South Africa’s Prolonged Spectrum Wars Reach Bullish Inflection Point

During the coronavirus lockdown of 2020, the Independent Communications Authority of SA (ICASA), which is South Africa’s telecoms watchdog and regulator, enabled some of the country’s largest mobile network operators to significantly boost their internet services. 

To increase browsing speeds for a nation categorized as one of the most hit by the pandemic, ICASA issued some temporary spectrum to these service providers, giving them a valuable chance to cope with the surge in demand for work-from-home data.

Spectrum is used to refer to the radio frequencies that aid the transmission of everything from data to information. By releasing more spectrum, ICASA gave telcos such as MTN and Telkom South Africa the avenue to provide more quality internet services to consumers who were at the time adhering to one of the strictest COVID-19 lockdowns of all time. 

The motive, at the end of the tunnel, was about reducing the number of dropped calls and drastically increasing download speeds. 

Did it work? Tremendously. According to the 2021 Mobile Network Quality Report by MyBroadband Insights, the allocation of the temporary spectrum [for free] during the national lockdown enabled South Africa to flex an average mobile download speed of 40.86 MB/s and an upload speed averaging 13.82 MB/s. 

A taste of what’s to come

With the extra spectrum, operators increased their network capacities; Vodacom and MTN, two of the largest MNOs in South Africa, used the opportunity to launch 5G services. In the middle of the frenzy, African Rainbow Capital Investments-backed Rain—a data-only telco—also rolled out the fifth-generation connectivity. 

However, because these spectra were allocated temporarily and at no costs, ICASA soon revealed its plans to withdraw them from operators by the end of November 2021. 

As expected, telcos expressed their dissatisfaction with the regulator’s intentions, citing the immense changes network expansion has brought into the industry, ultimately for the benefit of South African consumers. With ICASA not indicating a reconsideration, its relationship with the market’s biggest providers became cantankerous. 

Soon, Telkom SA filed a lawsuit against ICASA before the High Court in Pretoria, a play to legally block the telecoms watchdog from withdrawing the spectra it issued during the apex of the no-nonsense quarantine episode. 

According to the court papers, Siyabonga Mahlangu, the group executive for regulatory affairs at Telkom, highlighted that ICASA abruptly truncating the spectrum grace period would not be in the benefit of consumers and can potentially stunt the “greater functioning of the national economy”. 

Generally, South Africa’s mobile operators were worried that cutting off the network expansion drive would affect people working and/or studying from home, as they would suffer a humongous decrease in connection quality when ICASA reclaims the spectra. In the real world, this meant it would become a lot harder to stay connected to online meetings and jeopardize uninterrupted content streaming. 

The collective belief was that the temporary spectrum should remain in possession of the concerned telecom operators for as long as South Africa battles with its national emergencies. Indeed, the country is said to be currently bracing for a fifth wave of COVID-19 infections, and the economy, despite exiting what was the nation’s longest recession in 28 years, might not attain pre-pandemic levels until 2025. Meanwhile, Eskom’s electricity woes are shockingly far from over.

ICASA, while expressing willingness to defend itself in the court case, pointed out that the South African players who received additional spectrum ought to have been prepared for the withdrawal. In the watchdog’s argument, the mobile operators would continue benefiting from the spectrum under eased regulations, seemingly suggesting there was never a bone to pick amidst the confluence of the allocation. 

More than a decade behindhand

South Africa has not held a spectrum auction in more than a decade, despite the apparent potential that abides in a relatively industrialized economy dominated by highly educated and technology-savvy youths. 

The last time a spectrum was allocated was in 2011 when it issued 2.1 GHz to Cell C, a middle-tier telecoms operator in the market. What’s more, the last major spectrum allocation events happened in 2004 when it issued 1.8 GHz to Vodacom and in 2005 when it gave 2.1 GHz to MTN—enabling both telcos to launch 3G network services. 

Apparently, such frequencies are hardly sufficient to bolster the full transition to 4G, LTE, and of course, 5G. While 3G spectrum frequencies often range between 1.8 GHz and 2.5 GHz, 4G falls under the 2 GHz-and-above category. 

Today, a majority of the commercial 5G networks that have been deployed across the world rely on the spectrum in the 3.5 GHz range (which is between 3.3 GHz and 4.2 GHz). Should South African telcos continually rely on these spectra, it would culminate in more business spending, which means consumers will pay more for data services. 

ICASA has made a number of attempts to hold a spectrum auction, trying (and failing) at least once every year between 2017 and 2021. Unfortunately, amidst lawsuits, the allocation process has been stopped in its tracks one too many times. 

Apart from Telkom, MTN also took ICASA to court, however, for a completely different reason: intending to leave the operator out of one of the auction attempts last year. Also, e.tv, a lower-tier telco, sued ICASA alongside Telkom. At some point, MTN mounted a legal challenge against Telkom, as the operator looked to put an end to delays in the long-awaited broadband spectrum release. 

The regulator-operator tussle seemed to peak when the High Court in Pretoria ordered ICASA to halt the auction arrangements altogether, urging the industry to prioritize switching from analogue to digital frequency bands. 

Truly, this is a long-overdue switch, one that has indirectly hampered further spectrum allocation; there simply isn’t enough spectrum available for mobile operators to acquire. That might have something to do with ICASA’s alleged moves to leave telcos with more than 45 percent market share out of the bidding.

Despite the ups and downs from the previous year, 2022 is shaping up to make up for lost time. Word on the street is: ICASA (yesterday) has finally kickstarted the spectrum allocation process. It officially began with an opt-in auction comprising one bidding round wherein only tier-2 operators are eligible to compete. As such, leaving out MTN and Vodacom—for now—Cell C, Liquid Telecoms, Rain Networks, and Telkom SA. 

“The round will close early if bids from all qualified bidders were received before the scheduled end of the bidding window. Up to two authorized representatives of each qualified bidder, regardless of whether they are eligible to bid in the opt-in auction, will be allowed to observe and monitor the process,” ICASA reported.

On March 10, 2022, the second and most important stage of the auction process will accommodate six qualified bidders, including MTN and Vodacom. 

Image Courtesy: Cloudfront