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As a communications regulator Icasa is preparing to launch the long-awaited invitation to apply (ITA) this week for five broadband spectrum bands, a new research report has warned the authority to set realistic prices or risk damaging deployment and service quality. .
Icasa will publish on Wednesday the final ITA, which will seek to license spectrum, through an auction, in the 700MHz and 800MHz bands (the so-called “digital dividend” bands still used by television networks) as well as 2.3GHz. and 2.6 GHz Bands.
All of these bands can be used to expand operators’ 4G / LTE coverage, with the digital dividend bands particularly suitable for rural coverage and city building coverage.
A fifth band to be auctioned, 3.5GHz, is likely to be used to implement commercial 5G infrastructure in the country’s major urban centers. Icasa has promised to license the bands no later than March 2021.
Now research firm World Wide Worx, which this weekend released a new report titled “5G Prospects for South Africa in 2021: The Operators,” has warned that a high price for bidding on spectrum will have a direct negative impact on quality. from service. experienced by end users.
Although it is not yet known what reserve price Icasa will establish for each “lot” of spectrum to be auctioned, that detail will be contained in the ITA, a previous ITA, issued in 2016 but withdrawn after a legal confrontation with the then minister of communications. Siyabonga. Cwele, set a reserve price of R3 billion per lot. TechCentral understands that reserve prices will likely be the same or similar to the 2016 figures when the ITA goes public this week.
Too tall?
But could this be too high, especially given the fundamentally weak economic climate?
“When we look at other countries, with lower consumer data prices, there is a direct correlation between lower spectrum auction prices and higher investment in the network,” said Arthur Goldstuck, MD of World Wide Worx, who was the Principal Analyst of the 5G research project. “At the same time, delays in the availability of high-demand spectrum are likely to hit poverty-stricken areas the most, because those who are willing to pay for coverage will naturally see more investment in infrastructure in their areas, compared to those who are they can’t pay data. “
Goldstuck said that both Vodacom and MTN informed him during their investigation that lower spectrum prices would incentivize greater coverage of rural areas and that “less money spent on spectrum translates into more money they can spend on infrastructure to serve consumers. “. The GSMA, an industry body that represents the majority of the world’s mobile operators, has previously expressed similar concern, arguing that governments and regulators “should allocate 5G spectrum to support their digital connectivity goals rather than as a means of maximizing state revenue. “
Arthur Goldstuck
With South Africa’s tax revenue falling off a cliff as a result of not only the Covid-19 shutdown but also years of economic mismanagement, the national treasury is no doubt hoping that Icasa can raise as much as possible through the spectrum auction. .
However, with little – if any – participation from international operators expected during the auction, the government may be lucky enough to raise more than the reserve price established for each of the five lots (hence , R12 billion, assuming R3 billion per batch in a fully underwritten process).
To encourage greater participation in the auction, especially from smaller and less well-funded players, World Wide Worx said one option would be for Icasa to allow selected bidders to pay in installments.
“The promise of new entrants to the market will be born if we don’t see creative approaches to pricing,” Goldstuck said. “Only the major carriers have the existing infrastructure and investment budgets to enable a national 5G rollout, and a high upfront cost means that even regional newcomers will be left out of the auction.”
Another challenge is that television broadcasters continue to use the digital dividend bands, and may continue to do so for several years, given South Africa’s digital migration project, which is years behind schedule and still progressing at a snail’s pace. What incentive would an operator have to prepay for access to those bands if it cannot fully utilize the asset in the next few years?
Interference
“The emergency spectrum of 700MHz and 800MHz can only be used for experimentation and innovation for now,” MTN South Africa told World Wide Work researchers. MTN and other operators were given temporary spectrum under Covid-19 disaster regulations to help cope with a surge in consumer demand as a result of the work-from-home measures imposed during the national shutdown. “Unfortunately, we were unable to use this emergency spectrum in the areas that we expected and wanted due to high levels of interference from analog.”
Based on the research findings, World Wide Worx said it is “clear” that operators require accelerated spectrum allocation that has the following characteristics: contiguous and non-fragmented; at a reasonable price; and not interfered with by other radio signals.
“Spectrum assignments should be viewed with more nuances towards the associations that exist in the market. Once these associations have been evaluated, spectrum auctions should have participants belonging to the same association groups to ensure that the spectrum remains contiguous, ”the report says.
“And, since some networks may not have cash on hand, spectrum installment payments should be available as an incentive for operators who participate in spectrum auctions and commit to meeting obligations. This will allow the regulator to charge the prices they consider fair and, at the same time, offer operators a pause in the cash flow of spectrum payment in a lump sum. “
Additionally, the digital migration of broadcasting and the availability of digital dividend bands must be prioritized with “extreme urgency,” said World Wide Worx. – © 2020 NewsCentral Media
