Court ruling to halt South African spectrum auction thwarts 5G rollout

Pretoria High Court decision to halt auction is the latest delay in making spectrum available for 5G services.

Wireless telecommunications tower encircled by concentric, virtual rings.
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The High Court in Pretoria shattered hopes for a breakthrough in South Africa's progression to 5G networks last week when it halted the long-awaited auction of radio frequency spectrum licenses set for March 31.

Infighting over spectrum allocation has dragged out for 16 years, and the High Court ruling is a crushing blow for operators who are increasingly frustrated in their efforts to modernize telecoms in Africa's most advanced economy, as well as for consumers who have been promised lower prices and faster internet services for as long as anyone can remember. 

High Court Judge Selby Baqwa's ruling prevents the Independent Communications Authority of South Africa (ICASA) from proceeding with the auction, and also suspends the closing date for submission of applications, until a hearing is held on issues brought forward by telecoms operator Telkom and broadcaster e.tv.

Telkom, South Africa's former state-owned telecoms provider, along with the pay TV operator e-TV,  joined forces to argue that spectrum allocation should not take place until the issue of digital migration is solved. Broadcasters are supposed to migrating from analog to digital technology, freeing up spectrum they currently use for 4G and 5G mobile communications.

Broadcasters move slowly on digital migration

The broadcasters are moving slowly though, and still are using some of the spectrum that is being auctioned off. The digital migration saga has confounded the government since the first deadline for switching from analog to digital in 2015 was missed.  A parade of overwhelmed ministers and competing agendas at the Department of Communications has essentially seen the project grind to a halt. 

"Given the sheer geographical scope of the country that providers have to cover to provide broadband services — and the accompanying economic and social benefits — to the bulk of the country, rolling out fibre infrastructure is going to take quite some time," said Samantha Perry, a telecommunications analyst, in an analysis sent to media outlets. "High-demand radio frequency spectrum can help here but these frequencies desperately need to be assigned. It's been delayed for too long and it's costing consumers, operators and the economy dearly."  

ICASA indicated it would be lodging an appeal to last week's High Court ruling. "We have never been so close to licensing high demand spectrum," ICASA Chairman Keabetswe Modimoeng Said in a press release. "We were literally three weeks away from auctioning this much-needed resource that would have seen South Africans benefit through this process in terms of reduced data costs and improvement in quality of service and experience."

Government promises action on clearing spectrum

A potential benefit of the ruling, though, is that it might light a fire under the government's efforts to get broadcasters to finish their digital migration journey. Telecommunications Minister Stella Ndabeni-Abrahams put out a statement saying "the department remains committed to and focused on completing the Broadcasting Digital Migration project, and switching off all analogue transmitters, in line with the announcement made by President Cyril Ramaphosa during this year's State of the Nation Address."

5G comprises a set of standards and technologies designed to enable transmission speeds up to 20 times faster than 4G. There has been a huge amount of momentum building around 5G in South Africa. Research consultants Africa Analysis, in their Market Forecast for 2021, which was released before the delay, had said they were expecting rapid 5G roll out across the country, with the goal of reaching 11 million consumers by 2025.

Low cost 5G smartphones were also expected to play a big role in the uptake, as "the number of announced 5G devices, from a global view, at December 2020 has already surpassed the equivalent number of 4G devices at three years after the introduction of 4G." according to the report. 

When asked about the impact of the delay on the sector, Dobek Pater of Africa Analysis released a statement saying that "this depends on when the auction will actually take place and the resultant spectrum assignment. And also, whether the March 2022 deadline for broadcasters to vacate the low-band spectrum so that it can be used by the telcos is final, or if it will continue to be a moving target."

Dobek forecasts that the financial impact on South African telcos is likely to manifesting in three ways:

  • With continued refarming of spectrum, operators are already running less efficient networks, which translates into higher OPEX (operating expenses) than would have otherwise been the case.
  • Offering of new services (e.g., especially 5G services) often translates into an average revenue per unit (ARPU) uplift, in other words, higher revenue generation per customer. Without the incentive to build new infrastructure for 5G, operators may not realise higher revenues, so it will be an opportunity loss.
  • If the outcome of the current interdict / court challenge is a restructuring of the auction and/or a longer delay, bidder operators will probably have to spend more money on consultants to redraw their bid strategies and possibly re-evaluate the market. (This is a small cost in the greater scheme of things.)

The simple fact that the auction was so close has thrown the industry into disarray, and it will take some time before the implications are fully understood. But all the major players would have spent time, money and effort preparing for the auction, and will now be forced to rethink their plans for the short and medium term. 

Auction delay affects LTE as well

In addition, though the controversy around the High Court's ruling attention has focused on its effect on 5G rollout, 4G LTE is also affected. The High Court's ruling stopped the auction of IMT (International Mobile Telecommunications ) bands IMT700, IMT800, IMT2600 and IMT3500, which can be used for 5G or LTE 4G technology.

 "The release of spectrum in these bands, delayed to date by the slow digital migration process (which is now years overdue) are critical to ensure wider LTE rollout (something like 30% of the country actually has LTE coverage) and reduced prices," Perry said. "Operators have been repurposing spectrum in the lower frequency bands for years to enable services like LTE and it's not efficient or sustainable in the long-term."

Copyright © 2021 IDG Communications, Inc.

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