Assigning spectrum: Network bid put on hold, but testing continues

The introduction of the latest wireless network technology – long-term evolution (LTE) networks – was a surprisingly delicate issue in South Africa in early 2012. It was expected that spectrum licences for the networks would be awarded before the year’s end, but, even as operators race to increase capacity, implementation complications have delayed the progress of Africa’s most-advanced wireless network.

BACKGROUND: South Africa’s biggest mobile operators, including MTN, Vodacom and Cell C, have been laying the groundwork for LTE service provision. LTE, also known as 4G, uses considerable bandwidth to reach maximum download speeds of up to 100 MB per second. However, LTE-suitable bandwidth is in high demand and short supply, limiting the ability of operators to offer the service and prompting the government to work towards improving spectrum distribution.

Originally, the government planned to award two licences for LTE spectrum services through an evaluation process that factored applicants’ business and technical plans and innovation and network capabilities, rather than through a traditional auction. The government had envisioned a wholesaler model in which the companies contracted to build and own the networks would sell access to it to other providers, but be barred from competing with them on services. A key criterion for winning a licence was expected to be a threshold of ownership by what South Africa calls historically disadvantaged individuals (HDIs), or persons who were disenfranchised under apartheid. The threshold for HDI participation is 30%. Other stipulations would include covering 70% of the country within five years and including major cities.

INTERRUPTIONS: The process slowed in March 2012, after the Independent Communications Authority of South Africa (ICASA), the regulator, decided to withdraw its initial draft plan for spectrum assignment for LTE-suitable bandwidths. The proposal had outlined plans for 2.6 GHz and 800 MHz bands, with licensing applications due at the end of March. Current operators in those bands include Neotel, the country’s second fixed-line telecoms provider; Sentech, a parastatal organisation in charge of signal distribution; and a handful of analogue television broadcasters.

ICASA decision to withdraw the plan followed complaints from larger mobile operators regarding the draft structure and potential complications that might result since ICASA’s draft had preceded the Department of Communications’ own policy position on the issue.

GEARING UP: While the delay will slow the launch of commercially viable LTE networks, operators are nonetheless racing to build and test capacity. Vodacom conducted a trial in Midrand in Gauteng Province that yielded speeds higher than 100 MB per second. Similarly, MTN has invested in over 100 additional LTE-ready base stations and is using spectrum in the 1800 MHz range in Gauteng province for testing purposes.

The limited availability of spectrum has increased the intensity of competition between prospective LTE providers. MTN’s CEO, Karel Pienaar, said in early March 2012 that ignoring those firms with a proven track record in favour of awarding high demand spectrum to new entrants would be a serious mistake. “To think you can get a new player coming in that does not have scale and build a network from scratch is just foolishness,” he told local media.

This is not particularly surprising, given that breaking into South Africa’s mobile sector has long been a costly and cumbersome proposition for any new arrival. For smaller or niche operators in the country, network access is very expensive, and unlike several other countries on the continent, South Africa still depends on just one virtual network operator, Virgin Mobile.

Indeed, progress, especially in terms of legal restructuring of industry infrastructure, is slow. However, both the government and industry have already embarked on a process of deregulation and increased competition that will only keep moving forward. To this end, the new opportunities in the telecommunications frontier will be strongly welcomed when they finally materialise.

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The Report: South Africa 2012

Telecoms & IT chapter from The Report: South Africa 2012

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