The Department of Communications and Digital Technologies gave its presentation on the spectrum policy with specific reference to completion (including SMMEs), licencing conditions, low data costs, and socio-economic impact. It highlighted challenges it encounters and the ways forward in providing connectivity to the people of South Africa.
The Department explained the meaning of spectrum, saying it uses frequency bands and the waves in the spectrum are divided into analog and digital waves. Governance of the spectrum at international level is handled by the Minister who is in charge of the allocation of the spectrum, while at the national level, the Regulator is responsible for that.
China, as at 2015, was already on 6G and probably may be on 8G now while South Africa is still on 4G. The Department said 5G is already in South Africa because Rain is already offering 5G on its frequencies. The issue is in increasing the different frequencies. The Department started with 2G but as technology developed, the technology used for 2G was also used for 3G, 4G and can also be used for 5G.
The Department will ensure smaller operators entering the consortium are not bullied into selling out. One of the key challenges smaller companies always had is funding. It enters into the market or consortium but is not able to finance its own stakes. The Department will reach out to the likes of the DBSA and IDC to explain what the situation is to the smaller companies, so that DMIs can assist the smaller companies to ensure it favourably participates in the consortium.
It is very important to remember history because Vodacom is a baby of Telkom. Telkom created Vodacom but afterwards, decided to become a mobile operator itself. MTN and Vodacom gained so much access because it had time on its side. This is because it was commissioned during the time of the transition executive in 1993. By the time Cell-C emerged in 2001 and started operating in 2003, much already happened. A number of frequency lines were licenced to Vodacom and MTN.
Presentation by the Department of Communications and Digital Technologies (DCDT)
Deputy Minister, Ms Pinky Kekana, was present with the Director-General (DG) of the Department, Mr Robert Nkuna. The DG made the following points:
South Africa has more than 400 licenced Electronic Communications Networks but unfortunately these entities cannot access the spectrum due to its scarcity. The South African mobile industry is characterised by an oligopoly with a vertically integrated marked shared as follows;
Vodacom: 50%, MTN: 35%, Cell-C: 12% while Telkom mobile and others make up less than 3% of the market share. This results in high prices of its products.
Mr Nkuna said the market has many barriers to entry for small operators. This is because small operators are historically disadvantaged. The current infrastructure market, especially broadband, is characterised by fundamental market problems such as ineffective competition, infrastructure sharing bottlenecks (with unnecessary duplication of infrastructure, and inefficient use of spectrum).
The mobile market is characterised by high consumer prices because it lacks competition. As a result of this, the Competition Commission conducted an inquiry in September 2017. The purpose was to understand what features of the market(s) and the value chain, could result in high prices for data services. The results of the inquiry showed international benchmarking and profitability analysis confirm South African prices were high (especially that of prepaid data) and Vodacom and MTN applied price discrimination strategies in South Africa.
National Integrated Integration and Communication Technologies (ICT) White Paper Policy:
The Information and Communication Technology (ICT) White Paper’s approach to addressing South Africa's market issues are through spectrum policy, Wireless Open Access Network (WOAN) and High Demand Spectrum. Cabinet approved the National Integrated ICT White Paper in September 2016 and there were structural challenges highlighted in the White Paper which included exclusive/individual assignment of spectrum (which promotes economic growth for a few market players), and concentrated broadband infrastructure markets. The White Paper sets out the most significant barriers to entry in the telecommunications sector is the lack of access to spectrum.
Mr Nkuna said the White Paper introduces a new spectrum policy regime which seeks to treat spectrum needs as a public good used to meet public interest objectives. Spectrum needs to be governed in line with a paradigm shift towards the non-exclusive assignment preferably when dealing with “high demand” spectrum.
The White Paper introduces open access principles including: openness and transparency, equal access and non-discrimination, sharing and non-duplication, efficiency and standardisation and reasonableness.
In line with the principles of openness, a shared approach to spectrum use must be implemented and the regulator is required to conduct an industry wide consultation to determine the terms, conditions and time frames under which the currently exclusively/individually assigned high demand spectrum will be returned, subject to market developments and projected extent of availability of open access networks.
To realise the open access principles, the White Paper provides for the introduction of a wholesale Wireless Open Access Network (WOAN), as a wholesale provider. This must enable the entry of new, innovative and black-owned service providers. Although the WOAN will be a private company it will be modelled around a common carrier like SENTECH which provides broadcasting signal distribution to all broadcasters.
The White Paper provides that all currently unassigned high demand spectrum will be set aside for assignment to the WOAN.
The Minister performed significant consultations with stakeholders on the best approach to implement this policy provision, and as agreed with stakeholders, the Minister commissioned the Council for Scientific and Industrial Research (CSIR) to conduct a study to determine the spectrum requirements for the WOAN to ensure its viability.
In September 2017, the Minister told Cabinet of the outcome of the CSIR study and the approach to implement the spectrum policy pursuant to the study. The study was subsequently published in the Gazette (Government Notice 1003, Government Gazette No. 41935, 27 September 2018) and in September 2018.
The Minister published a draft policy and policy direction for public consultation including ICASA. On 26 July 2019, Minister Ndabeni-Abrahams issued in terms of Sections 3(1), 3(2) and 5(6) of the Electronic Communications Act (ECA), 2005 a “Policy on High Demand Spectrum and Policy Direction on the Licensing of a Wireless Open Access Network” which said the Minister may make policy in relation to spectrum by virtue of Section 3(1) of Electronic Communications Act (ECA).
The DG said, prior to issuing the draft policy and policy direction, the Minister held a series of consultative meetings with ICASA. Due to mobile operators having access to existing spectrum the authority must consider the assignment of 700 MHz, 800 MHz and 2600 MHz spectrum to the WOAN and ensure preferential treatment of the WOAN.
Policy Direction on the Licensing of a Wireless Open Access Network makes various determinations, including that ICASA has to issue an Invitation to Apply (ITA) and accept and consider applications for an individual electronic communications network service licence for a WOAN and ICASA should licence spectrum to the WOAN in a way enabling it to fulfil its policy mandate and to thrive.
The “Policy on High Demand Spectrum and Policy Direction on the Licensing of a Wireless Open Access Network” is envisaged to address various points, including, maximisation of the socio- economic benefits derived from the use of the spectrum and a shared approach to spectrum use through the creation of a sustainable WOAN, and barriers to entry by historical disadvantaged people and smaller players through the creation of a sustainable WOAN
ICASA commenced the process towards licensing high demand spectrum on 1 November 2019 by publishing an Information Memorandum (IM) (Government Gazette 42820, General Notice No. 597) and ICASA invited written comments on the IM which were due on 31 January 2020. It received over 40 submissions. The IM outlines ICASA’s intentions with regard to the licensing process and includes the process and criteria applied. This notice provides information to prospective applicants intending to apply for spectrum licences in the specified frequency bands and the IM makes provision for two licensing processes namely:
- Spectrum will be licenced to industry through an auction process
- A licensing process for a Wholesale Open Access Network.
Mr A Cloete (FF+, Free State) asked the Department to explain the meaning of spectrum and how it is created and governed, if there are challenges involved in the use of the spectrum, and if so how are such problems addressed.
Mr Dick Sono, Chief Director: Radio Frequency Spectrum, Department of Communications, said spectrum works using the principles of airwaves and sound waves. Spectrum uses the same principles as the airwaves but now it is called frequency bands. The waves in spectrum are divided into analogue and digital waves. The analogue waves consume too much spectrum unlike digital waves. In the spectrum, airwaves are created when the radio waves are transmitted or radiated.
In governance of the spectrum nationally, the Minister is in charge of the allocation of the spectrum and the Minister represents the Republic at international level. At national level, the Regulator is responsible for that. The allocation happens at the international level and the Minister sees to this area. After the conference, the Minister becomes the one responsible for developing the spectrum.
Another thing with spectrum is, it does not respect any borders so it needs to be coordinated at the international level and the International Telecommunication Union (ITU) comes in and guides the different administrations in the different countries, working with each other to ensure different services provided to people, will be favourable.
At this level the ITU provides guidelines to ensure countries do not interfere with each other when they provide services to communities. The Minister will be the one in charge of international allocation of the spectrum and spectrum does not respect borders.
Ms M Mokause (EFF) said the reality is, South Africans are poor and people cannot afford to communicate. The truth is, communication companies have problems that have nothing to do with the spectrum. She asked what the Department is doing about these problems, for instance the DG in his presentation mentioned there were times when the smaller companies reduced their prices but the bigger companies never did that even once, and she wanted to know if the Independent Communications Authority of South Africa (ICASA) and the Department were going to turn a blind eye to this.
There were times when people bought airtime and the airtime got swallowed by the systems of those communication companies. Those are the structural problems complained about now unfortunately, the people of South Africa were never told of any structural problems in the companies. Rather it was due to complaints about data getting swallowed that things started coming up.
Ms Mokause asked the Department what they will do to ensure big companies get punished. In the presentation, the Department said smaller companies were established in rural areas, and asked if those smaller companies which were established in those rural communities find themselves compromised, since it has to pay bigger companies to use their structures.
The DG said, data expiring has been dealt with previously and there are regulations that ICASA issued on this. There is a provincial detail of what the Department is doing about this that the Department can share with the Committee if given the opportunity.
On the issue of smaller companies going to the big companies for access to the spectrum, the DG said this is a big issue. The Department realised it does not work when it leaves it to small companies to sort out by themselves, as the big companies must decide if it wants to give access to small companies or not. So there is something the Department is doing to regulate this starting with the definition of the spectrum and also the obligations of the bigger companies to the smaller ones, regarding granting them access to structures.
Mr A Nyambi (ANC, Mpumalanga) asked the Department to explain what WOAN stands for, and the difference between the wireless and the open access. He asked a question about the difference because in slide 7 of the presentation, the presentation did not quite read like what was explained during the oral briefing. The Department must compile its presentations more clearly to ensure even someone absent from the meeting will understand what was discussed.
During the President’s speech, he was very clear the high demand spectrum will be completed by the end of 2020 and that the digital economy will drive employment for South Africans. It would be unfair of the Members of Parliament to expect the President to give details of the project, so it is expected that the Department will give detailed information on the matter.
He was disappointed the Department was still giving the same information the President already given. The Committee needs to know the details of what was done so that in cases where it is dealing with oversight for instance, the Committee will not accuse the Department of what it never presented to it.
It will be good if the Department can clearly say when it will be done with the project by giving specific timeframes and it must be able to give percentages of what was done and where there are challenges.
This way the Committee will be able to give credit to the Department where necessary and also criticise it when necessary.
The President gives the highlights of projects while the Departments give the details, where that does not happen it creates challenges.
On the issue of the White Paper, Mr Nyambi said it is a paper issued since 2016 and this is now 2020, so what happened in between these years. On the day of the meeting with the President, the details of the project must be given by the Department. This is very important because it is even possible the members of the Department might have changed over these years but if things were well documented, giving details will not be a problem and that way also the Committee will be able to praise the Department for what it is doing well and criticize it for what it is not doing well.
What is the Department doing about breaking the monopoly in the mobile market. When it comes to this there is also a need for details of what was done because the Members of the Committee come from different provinces and regions, and there is a way the presentation will go and it will seem as if some parts of the Republic are at the periphery while the others are on the areas of concentration
.The Deputy Minister said government realised very early on, communities need connectivity so as to be able to have communication. Due to infrastructural challenges government identified provinces and districts which need to be connected, especially institutions like hospitals, schools, clinics and ideally also go into households and within the households find people to partner with the Fibre in those households.
Government identified districts in the different provinces and decided to roll out the connectivity through a government owned entity. It also juxtaposes this with the programme of digital network, which moved concurrently.
Initially Vodacom built its towers, MTN built its towers, and there are no parallel programmes of companies doing this or that. Now it has to maximise resources and avoid duplications - that is one of the things the White Paper looked at.
Deputy Minister Kekana said the White Paper asked the question of how it comes up with the framework allowing people to share infrastructure amongst themselves so as not to replicate projects.
If Vodacom is building a tower, it must allow Telkom or any other company to connect so whatever money it planned to build a tower with can be diverted to other issues. Inasmuch as it looks like there is a delay in some of what the Department is supposed to do to ensure communities have connectivity, the Department is making progress to ensure these communities get connectivity.
The DG said WOAN means Wireless Open Access Network and apologised for creating confusion around it by using WOAN and licensing of the wireless companies interchangeably. The correct terminology is the Wireless Open Access Network (WOAN) which happens to be a wholesale. There is a possibility Telkom can have access to the the wireless network, but that is what their management will have to decide because the terms of the WOAN are far better than the terms of the auction.
The Department has decided that to allow WOAN to work well it has to ensure the rules governing the WOAN are favourable.
Mr Nkuna said one of the things the Department suggested is that it can give the entity time to pay for the WOAN licensing so it can take off. The Department said big companies must buy a minimum of 30% of the capacity of the WOAN to enable it to take off while waiting for smaller companies to buy licences and capacity. These are some of the remedies the Department applied to ensure the WOAN is adequately certified so it can start working.
Mr Nkuna said the process is clearly outlined and by the time the President made his statement, the process was already ongoing. The Regulators replied to the Department’s policy directions by going out to the communities and giving out the poster the president issued. This was how the Department deals with the licensing of the wireless network. The process was ongoing and there was a deadline of 31 January for submissions. The Department normally asks the Companies to outline how it will go about the licensing as a draft and ask the Department to comment.
The Department gets quotes on submission and coincidentally, it is looking at those submissions at the moment. Based on this it will move forward. The Department is in the middle of this process, looking at what was submitted to it, after which the Department can bring it to the Committee.
This will give the Committee the actual breakdown of what happened on a month-to-month or quarter-to-quarter basis. He asked the Chairperson to give the Department an opportunity to make such a submission.
On the provincial breakdown, the Department can share with the Committee details of what ICASA and the Department are doing.
Mr M Nhanha (DA, Eastern Cape) said the last time he was in China in 2015, it was already on 6G and probably it may be on 8G now while South Africa is still on 4G. He asked if South Africa can ever catch up with the international world and if so the Department should state how they plan on doing this, he knows it may be difficult for South Africa to compete with those big economies but it will be good to know if the Department has any plans to keep up pace with them.
He was pleased with the announcement around the wholesale network as the DG mentioned SMMEs will be allowed to participate in the consortiums. Given how things usually turn out where the big companies bully the smaller ones out of the consortiums, the small ones are usually bullied into surrendering to the big ones who pay them off. He asked if the Department looked into some possibilities on how to get rid of such things to ensure people are not in the consortium just for bidding and being bought over.
He heard the DG mention there are two big players in the network market, MTN and Vodacom, and asked how MTN and Vodacom bought that level of dominion and access to the spectrum in the first place, and if it was a case of the Department allowing them too much access and if so, why it allowed such access to the spectrum in the first place. The year 2020 is almost three months gone and the previous day it was good to hear that by year end, the spectrum auction will take place. It was interesting to hear Vodacom make that statement, in his own opinion, it is not good enough for the Department to say by the end of the year South Africa will have an auction. Rather the Department must have a vague idea of when the auction will take place.
The Deputy Minister said it is very important to remember history because Vodacom is a baby of Telkom. Telkom created Vodacom but afterwards, decided to become a mobile operator itself. If it did calculations properly, these issues of Vodacom versus Telkom will not arise.
On MTN and Vodacom gaining so much access, Mr Nkuna said it related to time on its side because it was commissioned during the time of the transition executive in 1993. By the time Cell-C emerged in 2001 and started operating in 2003, a lot already happened. A number of frequency lines were licenced to Vodacom and MTN. The obligation of the Department is not to undo the past but to ensure the past is adequately remedied so those too big do not bully those which are small.
The DG said one of the key challenges those smaller companies have always had is funding. It enters into the market or consortium but is not able to finance its own stakes. The Department will reach out to the likes of the Development Bank of South Africa (DBSA) and the Industrial Development Corporation (IDC) to explain the situation to smaller companies.
5G is already in South Africa because Rain is offering 5G on its frequencies. The issue is in increasing the different frequencies. In the past the Department started with 2G but as technology developed, in later years the one used for 2G was also used for 3G, 4G and can also be used for 5G. Those innovations are taking place and are in line with the policy issued by the Minister in 2019, the Department also asked ICASA to advise on the favourable approaches towards the licensing of the wireless network so that one of the 2G can be used for the 5G.
A Deputy Director-General (DDG) of the Department said South Africa participates actively in the competitions in international forums. Initially South Africa started with the 2G during the licensing of MTN in South Africa and even the introduction of the prepaid bundles was done by South Africa. As such South Africa created the knowledge on how communication can be consumed. Though it is internationally decided which frequency band will be used for a new emerging technology, it takes about five to ten years before it will be implemented. This is largely because the spectrum will be used in other technologies as well. When the international economies moved to 3G, South Africa also moved along with it. 3G rolled out around the mid 90’s and came into use around the late 90’s. In the early 2000’s South Africa licenced the 3G.
South Africa lagged behind during the licencing of the 4G. If the Department decided to continue with licencing it gave out during the period of the 3G it would not have lagged behind. During the 4G period, the Department decided it needs to use the spectrum. It had to change to modern structures and that took long because it was when the White Paper issues on how to use the spectrum came along. This took the Department back in licencing and it is just now that the Department is licencing the 4G. It does not mean 4G was not in use in South Africa. It simply means it was not given the licencing the spectrum requires.
Just as the DG indicated, South Africa is already catching up with the 5G. It is part of the policy structure to direct ICASA to provide the analysis for 5G so the Department can adopt it. 5G changes the market structure because when the licencing becomes effective, it can be used in different settings and as such the implications of using it must be taken into consideration first. South Africa is doing these things at the same time the international countries are dealing with 5G and how to licence the 5G.
In confirmation of what the DG said earlier on, the DDG repeated that some of the spectrum used for 4G can be used for 5G, and so the Department is only waiting to ensure the licencing framework does allow 5G before it starts using it. 5G does not allow roaming between countries, the decisions were taken only on the international level and as such even the countries claiming it is on 6G do so only for its local environments and not internationally.
Ms T Modise (ANC, North West) said she was not happy the DG said that 70% will be shared by others (which in effect refers to women, children and people living with disabilities). Rather the percentages must specify which category gets which percentage to avoid making it sound like it is taken for granted or not taken seriously.
The Deputy Minister said there will also be a possibility of unbundling because the 70% allocated to WOAN can be shared. The Department might not be able to explain the reason for that now but it is a feedback it will go back with and when it sorts it out. The Department will bring the information back to the Committee in future meetings.
The Chairperson asked how the Department plans on using the spectrum in assisting Telkom in catching up with others, because Telkom and others only have 3% while Vodacom has 50% and MTN 35%, and how it will use the spectrum to leverage those companies down so it can go up and be able to catch up.
On the SMMEs, the Department must make plans on how it can assist SMMEs to avoid exploitation. If besides the 70% owned by South Africa, if there is a quantum or if it has specific percentages every designated group will get?
The DG said the Department does not want Telkom to fade because South Africa owns 40% of Telkom, Public Investment Corporation (PIC) owns 12% of Telkom. When Vodacom started, Telkom owned 50% which it later sold to Vodafone around 2010 and Government has always been at the heart of these companies except for Cell-C, as none of these can operate without direct interaction with the Government.
Mr Nhanha said he had a follow-up comment as the Department claims there is 4G in South Africa. He needs to understand the authenticity of some of the players as it said that the movement from 2G, 3G and 4G is as a result of the creativity of the players in the industry.
The DG said one of the concepts of managing spectrum is the concept of trying to buy licences, for example the movement from analogue to digital waves in the spectrum. When you get a licence for the spectrum it comes with conditions. What happens with the players is when it wants to use the licence it changes the terms of that commission. While it waits for international licencing for the use of the new frequency, it makes use of the one the technology it already has, while still waiting for the international decision. It uses technologies it used for previous technologies (2G) for the next one (3G). Thereby using a portion of the spectrum for 4G, and when it offers 4G in the industrial section, it will be unable to increase capacity in terms of operation because there is not enough spectrum for 4G. This causes a delay when it wants to change the market structure. It decides to continue offering the previous spectrum which is the 3G instead of offering the new one which is 4G because of technological development internationally. When it buys equipment, it allows it to do that to be able to move between different technologies, because it will be costly to change the entire equipment when it wants to move to another technology.
This allows it to change the configuration of its network without having to change the equipment and that is where the creativity comes in.
The Chairperson thanked the Department for its presentations and its responses to the questions raised by the Members of the Committee, and said the Department promised to come back to the Committee to give detailed presentations on some of their operations that could not be addressed at the moment. He hopes it will attend to the other issues that need to be attended to and bring feedback to the Committee whenever it is invited by the Committee. The Department was released to enable the Committee to continue with the amendment and/or adoption of minutes from previous meetings.
There were no amendments to the previous minutes of previous meetings, the minutes were adopted and the meeting was adjourned.
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