As the Mafadi Consortium, we waited with much anticipation for the Invitation to Apply that would herald the start of the already long process to license the Wireless Open Access Network (WOAN). We had been working tirelessly to assemble a consortium of parties and entities distinguished by unrivalled industry understanding and with deep industry expertise since the Minister of Communications and Digital Services issued a policy direction to ICASA to commence the licensing process.
ICASA issued the Invitation to Apply and opened the window for clarification from potential bidders. We have written to ICASA seeking clarification in terms of both the approach and details of the Invitation To Apply as we find crucial elements of the ITA militating against the successful operations of the Wireless Open Access Network. The problems are so significant as to warrant some industry experts to warn that we might be witnesses to a process that will produce a stillborn that will be extremely costly to funders and which will damage the mobile market going forward.
Raising the alarm is crucial taking into consideration the envisaged role of the wholesaler wireless open-access network in transforming the industry to play a meaningful role in social and economic changes that our country so dearly needs.
It is now a universal truth that the ICT infrastructure is the core and indispensable input for national economies and the well-being of societies. Just like in all other countries, it is critical that access to and use of this infrastructure be extended to reach all South Africans. The Wireless Open Access Network was conceived as a crucial element of this infrastructure extension.
The emergence of the Mobile Telecommunications market, on the eve of the democratic dispensation and the policies adopted since democracy, is a classic case of what an enabling policy environment coupled with private sector investments can do to transform society. Government’s contribution to this success was through the allocation of adequate spectrum, importantly, without exorbitant auction fees that were the flavour of the moment.
The government also ensured that the new mobile operators had access to the existing infrastructure of the incumbent at favourable and asymmetrical rates. The new operators paid less to terminate calls on the Telkom network compared to what Telkom paid to terminate on their networks. This indirect subsidy is estimated to have run into R50bn before the termination rates were adjusted.
Importantly, the success of this support enabled the new mobile operators to build solid businesses and as a result rollout services. Fast forward to today, there are more people with access to telecommunications than to clean water, thanks to the government policy position and private capital pools invested in the industry.
A perusal of the WOAN Invitation To Supply issued by ICASA shows a drastic departure from this classic case study of success. As indicated, the Wireless Open Access Network was conceived as an aggregator network that would consolidate retail traffic especially from small retail operators and MVNOs who do not have the commercial opportunity to access large scale telecommunications infrastructure over which to deliver services. To be able to deliver traffic at scale the WOAN must have adequate spectrum, access to current passive telecom infrastructure as well as attract the required investments to rollout the telecommunications network.
The study conducted by the Council for Scientific Industrial and Research (CSIR) deals with the issue of the viability of the WOAN as well as a spectrum as a key factor endowment upon which the success and viability of the WOAN are predicated. The study points out a viable WOAN achieving 20% market share. The study indicates the minimum allocation of spectrum allocations to the WOAN in the following combinations for viability at 20% market share: –
- 1 x 25 MHz in the 800 MHz band
- 2 x 20 MHz in the 2600 MHz FDD band
- 1 x 25 MHz in the 2600 MHz band TDD
It must be noted that the CSIR study recommends these allocations as minimum allocations to the WOAN for viability at 20% market share.
The Wireless Open Access Network invitation to apply (WOAN– ITA)
Contrary to the CSIR study the WOAN-TA recommends a much smaller allocation of spectrum to the WOAN effectively killing each chance of existence even before it can start. The WOAN ITA prescribes the following spectrum allocation to the WOAN: –
- 1 x 10 MHz in the 700MHz band
- 2 x 20 MHz in the 2600 MHz FDD band
- 1 x 25 MHz in the 2600 MHz band TDD
Having crunched the numbers and dealt with the capacity of the WOAN, based on the allocated spectrum, the Mafadi Consortium is of the view that the reduction in the quantum of the Sub-1 Gig spectrum allocation to the WOAN is fatal to the WOAN business case and needs to be addressed. The 700MHz band is not clean as digital migration has not been completed meaning that even if the licensing of the WOAN would be fast-tracked the WOAN would have to wait for the digital migration to complete before being able to implement an effective and contiguous service. This places the WOAN in a disadvantaged position from the onset.
More worrisome to the Mafadi Consortium and what threatens to perpetuate the unequal access to the spectrum.
The Spectrum Auction ITA has implications for future allocation of spectrum as if read literally it suggests that the spectrum already in the hands of telecom incumbents will remain as such at the point of renewal of their licenses most of which should happen during the 2022-2023 time-window. This basically grandfathering the existing arrangements with no regard to the needs of the new entrant and market dynamics. If this position is maintained, it would mean that the WOAN would be deprived of the spectrum for almost another 15 to 20 years. It is important that the WOAN had adequate spectrum if it is to adequately fulfil its wholesale network provider ambitions.
What is also curious about the Spectrum Auction ITA it prescribes that the MNOs must launch MVNOs, effectively upstaging the WOAN business model, The WOAN business model is the wholesale model and MVNOs will be the key clients of the WOAN. By pushing the MNOs who for decades has resisted enabling the MVNOs ICASA is fundamentally undermining the WOAN business case.
The importance of the Telecommunications Towers for success of the WOAN and National Security
Towers and other high-rise structures supporting the Mobile Telecommunications Networks have become super important especially with regards to environmental restrictions limiting the number of towers that can be deployed in a particular area. Effectively infrastructure sharing is enforced by environmental laws first more than the industrial and commercial logic for doing so.
The Mafadi Consortium is of the firm view that considering the fact that the WOAN will be a newcomer in the infrastructure game and will not be allowed to deploy tower infrastructure where towers already exist effectively places the WOAN at the mercy of incumbent operators without any regulatory protections should they abuse their market position. The restrictions imposed by environmental laws on the deployment of towers create monopolies in specific cell-site coverage areas. The owner of the tower, therefore, becomes a sole provider, and unregulated could ask for any price from new tenants. Whereas incumbents have leverage over each other by virtue of their existing tower portfolios, the WOAN will enter the market with no asset base and could be exposed to unfair pricing strategies from incumbent effectively raising the barriers to entry.
It is important that the WOAN is guaranteed access to the tower infrastructure on fair prices. Considering that the WOAN will have to catch-up with the incumbents the Mafadi Consortium would agitate for asymmetrical pricing initially favouring the WOAN. Both the Spectrum Auction and WOAN ITAs are silent about this aspect.
The radio networks are moving away from traditional proprietary radio networks towards open-radio access networks (Open RAN), which could be likened to opensource deployments in the software world. It is highly likely that in the near future base stations will be shared amongst networks transmitting multiple Public Land Mobile Network (PLMN) codes over the same radio and same frequency spectrum regardless of ownership. This would be best executed if a common tower company is created through the consolidation of towers in the country either through telecoms tower sale and lease back by Telcos or strategic joint investments.
In the case of towers being sold, it is important that a strong local ownership and control is achieved as telecom towers will be important to national key points given the fact that the whole economy is becoming digital covering service delivery, payments and other transactions.
In conclusion, we are convinced as the Mafadi Consortium that unless the ICASA revert to the CSIR spectrum allocation to the WOAN, South Africa will have effectively abandoned its own ICT policy and it will be another case of lost opportunity to transform the industry and bring greater participation of ICT retail players especially black start-ups.
Access to passive infrastructure at fair prices must be guaranteed for the WOAN.
Spectrum allocation must take into account the future growth of the WOAN therefore policy decisions must take a long-term 15 to 20 years’ time horizon into account.
- Vuyani Jarana, Chief Executive Officer, Mafadi Consortium