectrum because they complement their existing holdings.

Now read: The truth about mobile data prices in South Africa

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Greed and corruption blocked cheaper data prices in South Africa