In just four days SA has provided a massive potential boost to the economy by finally opening the road to high-speed broadband — but it has taken 17 years to get here.
The long-delayed auction of radio spectrum suitable for high-speed data access, first planned for 2016, finally went ahead this week, entirely online. The last significant spectrum allocation in SA took place in 2005 which led to the rollout of 3G networks.
By Friday 5pm, the bidding had passed R8bn in value, the Independent Communications Authority of SA (Icasa) announced. It added that the auction would continue tomorrow.
In the first round of the auction hosted by Icasa, on Tuesday, Telkom and Rain were each allocated low-band spectrum, which enables coverage of large areas at lower cost, opening up new markets and allowing for faster mobile broadband growth.
At the same time, the cabinet scrapped the proposed Wireless Open Access Network (WOAN), a wholesale pool of spectrum that was to be managed by a state-owned enterprise.
It had been one of the most widely criticised elements of the proposed spectrum regime — critics had said it would fragment spectrum and had failed miserably in other countries — and its removal finally lays to rest attempts by previous ministers of communication to “punish” major mobile operators for their dominant market positions.
On the same day, the Competition Commission approved the acquisition by MTN SA of IHS Holdings, which owns 5,713 cellular tower infrastructure sites. The timing of the approval, though coincidental, could not have been better as MTN went into the main bidding process for new spectrum on Thursday.
“We plan to enhance our 5G offering, reach deeper into rural and unconnected communities, increase speeds and reduce congestion in urban areas and further expand our coverage in peri-urban areas,” Charles Molapisi, CEO of MTN SA, told Business Times as the bidding started.
“Additional spectrum allows us, as network operators, to continue to increase access to the digital economy. Extra spectrum will allow MTN to expand our best-in-class network with better reach, coverage and quality.
“Reductions in congestion will mean more people are able to access the internet and they will do so at speeds that help support and grow our economy.”
The auction process generates the highest possible fiscal contribution from Icasa, which will hopefully be used to improve the regulator’s capacity and ability to achieve its key objectives
— Keoikantse Marungwana, senior research and consulting manager at International Data Corporation
The spectrum allocation expected after the main auction will make all the mobile operators’ networks more economical, and the consumer is expected to be the major beneficiary.
“Spending R50bn in five years on capital investments is not sustainable, but has been a consequence of needing more towers, masts and antennae to accommodate the lack of spectrum,” said Molapisi.
“By spending less on infrastructure, we will help reduce the cost to communicate, while further enhancing the experience on our network.”
Because of the lengthy delays in auctioning further spectrum, the networks had to be adapted to enable 4G and then 5G connectivity, but at an exorbitant cost and low level of efficiency.
“As South Africa was never allocated 4G spectrum, the networks ‘refarmed’ 3G spectrum to make 4G work for our customers,” said Molapisi.
He said that qualms raised about infrastructure issues limiting the ability to roll out 5G in the short term were overstated.
“MTN conducted a modernisation of its network in the past two years and is fully equipped to deliver 5G in response to the spectrum auction. While a rollout is required, the network is ready.”
Telkom declined to comment on the spectrum allocated in the first round of bidding, with a spokesperson saying the company was too intensively engaged in the main auction process.
But Telkom's successful bid may help forestall its paused court action to have the spectrum auction halted, based on concerns about the process not promoting a competitive spectrum landscape.
International Data Corporation senior research and consulting manager Keoikantse Marungwana said the initial allocation provided “opportunities for aggressive expansion and enhancement of their mobile value proposition”.
The government said the proceeds of the auction would inject more than R8bn into the national fiscus
“This low-band spectrum has better economies for larger coverage areas at decent broadband speeds, which opens up Telkom's economically addressable market for mobile broadband growth. They can now seriously consider growth options that are less reliant on roaming partners,” Marungwana said.
“The Telkom [and Rain] win in the low-band improves the competitive landscape for the South African mobile operator ecosystem; there are now more players in the low-bands, which goes a long way in creating conditions conducive to more competition, and thus, more affordable mobile broadband options for consumers. This was one of Telkom’s key concerns about the lack of real competition in the mobile broadband space.”
Marungwana said the transparency of the auction process was commendable. “The consultative nature of the process is very progressive, and signals great administrative maturity in our regulatory regime. The auction process generates the highest possible fiscal contribution from Icasa, which will hopefully be used to improve the regulator’s capacity and ability to more speedily work through many of its key and strategic objectives.”
In a statement issued after a cabinet meeting on Wednesday, the government said the proceeds of the auction would inject more than R8bn into the national fiscus.
Licensing of high-demand radio spectrum “will improve the ability of mobile telecommunications operators to build robust telecommunications with greater penetration and reach”, and that “benefits of this long-awaited process include the reduction of the costs of data and voice communication”.
Vodacom also expressed its satisfaction with proceedings. : “It is extremely positive for South Africa’s telco industry and the country as a whole that all operators have decided to participate in this process and we remain optimistic that this will likely lead to a positive outcome,” a company spokesperson said. “The award of new spectrum is a critical part of reducing input costs and, with it, the cost of data in South Africa.”
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