Telkom prepares for spectrum battle with SA regulator
Telkom is not happy about the way South Africa's spectrum allocation is being handled by the Independent Communications Authority of South Africa (ICASA), and the operator is consulting lawyers to advise what it should do next.
"We believe that competition in the mobile sector is ineffective. The licensing of spectrum is one of the most potent tools in the hands of the regulator, to reset the imbalanced market structure and promote competition," Telkom Group CEO Sipho Maseko said during his live-streamed half-year results presentation earlier this week.
"We believe that ICASA as the regulator missed the opportunity to use the licensing of spectrum to address the monopolistic nature of the market."
South Africa's smaller players have for years complained that the local market is a duopoly controlled by the two biggest operators, Vodacom and MTN.
Maseko said that ICASA has disregarded the findings and recommendations made by the Competition Commission that it must not license spectrum in the manner that entrenches the duopoly.
After years of delays ICASA in October published the Invitation To Apply (ITA) for spectrum for both the planned Wireless Open Access Network (WOAN) and individual spectrum for operators.
The bands that will be licensed include lots of 700MHz, 800MHz, 2.6GHz and 3.5GHz spectrum.
He said that Telkom was preparing and planning to participate in the upcoming auction but its participation "should not be construed as a tacit agreement" to the ITA's contents.
"The caps proposed in the ITA disregard the fact that spectrum is available to the duopoly already through spectrum arrangements between themselves and smaller licensees," said Maseko.
"And we also think that there's a missed opportunity to enable the WOAN as an effective competitor to the duopoly including for 5G services, given the limited spectrum that has been given to it."
"Our view is that the current duopoly will be entrenched, at least for the next 20 years, which is the period of the spectrum license, including 5G services. There's an urgent need to level the playing field before this long-term commitment is made," he added.
Legal battle looms
In October, Telkom said it believed a spectrum arrangement between Vodacom and Rain should be considered a merger that should be scrutinized according to the Competition Act, and asked South Africa's Competition Tribunal to look into the agreements . Rain and Vodacom denied that the deal was a merger.
"There needs to be public inquiries that are held so that the actual arrangements between the smaller players and the larger players are understood; and their effect on competition," Maseko said this week.
He said Telkom had also made written and verbal submissions to ICASA as part of the ongoing Mobile Broadband Service Inquiry about the implications of the licensing of spectrum, including the need for a public assessment of the spectrum arrangements between smaller and larger players.
"We've also therefore instructed our lawyers to consider and advise us on the options that are available to Telkom, in the light of the fact that the ITA disregarded or [gave] insufficient weight to the promotion of competition as a material consideration in the licensing of high demand spectrum.
"Whatever action we take will be designed to ensure that there's regulatory certainty, that there is fairness, there's lawfulness and also there is the speedy licensing of a high demand spectrum. It can't be done on an unfair basis, because that actually increases the level of uncertainty for everybody," he said.
Maseko said that if policymakers want effective competition and want prices to come down they have an instrument in their hands to do this, through how they allocate spectrum.
"But if the policymakers decided that actually they want to have a market structure that looks exactly the same way as it is, obviously we would have no choice but to survive and operate with the spectrum that we have. But we don't think that it is good for the economy, we don't think that is good for the market.
"We've made what we consider to be sensible representations with regards to spectrum. We are not looking for an asymmetry in our favor. All that we are looking for is the right balance, to enable competition across the market structure," he concluded.
— Paula Gilbert, Editor, Connecting Africa