How to address spectrum hoarding

Spectrum is an extremely high-value resource with companies prepared to pay enormous sums of money for exclusive access. Nigeria recently held an auction for 100MHz in the 3.5GHz band and MTN paid USD273 million for a 10 year exclusive license. But one of the main problems is that spectrum is often not fully utilized. There are geographic areas that a national operator might decide not to use that spectrum and there may be legitimate operational reasons for this decision. However, from a country perspective, this is a wasted opportunity because spectrum is in high demand and could be used to provide connectivity to people that either don’t have it yet or where the quality of service is poor. The main bottleneck to efficient spectrum use is the lack of appropriate incentives. Once spectrum is awarded, African regulators tend to ignore the opportunity cost because the regulatory cost is just too high. From a commercial perspective, once spectrum is awarded, the last thing an operator wants to encourage is more competition. 

Regulators have struggled with how to address spectrum utilization. South Africa has just issued a policy document for consultation on Next Generation Frequency Spectrum Policy for Economic Development. The policy directs the regulator, ICASA, to implement a “use it or lose it” principle. This means that an operator has to return the spectrum if it fails to meet certain utilization objectives. Of course, the actual implementation is left to ICASA whose track record on this sort of initiative is dreadful. But it is the first time that South Africa has put forward a policy objective that includes “use it or lose it” as well as spectrum sharing and trading. 

Another approach to spectrum hoarding has been put in place by Ofcom in the UK. The UK approach seems to have been developed with an acknowledgement of the skewed incentives on spectrum currently in place. The problem in the UK is not so much spectrum hoarding nationally, but rather that there are plenty of rural locations where spectrum is not fully utilized. Ofcom has brokered an agreement with the national operators that if they are not using spectrum it can be licensed, on a 3 year basis, by geography. Ofcom distinguishes between low power and medium power uses, with low power limited to a building, such as a college or business campus. This shared access regime has been tested using 5G spectrum in projects in the construction, outdoor forest environment, agriculture, manufacturing and autonomous vehicles sectors. In terms of outcomes, the most common challenges seem to be around the application, monitoring and transparency of the process with recommendations that shared access needs to be automated as much as possible in order to speed up the process. 

This innovative test and pilot approach to spectrum is desperately needed in Africa. Regulators are too scared of testing out new approaches because they so often fail to put in place simple measurable outcomes, transparent rules and flexible frameworks. The new draft policy directive is ICASA’s opportunity to try a new regulatory approach to spectrum. This is an exciting development and could have significant consequences in South Africa if ICASA is able to take this opportunity and run with it. 

Other news from around Africa

• Nigeria suspends new excise duty on telecoms: A proposed 5% excise duty on telecom services has been suspended because of the negative impact on the economy. This is one of the few times that the Minister of Communications has prevailed over the Minister of Finance. Hopefully not the only time! 
• The Equiano cable lands in South Africa: In early August, the Equiano cable landed near Cape Town. Google estimates that the cable will contribute USD7 billion in GDP by 2025. 
• South Africa and 2G/3G deactivation: The Minister of Communications is proposing that 2G and 3G networks are turned off in June 2024 and in March 2025, respectively. 
• Sri Lanka increases its telecommunications levy: This story is outside of Africa but Sri Lanka reduced its telecom levy in 2019 from 15% to 11.25%. The government claimed that this led to a reduction in telecom revenue of 28%. Could this counter-intuitive result have anything to do with COVID lockdowns that went into effect a few months later? Surely this sort of simplistic analysis is not the justification for the subsequent increase to 15% in 2022?