An International Telecommunications Union forum on November 17 2007 reached a treaty aimed at meeting the global demand for radio-frequency spectrum, which has been fuelled by rapid technological developments and growth in the ICT sector. The treaty, reached at the World Radiocommunication Conference 2007, aims to ensure “the most rational and efficient ways to exploit the limited resource of radio-frequency spectrum” and among others, stipulates that valuable radio spectrum now used mainly by broadcasters should be opened up to broadband services offered by mobile phone operators.
The new treaty came hot on the heels of the Connects Africa Summit, where there were calls for infrastructure-sharing and for effective spectrum management as some of the ways to improve connectivity in Africa.
This CIPESA/Fibre for Africa paper makes the case for reform in the allocation and management of spectrum for telephony, and argues that efficient spectrum management has a bearing on efforts to deliver affordable fibre in Africa.
Neotel’s quest for ‘cheap’ spectrum
South Africa’s Second National Operator Neotel last March reported a milestone when it was awarded a licence by the Independent Communications Authority of SA (ICASA) to operate on the 800 MHz frequency. Without access to that spectrum, it would have been forced to work through a sphere owned by a competitor – Telkom SA – which would have represented an expensive option for Neotel. Neotel said the 800MHz frequency band is critical for ensuring consumers benefit optimally from technologies whose handsets are available at low cost. ICASA said the allocation would “open up access to new, innovative and world-class technologies, and the provision of services to low-income consumers for whom telecoms has previously been unaffordable”.
This narrative about Neotel has a bearing on efforts to deliver affordable fibre in Africa. It shows that the market is the loser where few operators have access to a strategic and scarce resource such as spectrum (or international fibre). It follows that where such monopolies or duopolies exist, regulatory mechanisms are needed to ensure that they do not arbitrarily decide what to charge for their services. While this could call to mind the need for multi-national collaboration in developing regional fibre, it also raises questions as to whether the more favoured spectrum bands in Africa are optimally managed and utilised.
What ITU Says
Spectrum is the lifeblood of mobile communications, enabling operators to employ certain technologies, and to operate in certain localities. But its allocation has often been inequitable, offering incumbents and other early comers advantaged access, thereby raising the barriers to entry for new players. With open access premised on the need for numerous operators co-existing in a level playing field, it becomes evident that equitable spectrum allocation and management are necessary for open access to work in Africa.
ITU recommends that spectrum management should objective, timely, transparent and non-discriminatory. Indeed, a number of African countries have enshrined these principles in their national ICT policies. Kenya’s ICT policy says the communications commission shall manage radio frequency spectrum to achieve, inter alia, efficient and affordable telecommunication services. Zambia and Zimbabwe’s policies commit to establish equitable and cost-effective mechanisms to manage their spectrum in order to allow for the development of modern, effective and efficient communication systems.
The Ghanaian and Ugandan experiences
Despite the realisation that spectrum allocation needs to be equitable and aimed to ensure a level playing ground and affordable services for consumers, the reality on the ground does not always reflect this. Ghanaian telecom company WESTEL was fined US$25 m by the regulator National Communications Authority (NCA), for failing to roll out the number of lines required under its licence agreement. It had hooked up 3,000 lines rather than the obligatory 50,000 lines by 2002. The company attributed its slow progress to inability to get from the NCA the GSM band spectrum it needed, and the prohibitive interconnection arrangement it had with the incumbent, Ghana Telecom. Consequently, WESTEL suspended its investments, and was in 2006 renationalised, then a majority stake in the company was sold to a new group. By then it had accumulated US$38.5m in outstanding fines and licence fees.
In Uganda, it emerged earlier in 2007 that the regulator nine years ago signed agreements with telecom operators stipulating that channels in the GSM 900 band would be shared equally among a maximum of three operators. An agreement with MTN, which got the Second National Operator (SNO) licence in 1998 stipulates that: “The Licensee (MTN) shall be informed of any applications for frequencies in the GSM 1880 – 2200 MHZ band. The licensee will be given opportunity to comment on the application prior to any [Communications] Commission’s action. Such comments shall be taken into account by the Commission.”
Edward Baliddawa, who chairs Uganda’s parliamentary Sessional committee on ICT, contends that this clause threatened to not only lock out permanently any operator from the GSM 900 band, but also went ahead to put unfair conditions on the other bands that any investor might have to be forced to resort to. This was because the two national operators (MTN and Uganda telecom) had also taken up chunks of channels within the 1800 MHZ band in addition to the GSM 900 which they already fully controlled.
Why Low-end Spectrum is Critical
The catch is that GSM 900MHz transmits over longer distances than 1800MHz. This means that GSM 900 operators use less base stations to cover a similar area than do operators in the 1800MHz range. Additionally, GSM 900MHz has better penetration characteristics for buildings, and some of the handsets available in African markets are not GSM 1800 compliant. In many African countries, the number of operators in the GSM 900MHz zone has been two or three.
And as South African communications minister Ivy Matsepe-Casaburri noted during the October 29-30 Connects Africa summit, effective spectrum management should entail creating more licences in the highly sought-after low-end frequency spectrum, which she believes would encourage private investors to provide mobile wireless technologies and infrastructure in rural areas. Others have argued elsewhere that the “last mile” is where inadequate or inappropriate spectrum allocation could prove a stumbling block to improving affordable connectivity; and that this is especially so in countries where geographical distances dramatically raise the time and cost of making the last-mile connection.
The Case for Re-allocation
In Uganda, the Communications Commission says it has reviewed operators’ licenses as part of the implementation of the new licensing regime that came into effect on January 2 2007. At least two additional national telecoms operators have been licensed and the regulator has allocated them some of the GSM900 frequencies earlier allocated to the three existing operators.
Looking beyond Africa, in Finland the 900 MHz band was assigned unequally between the three nationally operating mobile operators. The two smaller mobile operators complained that they were less competitive as they did not have GSM 900 channels and their cost structures were resultantly inefficient. In the wake of regulatory revisions, towards the end of 2005, the regulator carried out a more equitable re-assignment of GSM 900 channels. And with more European countries aspiring for a more equitable allocation of spectrum, in France and Finland, all 2G/3G operators have the same amount of spectrum.
Some consider that the implementation of secondary market for frequencies would help to ease access limitations. This would work by having mechanisms which enable those companies that have big allocations to sell some of their surpluses. It has been argued also that the best way to improve competition especially in cases when one or few operators have rights of use for spectrum, but don’t use them effectively, is to soften or cancel restrictions related to technology use. And then the use of technology neutral licences may certainly be one step which may contribute to alleviate potential competition problems as this, at least in the long run, will increase the amount of spectrum which to a large extent may be used to offer competing services.
The GM Association says spectrum should be allocated “on the basis of achieving economically efficient, competitive and structurally desirable outcomes rather than to extract monopoly rents from the industry.” It says if the market is the best allocator of scarce resources, as most economists would argue, it is important that countries should be able to develop their own spectrum trading arrangements.
A recent Infodev report notes that in the absence of strict regulations governing the use and non-use of frequencies, private operators may be tempted to ‘bank’ licences, being motivated by the prospect of a future sale, or simply by the desire to keep the frequency out of the hands of a competitor. It adds that the process of returning spectrum can be an awkward one unless it was written into the licence awarding the original frequency assignment.
A way forward is to advocate for a ‘spectrum commons’ model as an alternative to the market-based model. The spectrum commons would be administered by an independent organisation constituted of representatives from the government, the private sector and civil society. Such a model would be designed to produce a more democratic allocation of spectrum. It would start from the principle that the spectrum should be regulated in the public interest and for public benefit. Commercial use of the spectrum would need to demonstrate social and economic benefit and would be considered a form of “leasehold” of a portion of the spectrum commons. Spectrum “rental” charges would be levied and applied to the public good with a proportion being re-invested in the improvement of the communications environment through support for civil society communications initiatives and other communications services for public benefit. – CRIS and APC, Involving Civil Society in ICT Policy
The GSM Association says the citizens of 19 African countries are still being forced to pay too much for international calls, due to the maintenance of a monopoly on international gateway services. It argues that introduction of competition into the international gateways market can reduce call prices by up to 90% and double call volumes, giving the example of Kenyan mobile operator Safaricom which received an international gateways license in 2006 and was able to cut international call prices by 70%. In similar vein, reducing the stranglehold some companies have on spectrum could translate into tangible benefits for users. And the process of unbundling would itself be an enabler of open access initiatives, such as ongoing backbone initiatives, and the upcoming marine fibre networks.