SA’s telecoms regulator failed to clinch an out-of-court settlement with operators over the allocation of valuable radio-frequency spectrum, raising the prospect of a prolonged legal squabble in the auction process and potentially dealing a blow to President Cyril Ramaphosa’s economic reform agenda.
The Independent Communications Authority of SA (Icasa) said on Tuesday it was unable to reach an amicable settlement with Telkom and MTN, which are challenging its spectrum auction process in court.
Icasa had planned to auction about R8bn worth of broadband spectrum, but the March deadline could not be met because of legal battles over the process. The regulator has since filed a consent order with unspecified proposals, which it hopes would get the support of telecoms operators opposing the process and pave the way for the auction to take place in January 2022.
However, the consent order, which Icasa said took into consideration some of the issues raised by the operators, could still be opposed and further delay process.
“All the litigants could accept the proposed consent order or file papers opposing Icasa proposed consent order,” Icasa said in a statement.
Releasing the additional spectrum is one of the cornerstones of Ramaphosa’s reform agenda as it will lower SA’s internet costs, which are among the most expensive in the world and have been partly blamed for sluggish economic growth over the past decade as operators repurposed frequency bands historically used for voice calls.
Ramaphosa had previously encouraged the parties to settle the matter amicably.
“Icasa has over the past four months engaged extensively and intensively with the active litigants with the intention to reach a settlement agreement so that the licensing process can proceed without further delays,” the regulator said in a statement. “Despite the parties’ best efforts, however, a comprehensive settlement has not been achieved at this stage.”
Telkom, together with e.tv, argues that Icasa is moving fast to complete the spectrum allocation without addressing issues concerning digital migration and competition. The matter was heard in court in February and judgment was reserved.
Icasa says it will hold off on completing the auction until digital migration is completed, to which newly appointed communications & digital technologies minister Khumbudzo Ntshavheni says she is committed. “Migration” refers to television broadcast services moving services from analogue to digital platforms, freeing up airwaves for mobile operators.
Icasa is also facing legal opposition from MTN, SA’s second-largest mobile operator, which lodged papers with the high court in January. It argues that the auction process favours smaller players, leaving little for the bigger operators, especially for the spectrum necessary for new 5G services, which will boost smartphone services and power everything from production lines in factories to driverless cars.
Keabetswe Modimoeng, the chair of Icasa, said one of the reasons for the breakdown in talks had to do with new issues being raised. “We noted with grave concern that some parties at the negotiations have sought to introduce matters that were not related to the issues in dispute,” Modimoeng said, adding that such additions could work to lengthen the entire process.
Icasa has also defended its spectrum auction, saying it remains “the most efficient” way to allocate spectrum.
This comes after the Free Market Foundation issued a report earlier this year that proposes Icasa should allow trading of radio waves among companies.
The think-tank says part of the problem is that the sale of spectrum is solely controlled by the state and through an auction system. That means licence holders cannot freely trade these assets and the price for spectrum is not truly determined by the markets.
Correction: September 7 2021
This article has been updated to add additional information to clarify that Icasa has filed a consent order that could be rejected or accepted by opposing parties.
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