Spectrum pricing a barrier for 5G in SA

South Africa's mobile operators are calling for lower spectrum pricing saying high fees may prove to be a barrier to 5G growth in the country.

This was one of the findings of a study into the prospects for 4G and 5G in South Africa by technology market research company, World Wide Worx.

The report found that emergency temporary spectrum, and the promise of permanent spectrum by the end of this year, may have given a glimmer of hope to mobile network operators wanting to roll out next-generation 5G services.

But spectrum pricing and regulation delays are impacting the efficient and cost-effective roll-out of both 4G and 5G.

"When we look at other countries with lower consumer data prices, there is a direct correlation between lower spectrum auction prices and greater network investment," said Arthur Goldstuck, managing director of World Wide Worx and principal analyst on the 5G research project.

"At the same time, delays in making high-demand spectrum available will probably hurt poverty-stricken areas most, because those who are willing to pay for coverage will naturally see more infrastructure investment in their areas, compared to those who can't afford data."

Arthur Goldstuck, managing director of World Wide Worx.

World Wide Worx conducted in-depth interviews with the major mobile operators, including Vodacom, MTN, Telkom and Cell C, as well as Seacom, which supplies much of the international backhaul that provides operators with data capacity.

All operators were unanimous on the fact that a high price for bidding on spectrum will have direct impact on quality of service.

Both Vodacom and MTN confirmed that lower spectrum prices would incentivize greater coverage of rural areas, noting that less money spent on spectrum translates to more money they can spend on infrastructure for serving consumers.

The GSMA has previously warned governments and regulators to avoid inflating 5G spectrum prices, as it risks limiting network investment and driving up the cost of services.

"The promise of new entrants to the market will be still-born if we don't see creative approaches to pricing," said Goldstuck.

"Only the major operators have the existing infrastructure and capex budgets to allow for a national roll-out of 5G, and a high upfront cost means that even regional newcomers will be kept out of the auction," he said, adding that one option would be to allow installment pricing which could be more viable for smaller players.

Never ending delays
South Africa's love-hate relationship with spectrum has been going on for years, with operators waiting over a decade for government to issue more high-demand spectrum for 4G rollout.

Now the market is anticipating a 4G spectrum auction by the end of 2020, with a possibility of some 5G bands included, or auctioned separately in 2021.

But after years of broken promises from government, operators remain in the dark.

The Independent Communications Authority of South Africa (ICASA), has said it will soon issue an Invitation to Apply (ITA) for high-demand spectrum.

However, Goldstuck points out that ICASA told Parliament's Portfolio Committee on Communications that the ITA would be issued by the end of June.

However, at the beginning of July it announced that, "given the complexity of the process, there are additional considerations the authority must apply itself to."

In 2005, Vodacom and MTN received some 2.1GHz spectrum for their 3G roll-out, and Cell C was allocated spectrum in 2011.

Since then, operators have had to refarm 3G spectrum to facilitate the roll-out of 4G to consumers.

World Wide Worx said that as a result, investment that could have been made in providing affordable access to customers was diverted to servicing technical issues.

Operators have been hopeful since 2016, when ICASA's previous ITA for high-demand spectrum was issued, but that process was derailed by a court case from then Telecommunications Minister Siyabonga Cwele, and operators are still waiting for an auction.

In April 2020, ICASA gave some operators emergency spectrum to meet the spike in broadband services demand due to the COVID-19 pandemic. The emergency spectrum allowed both MTN and Vodacom to launch 5G services in the country.

ICASA previously said the emergency spectrum will only be available until three months after South Africa's national state of disaster ends, or at the latest until November 30, 2020.

But operators told researchers they do not expect the temporary spectrum to be withdrawn before new spectrum is issued.

Despite this, the regulatory slowdown has left question marks over the process needed for its continued use.

SA operators have been forced to refarm 3G spectrum to facilitate the roll-out of 4G to consumers.

Dirty spectrum
Operators say much of the emergency spectrum has proved to be less helpful than originally expected, calling it "dirty spectrum," which has been degraded by interference from TV broadcast services that have still not migrated from analogue to digital.

South Africa missed the International Telecommunication Union's (ITU's) June 2015 deadline for all countries to switch from analogue to digital television, and since then the process has moved at a snail's pace.

"The 700-800MhZ emergency spectrum can only be used for experimentation and innovation for now," MTN told the researchers.

"Unfortunately, we couldn't use this emergency spectrum in the areas we expected and wanted to release in because of high-levels of interference from analogue."

The emergency spectrum that was issued is in what is known as TV white spaces – the spaces between TV channels that will be available when all broadcasting is digital.

World Wide Worx said it is "all but unusable due to a combination of noise from analogue signal, and these bands not being freed up across South Africa".

Telkom further warned that the emergency spectrum issued had only been suitable for entry-level purposes.

For full 5G services to be rolled out it believes ICASA would need to allocate large "contiguous blocks" of spectrum, and the reality is that in some spectrum bands, such as the 700-800MhZ and 2300MhZ, such blocks are simply not available.

Until the regulator acts decisively on both digital migration of TV and cost-effective spectrum allocation, World Wide Worx believes SA consumers will continue to experience expensive data and poor coverage, compared to countries where spectrum has been issued efficiently and cost-effectively.

— Paula Gilbert, Editor, Connecting Africa