Sean Nourse

Don’t be wholly discouraged by current regulation challenges

Recent regulatory delays in the telecommunications sector has left the business sector feeling despondent, but industry players believe the situation is not as hopeless as it seems.

Winston Smith, MD of Alvarion, says in theory, the telecoms regulation outlook in SA is very positive. “ICASA has provided the spectrum guidelines to the market, but unfortunately has already postponed the invitation to apply to end May.”

Smith says the intention is to award spectrum to prospective applicants in the 2.5GHz and 800MHz bands, during the course of 2012. “This is very promising, even though there is no word regarding the 3.5GHz bands yet, and the spectrum in the 800MHz bands is dependent on the spectrum which is currently been utilised for TV broadcast to be freed as part of the digital migration process.”

Winston Smith

Smith believes that any news on spectrum allocation is good news, and the potential for new operators to increase competition and reduce pricing is starting to look like a reality long awaited by the market. “The regulator and Department of Communications (DoC) are eager to open the market with the introduction of the invitation to apply for licensed spectrum, open discussions on local loop unbundling and the digitisation of the broadcast network,” he explains. “And this bodes for much needed changes in the telecommunications market within SA.”

According to Robert Madzonga, chief of corporate services at MTN, the SA communications market is currently operating in a fiercely competitive, multi-operator environment. “The fundamental issues from a policy/regulation perspective are the decisions taken now on spectrum. To realise the potential of mobile broadband in SA, network operators need spectrum to support increased capacity and coverage. To facilitate first phase LTE roll-out, the DoC should prioritise the timely and harmonised release of the 790 – 862 MHz (Digital Dividend) and 2500-2570 / 2620-2690 MHz (2.6 GHz band) spectrum for mobile.”

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Lex van Wyk" src="http://www.iweek.co.za/images/stories/2010/March7_12/Lex%20van%20Wyk.jpg" />Sean Nourse, Internet Solutions’ executive for connectivity, however, believes that the telecoms regulation outlook is rather bleak considering the most recent delay by ICASA in the unbundling of the local loop (by 12 months to November 2012), and the knock-on implications this has for the 2013 goal of auctioning off digital dividend spectrum. “It is through the digital dividend spectrum that rural areas will have access to efficient and cost-effective Internet access,” he says.

Private sector ISPs have grown tired of waiting for legislation which will govern equitable access to last mile infrastructure, and are deploying fibre through metropolitan areas – implying both massive private sector investment; and the doubling-up of infrastructure, he continues. “The constant delays to loosening the regulatory stranglehold on the industry have become obstructive as private sector organisations will clearly invest CAPEX in high-profi t areas which will guarantee a return on investment – a move which does not bode well, necessarily, for the country’s economic growth and empowerment.”

Nourse points out that, in Europe, having connectivity is a right. “Internet penetration has a direct impact on a country’s GDP,” he says. “And in a country like SA where there is a high unemployment rate, entrepreneurship needs to be supported and facilitated.”

MTN’s Madzonga agrees with this standpoint, and explains that connectivity is being increasingly seen as an integral driver of improved socioeconomic performance.

According to an Analysis Mason Report (November 2010), he says, wireless broadband is forecast to have a direct revenue impact of R28 billion (0.7% of GDP) in 2015 in South Africa. “Moreover, the report states that recent econometric studies have quantified the direct impact on productivity and economic growth suggesting that an increase in broadband penetration of 1% could result in 0.1% productivity gain. In addition, wireless broadband and related industries could generate about 28 000 new jobs and 1.8% of GDP by 2015 and it will benefi t the healthcare sector by realising South Africa’s potential in telemedicine.”

On the upside, Madzonga points out how mobile operators have contributed substantially to government objectives, by bringing unprecedented levels of connectivity and the substantial socioeconomic benefits that come with this. ”Future plans are to bring broadband coverage to 85% of the population within the next few years. The challenge is the high demand for capex investment without the threat of being cut-off from the broadband market through spectrum starvation,” he says.

To overcome this challenge, he explains that a balanced approach to the (early) release of LTE spectrum is required. “The benefi ts of substantial scale, reach and know-how of existing licensees must be considered to realise the objective of ‘Broadband for All’. In addition, to realise this objective, the private sector requires engagement from all sectors of government. Industry has often complained of the costs and delays involved in getting the planning permissions required for network expansion. This is a key area where government can act to ensure the development of the rapid deployment guidelines as envisioned in the Electronic Communications Act (ECA), in order to ensure that broadband infrastructure is rolled out rapidly and cost effectively.”

Alvarion’s Smith agrees there isn’t enough being done to connect rural areas (and SA) to the rest of Africa. “Operators have either very ‘easy’ targets to meet in terms of their licence obligations or none. This simply means that the desire to serve these markets effectively is not there. ICASA, however, has placed much stricter obligations on the new spectrum holders such as the having to provide 70% geographic coverage within five years, of which at least 50% must exclude the large metropolis. This will essentially force new operators to cover markets that are currently under served.”

OPPORTUNITIES OPEN UP

Nourse believes that South Africans’ can-do attitude has seen the innovative utilisation of technology bypass some of the hurdles of the regulators.

In addition, Smith believes the regulator is encouraging the use of open access models, whereby multiple operators utilise a single network and licence thereby further increasing the potential number of operators and subsequent expansion of broadband.

According to Lex van Wyk, MD of Teraco, SA’s telecoms infrastructure is in its infancy from a terrestrial perspective. He says that this last-mile technology represents a major remaining challenge because the cost of providing highspeed, high-bandwidth services to individual subscribers in remote areas can be higher than the service provider would like. He believes the country needs another three to five years before the fibre is laid and users will really benefit. “However, the resulting open-connect between service providers and business will be of great benefit to everybody,” he says.

Smith explains that corporations are utilising technologies that are either not requiring licensed wireless spectrum or using wired alternatives, such as fibre, to provide high speed connectivity for their businesses. “The reality is that today whilst there are many different access mediums, licensed wireless options such as WiMAX or LTE would form a key part of the solution due to the improved spectrum efficiency, interference mitigation and advanced antenna techniques over that of unlicensed wireless technologies.”

Essentially, Smith says, this means that large corporations requiring high bandwidth and high availability networks are forced to either use the existing incumbent operators, or deploy their own expensive fibre networks with much longer deploy times.

Compared to international telecoms regulatory environment, Smith believes ours compares favourably with other developing markets, except in terms of timeline. “We are largely behind these markets in opening up the telecoms opportunities. Clearly we are following best practice models, but already all of our neighbouring countries in the SADEC region as well as the other members of the esteemed BRICS countries are ahead of SA in terms of awarding spectrum licences for 4G networks ensuring multiple operators and related competition in broadband pricing.

We are significantly lagging in this aspect and as such have to be content with low broadband penetration rates which equates to slow economic growth, he says.