R922 million Telkom’s new spectrum bill?

Telkom could face a bill of over R922-million per year under the Independent Communication Authority of South Africa’s (ICASA) new pricing structure for frequency spectrum.

The operator’s fees used to be just under R37.5m, but under ICASA’s Administrative Incentive Pricing (AIP) scheme set to kick on on 1 April 2012, Telkom’s existing bulk spectrum licenses are regarded as a more expensive point-to-area, or point-to-multipoint link.

This dramatic increase was shown as part of ICASA’s presentation during its workshop on the new AIP scheme, held in Sandton on 5 March 2012.

Telkom isn’t the only bulk user affected in this way as Transnet, Eskom, the SANDF, and the SAPS can also expect higher spectrum bills if they don’t convert or return some of their licenses.

When asked whether the regulator had considered the impact to the end user, ICASA councillor William Stucke said that the purpose of the new regulations is to “improve the efficiency of utilisation of spectrum.”

Stucke went on to explain that some bulk users have a point-to-multipoint assignment for national usage but they use it as a point-to-point link. Point-to-point links are less expensive than point-to-multipoint assignments.

“By making licensees think about whether they want to keep particular spectrum this exercise has succeeded,” Stucke said.

Spectrum returns

Though not provided for in the new regulations, ICASA said that it would allow those with spectrum to return or convert their licenses before 1 April 2012.

“The Authority is doing this out of the kindness of its heart,” ICASA said to much laughter.

ICASA said that under the legislation that governs them, they may take back spectrum that is not used effectively under the conditions for which it was licensed.

However, ICASA explained that it wants to afford licensees the opportunity to return spectrum “before wielding the big stick.”

William Stucke, taken by Rodney Jones at iWeek 2006
William Stucke, taken by Rodney Jones at iWeek 2006

Big telecoms players unhappy with interpretation

Some of SA’s larger players in the telecommunications space, among them Telkom, Neotel, Vodacom, and MTN, were unhappy with ICASA’s proposed implementation of the regulations.

Telkom and Vodacom in particular wanted to know where in the regulations it said that ICASA should regard bulk national licenses as point-to-multipoint links.

Telkom pointed out that the regulator has a list of all its links used under the bulk license that shows which are point-to-point, and yet ICASA applied the more expensive point-to-multipoint formula.

Stucke explained that a bulk assignment is very convenient for the licensee, who could just inform ICASA that they were using a link rather than applying to use one.

Bulk national licenses, by definition, are area (point-to-multipoint) licenses, Stucke added, who went on to invite Telkom to tell ICASA to convert its bulk license into point-to-point licenses using the existing list.

“You can’t have it both ways,” Stucke told a Telkom delegate.

ICASA bares teeth

Stucke’s replies didn’t seem to placate some of the industry players present at the workshop, who continued to press the fact that the regulations don’t make provision for ICASA’s treatment of bulk licenses.

At these queries, Stucke said that the operators are more than welcome to apply for all the point-to-point licenses they need individually rather than converting their existing licenses.

“You can convert them, or you can try to apply for each one before 1 April,” Stucke said. “Which do you think you could do first?”

Another court battle looming?

Industry speculation suggests that most players will take ICASA up on its offer, but that Telkom may make a counter-proposal to the regulator that ICASA would not be able to accept. It was predicted that ICASA would not be able to respond to Telkom until after the 1 April 2012 deadline.

Further speculation is that Telkom has enough to lose that it would take ICASA to court, should the regulator charge them for their bulk license as it proposed to, if an agreement isn’t reached by 1 April 2012.

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R922 million Telkom’s new spectrum bill?