It's a logjam that took four years to remove, but the Independent Communications Authority of South Africa (Icasa) finally began the process of issuing new spectrum to telecommunication providers this week.
The spectrum is critical for the rollout of 4G and 5G internet services, and for making data access affordable and accessible to most South Africans.
This week the regulator issued an invitation to apply (ITA) for participation in a spectrum auction, four years after an abortive ITA was first issued.
That ITA was withdrawn when the minister of communications, who sets policy directions for Icasa to implement, took his own regulator to court. The new ITA had been promised by the end of June, but was delayed pending the appointment of new Icasa councillors.
The spectrum is due to be issued in three main bands, namely 700MHz-800MHz, referred to as low-frequency bands, and high-frequency spectrum across the 2.6GHz and 3.5GHz bands. Collectively, these are referred to as "high-demand spectrum", and the mid-frequency bands are generally regarded as appropriate for 4G services.
Icasa said on Wednesday that it had delayed issuing of spectrum in the 2.3GHz band, pending feasibility studies.
However, this band is already heavily occupied by Telkom for fixed wireless services, and it has objected to the spectrum being reallocated.
Significant blocks of high-demand spectrum have not been issued to the major network operators by Icasa since 2005, when it allowed use of the 2.1GHz band for the roll-out of 3G networks by Vodacom and MTN. Cell C was allocated spectrum in 2011.
Since then, operators have had to "refarm" 3G spectrum to facilitate the rollout of 4G to consumers. As a result, investment that could have been made in providing affordable access to customers was diverted to servicing technical issues.
One of the key issues in the allocation of new spectrum by auction was the possibility of an excessive reserve price.
The 2016 ITA had set a floor price of R3bn for entering the auction.
Icasa set minds at rest this week, when chair Keabetswe Modimoeng said the authority "factored in the important aspect of establishing reasonable reserve prices by considering lessons from the failure of auctions or spectrum sales historically".
Good spectrum
— Keabetswe Modimoeng,
auction designs are
a balance between
price discovery and
the risk of collusion
in the auction
amongst bidders
Chair of Icasa
As a result, he announced, available spectrum would be divided into auction "lots", with varying amounts of spectrum available in each band, and priced according to demand and to ensure affordability for smaller players. So, for example, one narrow slice in the 3.5 GHz spectrum band has a floor price of R9.8m, a slightly wider slice starts at R19.6m, with eight other larger slices at R75.6m each. In total, 33 lots are available at auction, with the most expensive - and also the biggest single lot - in the 800MHz band having a reserve price of R1.15bn.
The nuanced approach, said Modimoeng, was because "good spectrum auction designs are also a balance between price discovery and [mitigating] the risk of collusion in the auction amongst the bidders, and setting the reserve prices provides a realistic starting point for price discovery".
However, operators expressed concern at the potential fragmentation of spectrum.
A Vodacom spectrum expert, who declined to be named, said: "The way that spectrum is brought to market needs to be done in a way where whoever's willing to pay for it and invest in putting it to use should get fair access to that spectrum. Spectrum is a finite resource and should not be fragmented, or packaged into small amounts, to the point where an operator is not able to deliver the service on which the technology was originally designed to deliver."
An MTN spectrum specialist, who declined to be named, echoed this view, saying that the input cost of data would come down if operators could "maximise factors like the spectrum band size, which increases maximum amount of users that you can cover in that channel to get the best experience".
"If this cost can come down, it reduces the cost of access."
These requirements are only likely to be met by the existing mobile network operators, who are able to combine the new spectrum with their existing allocation.
Emergency spectrum issued in April to address increased demand during lockdown will now expire at the end of March, and existing infrastructure rolled out to utilise that spectrum will have to be repurposed.
Nevertheless, the lower reserve prices represent a boost for potential economic development. A study by World Wide Worx, entitled "5G Prospects for South Africa in 2021: The Operators", released last week, concluded that the allocation of new spectrum was an opportunity to utilise communications technology for economic development for the country as a whole.
Modimoeng concurred: "The spectrum auction proceeds will have broader economic benefits for the country as they will also incentivise broadband infrastructure investment and thus stimulate economic growth. More importantly, the release of spectrum is critical to ensure continued provision of good quality broadband services and the lowering of the cost to communicate (particularly data costs) in SA."
The ITA bid deadline is set at December 28. Icasa says that spectrum allocation will be finalised by March 31 2021.
• Arthur Goldstuck is founder of World Wide Worx, and led the '5G Prospects for South Africa in 2021' study.
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