The government’s scramble to slash debt and find more sources of revenue may be the push it needs to finally give mobile operators their wish for new high-demand spectrum — the radio frequencies on which data and information are carried.
At a time when finance minister Tito Mboweni is trying to save up to R160bn over the next three years, the sale of new spectrum may give the National Treasury some water to fill its leaking fiscal bucket.
The minister indicated as much in the budget speech. Referring to the source of money for a new sovereign wealth fund, he said "there are a variety of possible funding sources, such as the proceeds of spectrum allocation" that the state is considering.
SA’s last big set of spectrum was allocated in the 2.1GHz band, which enabled Vodacom and MTN (in 2004 and 2005 respectively) to roll out their 3G network. Cell C received such spectrum in 2011.
But Mboweni doesn’t put a timeline to the allocation. "The spectrum licensing plan was released in November, preparing the way for auctioning high-demand spectrum," he said, adding that industry regulator the Independent Communications Authority of SA (Icasa) "will be appropriately capacitated" for this.
Critics are doubtful of the government’s urgency. When tabling his budget last year, Mboweni declared to much applause: "Data costs must fall!" He said at the time that he would "work relentlessly" with communications minister Stella Ndabeni-Abrahams to ensure that spectrum is allocated as soon as possible.
And even if spectrum is allocated tomorrow, it’s unlikely that operators will be able to use it immediately, says Mark Williams, MD at global consulting firm Berkeley Research Group. Digital migration — where analogue television signals are to be switched off in favour of digital television, which will free up frequencies for other uses like mobile communications — has not yet taken place.
"The 700MHz and 800MHz spectrum is a good example," says Williams. This spectrum has not yet been cleared of existing users and it is not clear when it will be.
"This means that these vital spectrum bands are being assigned but with no understanding of when they will become available for use by operators."
Still, the Treasury has made plans for at least part of the digital migration project. In its Budget Review, it says that to unlock spectrum for high-speed internet, R1.9bn is "reprioritised" to subsidise devices that allow analogue televisions to receive digital signals for 2.8-million low-income households. A voucher system will be introduced to allow households to acquire these devices.
Williams says: "Access to spectrum is critical for the sector, for customers and for the broader economy, as it is an essential component of telecommunications and will become even more important as we move towards 5G."
Mobile operators have long argued that new spectrum will help reduce the cost of mobile data in SA. It will allow network operators to cover a wider geographic area with existing towers while carrying more data traffic.
But in its absence, operators have had to reallocate or "re-farm" existing 2G and 3G radio waves for 4G services at great cost. Vodacom and MTN, which have the largest networks in the country, spend about R10bn a year to build their networking infrastructure.
However, once licences have been awarded, Williams says, "it is very difficult to change assignments, so care needs to be taken in the way that spectrum is put out into the market. If it is assigned in the wrong way, it could lock the industry into unbalanced market structures for many years to come."
Industry players have already criticised Icasa’s proposal for how spectrum will be allocated. Some say a pure auction would likely favour the large players, Vodacom and MTN, as they have the deepest pockets.
With the world on the cusp of a 5G future, Williams warns that the government and Icasa need to have a carefully thought-out strategy for 5G. "There is a risk that 5G will develop in an unco-ordinated way and not result in the investment and competition that is needed to really deliver the full potential of the technology."
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