South Africa proposes a single wholesale open-fibre network

By:
Natalie Bannerman
Published on:

The South African government proposes a single wholesale open-fibre network that will force licensees to buy capacity and potentially give back spectrum

Robert Nkuna, South Africa’s telecommunications & postal services director-general, defends proposal to create a single wholesale open-fibre network (woan).

Since the Electronic Communications Amendment Bill was created the government has faced a lot of opposition from the telecoms industry. In particular, MTN and Vodacom, the country’s two biggest operators, have said that the bill will hurt their business. Speaking at a conference in Sandton, SA, Nkuna attempted to reassure the industry of the government’s plan’s and justify its rationale. 

“We are well meaning in what we are doing,” said Nkuna. “If this industry is to expand, grow and facilitate growth in other sectors, we need some changes. Is the department expecting new companies of the scale of MTN and Vodacom? Maybe not. But our view is, with this intervention, we can have medium-tier companies emerging. These companies will be independent of whoever is providing network and spectrum access.”

However, Godfrey Motsa the CEO of MTN South Africa, said: “A slowdown in capital investment in our mobile networks will degrade the service and quality of the networks. This will have serious and unintended consequences, including the hindering of economic growth with a negative impact on job creation.”

Both MTN and Vodacom invest roughly 20 billion Rand a year ($1.4 billion) in network infrastructure, a fact that Motsa said will be also be impacted by the implementation of this bill. He adds that the risks associated with the bill are “extensive and significant” and it will discourage investment.

Nkuna denies this saying that government will not be “reckless” in its interventions and “any notion that … the department is trying to destroy the existing companies … that is not our intention.”

A hybrid model is Motsa’s suggested solution to the problem and backed by the major operators, a decision he said was created through “active collaboration between both the ministry and the industry. The new bill deviates substantially from that proposal.”

Under woan telecoms licensees will be expected to buy capacity, creating what the Free Market Foundation has described as an “infrastructure monopoly” in the country. It went on to say that the new legislation “ignores months of behind-closed-doors negotiations” between the mobile network operators and the government.

Leon Louw, executive director of the Free Market Foundation, added to these concerns highlighting a clause within the bill that requires mobile operators to return previously allocated spectrum “in which they have invested billions” of rand and a requirement for mobile operators to provide access to their network infrastructure to competitors at cost-based pricing.

“We need to figure out what happens when the expiry date arrives, said Nkuna. “Because (the operators) have been issued with this spectrum, (do they) just continue (using it), irrespective? What we are envisaging is a new licensing dispensation, post 2027/2028, on what will be the best way of using this scarce resource. We will need to do a study well in advance, by the regulator, to say at the expiry of the (spectrum) licences, what then happens?”

But once again Nkuna defended the new bill saying that woan will create better service-based competition. Adding that that members of the Internet Service Providers’ Association, which represents many of the county’s internet service providers, have said that they’ve long struggled with access to spectrum and have therefore been unable to compete, Nkuna believes woan will fix that.

“We can never be reckless in the decisions we take as a government,” Nkuna said. “On the whole, we are trying to drive South Africa into a digital society and knowledge economy. That’s the endgame. The industry will have to sit down and design this network however they want to do it. The emphasis is on sharing the scarce resources (spectrum) at our disposal.”

Alf Wiltz, telecoms department chief director, echoed Nkuna’s view and adding that the government will find ways to incentivise the Woan to ensure its success. “We need to move away from spectrum that is assigned exclusively to the few incumbents and more to a situation where spectrum is shared,” said Wiltz.

There are to be industry hearings on the 1 & 2 February 2018 where all industry players will be able “to explain what it is they are raising”, said Nkuna. All parties have until 31 January 2018 to contest the bill in writing.

“We want to conclude the process by the end of the financial year (31 March 2018),” said Nkuna. Although he stresses that although he wants to complete the legislative process “without delay”, the government “still wants to consult sufficiently”.