Availability of the Spectrum and the impact thereof on reducing the costs to communicate: DCDT Briefing; with Deputy Minister

Meeting report

The Chairperson opened the virtual meeting, welcoming the Members, support staff, and all the guest delegates. After reiterating the agenda and noting the apologies, the Chairperson handed over to the Deputy Minister for his opening remarks.

Opening Remarks by the Deputy Minister

The Deputy Minister of Communications and Digital Technologies, Mr Philly Mapulane, said that Wednesdays are difficult days for the Ministry because those are Cabinet days. The Ministry is supposed to attend these meetings as members of the executive, unless there are exceptional reasons not to. Tuesdays are the best days. He took the opportunity to wish the Select Committee the best for the festive season in advance. South Africans rely on mobile telecommunication services to communicate or to shop online in the more affluent areas. Unfortunately, some people living in rural areas do not have the luxury of connectivity. The people in rural areas do not have access to communicate due to the higher cost to communicate. Access to connectivity is very essential to society and the high cost to communicate impedes the right of all South Africans to communicate. He informed the Select Committee that two studies were conducted in the past. The Competition Commission conducted the first study, and the report was released in 2019. Another study was made by the Independent Communications Authority of South Africa (ICASA) in March 2021. Both of these two studies found that there are significant competition concerns in the market. There are recommendations, and the Department will ensure that these recommendations are implemented.

The mobile network operators have contributed to the lack of spectrum when there is a delay in licensing and site management partners for data and voice costs, which is leading to the high cost to communicate in the mobile sector. This matter has been addressed by ICASA, and it concluded the process of licensing that was successful and resulted in benefiting over R14 billion of the proceeds of the auction. The main operating benefits from the allocation of the spectrum such as MTN, Vodacom, Rain, Telkom, etc. It is aware that the availability of the spectrum to be harvested is dependent on the analogue switch off but it has to conclude the process first so that the country can fully migrate from analogue to digital. Five provinces have completely been switched off: North West, Limpopo, Northern Cape, Mpumalanga, and Free State. Four provinces have not been switched off: KwaZulu-Natal, Eastern Cape, Gauteng, and the Western Cape. The process of doing this migration is through the broadcasting digital migration. There has been a challenge by e-media, which went to the High Court, in which the High Court has ruled in its favour. The Constitutional Court has recently concluded that more consultations should be followed for the indigenous to register and receive the allocated boxes. The Minister has therefore extended the period for all the work qualifying households to register until 30 September 2022. It is believed that this time around, all the qualified households have been captured. The next step is for the Minister to determine the date of the final switch off in consultation with the industry.

Briefing by the Department of Communication and Digital Technologies: Availability of the Spectrum and the impact thereof on reducing the costs to communicate

Ms Nonkqubela Jordan-Dyani, Acting Director-General, Department of Communications and Digital Technologies (DCDT), said that the salient issues about the policy provisions and what it is meant to do would be covered in the mid-term strategic framework. The Department wants to ensure transformation of the industries and to equally support other industries to ensure that South Africa is more competitive. It focuses on social obligations to close the digital divide and on ensuring that government institutions are connected and able to provide services to the citizens. It has therefore been focusing on addressing the issue of cost to communicate to ensure that it is affordable for all citizens, irrespective of where the person resides in South Africa.

Mr Dick Sono, Chief Director: Radio Frequency Spectrum, DCDT, took the Select Committee through the presentation.

To address cost to communicate, several factors should be considered and addressed. These, amongst others, include spectrum. The competition issues will not be directly addressed by the current spectrum holding, hence it is impacting negatively on cost to communicate. On 08 September 2022, the Minister issued a draft Next Generation spectrum policy GG No. 46873 for public consultation. The closing date to receive public comments was 20 October 2022. At the heart of this spectrum policy is to ensure economic inclusion of all South Africa; bridge the digital divide; bridge connectivity divide that continues to exclude rural and underserved communities; drive cost to communication down; avail more spectrum to support technology innovation and emerging technologies.

Government service users of spectrum must provide services that offer significant benefits to society, such as security, safety of life, etc. To promote economic development, there must be market-based approaches such spectrum-trading for spectrum sharing, dynamic spectrum access use, and spectrum ‘sub-letting’. In order to bridge connectivity gaps, broadband access must be extended, and it must provide reliable data services for rural, remote and under-served communities – including all low-income areas, and secondary cities and towns. This policy supports the “development of alternative infrastructure” such as Wi-Fi and community networks. The Regulator must set aside spectrum for use by the state digital infrastructure company. This spectrum policy supports the overarching principle of “leave no one behind”. The reform support development of regulatory framework to ensure indigenous households receive monthly free data. Administrative assignments can allow for assignment of spectrum that is more easily able to target specific concerns such as competition. There is a universal service obligation to provide affordable data and reduce the digital divide.

[See the presentation for further details]

Discussion

Ms W Ngwenya (ANC, Gauteng) welcomed the presentation from the Department. She said that the Committee must agree that the availability of spectrum to all the people in South Africa is very important and is non-negotiable. Data has become a new basic need and service that all people must have access to. It must be accessible at the same level as water and electricity. Why does it take so long for government to release the new spectrum? The new proposed spectrum policy and 5G policy indicated that the Department is expected to speed up the roll-out of the new technology. How much spectrum will be needed for 5G when it is being rolled out? To what extent will its availability impact cost and the poor living in remote and rural areas?

The Chairperson thanked the Department for its robust presentation, which was quite very critical for the country at this juncture, given the challenges that the country has faced during the COVID-19 outbreak in so far as connectivity is concerned. Some of these areas also included schools, clinics, and other social components of the country because of the lack of spectrum. It gives the Committee a sense of relief that there are plans in place, and there has already been a significant amount of rollout. It gives the Committee comfort to understand that there is a robust programme meant to bridge the connectivity gaps and provide reliable data services in remote, rural, and underserved communities. The issue of spectrum has become a right rather than a privilege. It gives the people of South Africa access to information. That information gives people knowledge, and that knowledge empowers people. Therefore, it is an issue that has to be prioritised. Data cannot only be referred to as new money which translates to a situation where the price tag of the data becomes too expensive. The Committee believes that ICASA and the Department must ensure that the price tag is affordable, so that even the poorest of the poor have access to the spectrum. Those whose livelihoods are through social grants should also be able to afford this. It cannot exclude millions of people in the country. It must be compulsory for everyone to access it. There should not be gatekeeping that is caused by the exorbitant pricing that is associated with data. He asked what the ownership structure was regarding the bidding that took place. What is the participation of the communities, particularly those previously disadvantaged, in terms of the ownership of these entities? A majority of these entities mentioned are owned by South Africans. It is critical and it can no longer outsource the issue of ownership even to foreigners.

Participation should be mainstreamed insofar as these companies are making billions of profits year on year. These companies are doing well for obvious reasons, because everyone wants access to telephone lines, data, and airtime. It can no longer reduce people just to being mere consumers. It has to use the fourth and fifth industrial revolution to ensure meaningful participation of people in these processes. At the start of inception, it is important that there is this meaningful participation. He asked the Department to share the information of the structure of ownership with the Committee. This will enable the Committee to see if the money it spends empowers people to transform and change the complexion. He made mention of the mineral sector, which was determined that a certain percentage of 26% should translate to unencumbered shareholding of previously disadvantaged Africans. It is important to regulate a certain significant percentage of ownership of transactions that relates to the broadband spectrum and everything related to that space. It has to take a revolutionary approach when it comes to this. It should not be an option but a condition. The Department must lead from the front insofar as ensuring that there is a clear policy perspective that drives that particular communication across the spectrum.

Responses

Mr Tinyiko Ngobeni, Deputy Director-General: DDG: ICT Infrastructure Development and Support, DCDT, said that, during the COVID-19 era, it because very clear that there was a need to have various social and economic services to continue to function in an effective manner. As a result, the Department, together with ICASA, worked closely with the sector and came up with the policy directives. Amongst these policy directives was the issue of planting spectrum temporarily to mobile operators who already have networks. This spectrum was given with conditions that it needed to implement an obligation to particularly connect it to schools. During the usage of that spectrum it became clear that there was a demand. The capacity tripled in terms of what was transmitted over the mobile networks. Spectrum was very essential and it therefore started implementing an obligation of connecting to schools. The initial approach was to provide connectivity to schools and engage with the Department of Basic Education. However, obligations were defined to not only provide for connectivity but also to provide devices to schools to support matriculants. The implementation of the obligations has not been satisfactory. It became clear that the operators were starting to indicate some challenges with the implementation thereof. There is a need to develop a policy framework that will ensure the effectiveness of implementing these obligations and provide an enforcement mechanism as to when it is issued to the entities.

Ms Mariam Paul, Chief Director, DCDT, said in the chat box that, for the virtual classroom project (social obligation for temporary spectrum allocated during COVID-19), 17 schools received broadband connectivity and ICT devices for remote teaching as well as laptops for all grade 11 learners. KwaZulu-Natal, Limpopo, Northwest, Free State and Mpumalanga have two schools. Eastern Cape has four schools and Northern Cape has three schools.

Ms Adelaide Masemola-Ramatlo, DCDT, said, on the issue of spectrum, that the Department has undertaken various initiatives, and it is now seeing some changes in the presence of data. The Competition Commission study has brought many changes in the market. There was a reduction of one gigabyte, which decreased between 25-35% across all mobile operators. However, there is still an issue of new digital players, such as WhatsApp, Facebook and Twitter – which has changed consumer needs and preferences. There is a demand for transformation. The outcome of the Competition Commission will give it an idea of the direction the Department should move into and which policy imperatives should apply. The Department is currently busy with the issue of cloud computing, which will, in the end, leverage new sales enabled by 5G. Infrastructure is an impediment, especially in small rural areas. The Department has seen mobile operators making huge investments and trying to reduce payment. In terms of competition, this will also be dealt with.

It is a known fact that MTN and Vodacom are dominating the space. There is a working group with other regulators to review Chapter 10 of the Electronic Communications Act to ensure this issue is being dealt with. Implementing the policies takes long due to the issues of how the law is crafted. The Competition Commission report has helped the Department find innovative ways to deal with this. It will help to ensure that more content is zero-rated.

Ms Jordan-Dyani said that the Department is in the process of reviewing the Electronic Communications Act. This will hopefully be serving before the Committee next year to allow the Department to make amendments that will enable it to assess this annually. These recommendations will then make their way through to the policy directive, the regulator and ICASA. Currently, there is a trilateral forum with the Department, the Competition Commission and the regulator to assess this and see what is currently happening. The legislation is a slight hindrance for the Department to try and reduce the costs to communicate. Unfortunately, during COVID-19, there was a reduction. There was a decline of 33% across all the mobile operators. There is a plan to ensure that data is affordable in this country.

Mr Collin Dimakatso Mashile, Chief Director: Broadcasting Policy, DCDT, said that, in terms of ownership, the law indicates that the ICT sector must be owned by South Africans. ICASA will be reporting on ownership patterns within the broadcasting, postal and telecommunications sectors. Due to the requirements in various charters in the sector, it is currently managing the ICT B-BBEE sector council.

Mr Alfred Mmoto, DCDT, said that he would be talking about transformation in general because ownership is just one element of B-BBEE transformation that it is looking at. The current code was gazetted in 2016. The council develops and monitors the record every year to be able to determine the extent of transformation relating to the elements of the B-BBEE sector code, ownership, management control, skills development, and enterprise development. It looks at these reports; what is identified will be the basis of the various engagements. For instance, it can identify that there has been underperformance regarding management control, or women, youth or different groups of society. This record is also submitted to the B-BBEE Commission to look at certain elements and the code to determine what should be improved in the sector. The council has subsequently reviewed the code to intensify transformation in the sector and try to strengthen certain elements like ownership, management control and skills development. This will allow the sector to focus extensively on those because it is perceived to have the economic impact it is looking to address the challenges. Most multinationals have B-BBEE ratings, which should translate into the impact it seeks. The Department has been engaging on these programmes to identify the groups so that they can be able to train – for instance, to strengthen the small and medium-sized enterprises (SMMEs). It will then have the potential for economic growth and to create more job opportunities. These kinds of interventions have been developed. There have been processes with Microsoft, Google and Amazon Web Services, which are still ongoing. The transformation in the sector is being monitored regularly. It focuses primarily on ownership and management control. Control management looks at the different levels of management and to determine if it reflects the demographic of South Africa. Enterprise management is focused on support for SMMEs. This is generally what the Department has been doing.

Mr Alf Wiltz, Chief Director: Telecommunications and IT Policy, DCDT, said that the invitation to apply (ITA), which was issued in December 2021 for the item on spectrum, was there to specifically ensure the promotion of broad-based black economic empowerment. This is in addition to what is already prescribed in the radio frequency spectrum regulations. It specifically said that the licensee must be within 36 months of promulgating the limitations of control and equity ownership by a historically disadvantaged group. The IT sector code 2021 regulations said it must reach a minimum of level four contributor status in terms of the code of good practice. He said part of the disqualification criteria included a requirement that an applicant should not have less than 30% equity ownership by historically disadvantaged persons. So, this is how it was enforced. However, it took it even further. The ITA included, for example, that successful bidders had to host mobile virtual network operators (MVNO’s). In this regard, it said at least 51% ownership should be held by the historically disadvantaged groups. Whereas, in the past, it was 30%. ICASA has now brought a dual system of both applying to individual license and level four status. These new developments and progressive regulations will apply over and above what ICASA already prescribed. The cost to communicate and data service marketing inquiry is a process that has already started in 2014-2016, when the then Minister requested a process to start through the Competition Commission around the cost of data.

This culminated in a report called ‘The Data Services Market Inquiry Report 2019. The report made several recommendations, including some structural changes to the Electronic Communications Act that will bring about more effective competition and mechanisms to reduce the cost to communicate. At the heart of the amendments were the additional powers to enable the regulator ICASA to better regulate the sector and competition. There were a host of matters from rapid appointment, and a new licensing category bringing the best of passive infrastructure.

In terms of sharing, there are linkages to the current proposed spectrum and community networks to improve the whole facilities leasing framework that has been problematic over the years. So, there have been calls to improve these facilities towards a better open access regulation that sets pricing principles. The competition chapters are problematic and cumbersome, so it is difficult to come to some process to do market reviews. Alignment is being done with the competition legislation, which makes it easier for ICASA to do competition assessments and deal with the specific problems in the competition areas. Lastly, there is a direct provision for cooperation between the Competition Commission and ICASA, where the regulator can use the findings of the other regulator in doing its work. There are a number of very good initiatives towards promoting competition and reducing the cost to communicate. It has put together an inter-departmental task team with the Competition Commission, ICASA and other stakeholders such as the South African Local Government Association. It is all working together on the Electronic Communications Amendment Bill, which focuses on competition matters.

Ms Jordan-Dyani said that the goal is to bridge the digital divide, so access must be equal in urban and rural areas.

Mr Ngobeni said that the 5G technology is not only about speed but always the delays of the service. There is often a wide bandwidth with many spectrums required for the 5G compared to previous technologies. There is about 50 megahertz required for 5G.

Mr Sono said that, from a theoretical point of view, deploying a 5G one requires around 80 megahertz (MHz) to 200 MHz of spectrum. This particular spectrum must be a continuous band. Unfortunately, in the past, it was licensed in smaller chunks where operators were many and were given an average of around 2/10 MHz, equating to 20 MHz of spectrum. This is not only a problem in South Africa but a problem worldwide where technology evolves. He said that with technology, anything could be done. There are tools and mechanisms that can be utilised to ensure that different fragmented bands such as 2/10 or 902/10 or 1 800 and 3 600 MHz. This is called a carrier aggregation, meaning that it combines different spectrum bands so that there is a cumulative 80 MHz spectrum. He said that if one looks at the latest spectrum, one would realise that it is getting around 110 MHz. This spectrum is in a different vent. Vodacom uses the same technological aggregation, and it comes at a cost. A combination of different bands such as 718, 3 500 and 2 600 MHz were auctioned, and Vodacom won. The auction was aggregated to ensure it delivers the basic minimum requirements of 5G. He said that 5G is not only about data, but there are also different applications to it such as speed.

In the last conference in 2019, pronouncements were made on 26 gigahertz (GHz) spectrum, which is way above the usual spectrum. It does have its own challenges because the spectrum is at the higher end of electromagnetic wave. It tends to transverse or travel shorter distances. This spectrum can only be used in dense areas like cities and metros, and it cannot be used in rural areas because deploying such a spectrum would need small cells and a small base station, which have to be in one area. It works better, from an economic point of view, in crowded areas. The Department does want to ensure that 5G is utilised in rural areas. It will have to link one base station to another. These are the methods provided if 5G has to be achieved in rural areas. It is possible to be achieved based on the use of other technologies that can be supplemented or complemented with the current technologies. The Department advocates that data be regarded as a basic need, and some of it should be free. This is the principle of “leaving no one behind”. The problem it is facing now is that the people that are more disadvantaged are the ones in rural and remote areas and indigenous homes. This particular policy is saying that these people should be prioritised and free data should be given to those people. The core of the policy is that everyone must have access to data but at an affordable price. The free option will be determined by the regulator and all stakeholders involved in ensuring a real life.

Ms L Bebee (ANC, KwaZulu-Natal) asked what the Department is doing to ensure that mobile operators meet the licensing conditions, since it prefers to pay fines instead of abiding by the government policies. She asked when a full time chief executive officer will be appointed for ICASA.

Ms Jordan-Dyani said that the Department has been in a discussion and caucus with ICASA, on putting measures in place if the mobile operators do not meet the obligations within an agreed time. This is very critical because a mobile operator can lose its license or it can be suspended up until such time it has been reconciled. She said that, when the spectrum was auctioned, mobile operators could opt for the easy in terms of low-hanging fruits, in far as the spectrum roll out rather than focus on urban or semi-urban areas. However, this will still remain a challenge for rural areas insofar as the obligations are concerned. The list of obligations will be coming from government. It has been dealing with government departments regarding the identity of the sites in terms of schools, health clinics, traditional leaders of officers, place of residency, and public libraries. These obligations are then given to ICASA. It is the responsibility of the regulator to ensure that the mobile operators start in rural, underserved and outreach areas first before moving into towns. This is one of the ways quick wins are achieved. During COVID-19, it saw how schools, clinics and people living in rural areas suffered the most because they did not have access. It is the responsibility of ICASA to appoint a full time chief executive officer. The Department can only pass on the message to ICASA and request it to write a response to the Select Committee, in as far as the timeframes for filling the position are concerned.

The Chairperson said that if one puts in a full tank of petrol or diesel in a car, it uses it until the tank is exhausted. There is no point where one is regulated that one can use the petrol or diesel until the end of the month and after that, it must be thrown away. It is not done like that. Why is there a prescription when it comes to airtime and data? Why does it say that it will expire after 30 days? It does not make sense. People should be allowed to use data until it is finished. Why does it have to bring an instrument to expire it? This is brutal exploitation. It must stop because it is unfair towards the people of South Africa. He said that data and airtime are very accessible in many first and second-world countries. Locally, they are so exorbitant, and something needs to be done urgently. The Department has to lead the front regarding accessibility and affordability. These companies must act in the best interest of the nation whilst not compromising what it always looks to do – which is to maximise profits. It should not happen to the extent that it is brutal.

The Deputy Minister said that the Chairperson had raised a fundamental point about the cost and the usage of data.

Ms Ramatlo said that data in South Africa is comparably higher than the global standard and other African countries where the same service providers are operating. MTN operating in other countries are cheaper than in South Africa. She said that research duties had been done that indicate that data costs are higher in Africa, but there is still room for South Africa to reduce the price of data. It is currently undertaking a study as part of its innovative ideas to further reduce the cost of data. The Competition Commission did such a study. It is directly engaging with the stakeholders to understand what the challenges are. Most of the time, it will get a service provider to do this, but the Department is doing this itself. The Department is now receiving more knowledge about the various issues raised. She said that there is something called the ‘subscriber charter regulation’ that was issued by ICAS. It clearly stipulates that operators should allow consumers to use the data that was not spent, but it does come with certain rules and regulations. It is quite complex, and the regulation should be revisited to ensure that it is simpler and that the public can enjoy the benefits of technology.

Closing Remarks by the Deputy Minister

Deputy Minister Mapulane thanked his team for its response and discussion with the Select Committee. He said that the discussions around the spectrum tend to be very technical. It is always a challenge to continue to ensure that it takes it from the realm of technical to practical.

The experience gained from COVID-19 up to now is that the world is getting more and more digital. The digital economy is growing very rapidly. Studies are saying that 50% of the global economy will be digital. The fourth industrial revolution has to be characterised. In many developing countries in Africa and other developing countries, people do not enjoy the benefits of this rapidly growing digital economy because they do not have connectivity. Issues such as this have to be responded to, hence the Department has a broadband policy with a programme called SA Connect that it hopes will attain some of the objectives to ensure that 80% of the countries have access to the internet through a variety of means. This would include a universal service obligation by the network operators and other initiatives.

He said there was a point where the cost of data went down, but all the evidence points to the reality that it is still going up. It is no longer a need to have data but an absolute essential. So, the cost of data has to come down. However, people are impatient and raise demands. It will take some time to bring the costs down. There is work being done to ensure that data is affordable because people need it to access work, especially the youth. There is indeed competition because MTN is one of the mobile operators dominating the market. There are mobile operators or service providers that do not facilitate competition. The Department is looking at making the entire spectrum wireless like Open Access. However, some plans were abandoned because of experience in other markets. It drew a lot of lessons from the collapse in Mexico. There was a need to rethink that approach, and the view was to utilise the next spectrum policy. The proposed amendments will help with the issue of competition and ensure more transformation.

Transformation is an important aspect for ownership and for ensuring that the majority is of the people who inhabit this land. It does still remain a struggle. The Department is also unhappy that the data cost has not decreased. It is not only the responsibility of the Department to ensure that the costs of data comes down, but also that of the regulator. A government policy must ensure that the sector is regulated in a manner that would do all the things spoken about, such as competition and transformation. The regulator is an independent body that manages its own affairs. So, the Department does not work there, but questions can be taken to them, while ensuring that they are responded to.

Closing Remarks by the Chairperson

The Committee was appreciative of the responses by the Department. It was happy that things were taken seriously and that follow-ups would be made. The Committee has raised a number of issues concerning competition, transformation, providing a better service and affordability. All of these things are important.

The issue of technology is part and parcel of the present trajectory, but it is also a vehicle that is going to that it to the future of evolution through a revolutionary approach. The Committee expressed its deep-felt gratitude to the Department for always being readily available for meetings, presentations, and responses. The Committee also expressed its appreciation towards the Minister. Although the Minister could not attend some of the meetings, she has actually communicated with the Committee. He said that the festive season is here, and it is a period to interface with families and communities at large. He hoped for the best for the year 2023. He wished the Department a robust engagement that is constructive and productive for its meeting where it will be refreshing its mandate. He hoped that the policy project would bring the much-needed solutions to the challenges that the entities are facing. The Committee was appreciative of the manner in which the questions were responded to. He said there is hope that nothing cannot be resolved if it works in a manner that pays attention to detail. If it cannot do that, it does outsource it to find solutions.

The Chairperson thanked the Members for the manner in which the work for 2022 was done. He said that the Members should go back home and interface with families and communities to not only remain relevant as public representatives but remain rooted in their culture. He said that the Committee should, at all material times, strike a balance between modern beliefs and the original belief system. If this is done, people can be the best of what they are expected to be. No nation will ever succeed if it negates its own culture.

Ms Ngwenya asked if the minutes would be adopted.

The Chairperson said that the minutes cannot be adopted because the Committee was not quorate. He thanked everyone for all the work they had done. He thanked the researchers and the secretariat for all the work they have done to ensure the Committee is efficient and effective. Everyone is working towards the same goal. The only difference is that some are public office bearers and other are civil servants. He said that these are just semantics. He wished everyone an early Merry Christmas and a Happy New Year.

The meeting was adjourned.