The Independent Communications Authority of South Africa (ICASA) released the long-awaited Invitation-to-Apply (ITA) for both the international mobile telecommunications (IMT) spectrum, also known as high-demand spectrum, and the wireless open-access network (WOAN) on 2 October 2020. The closing date for the IMT Spectrum ITA is 28 December 2020 and for the WOAN ITA is 30 March 2021.
Some important considerations that ICASA took into account when finalising the ITAs, included:
- imposing empowerment obligations on successful bidders in the auction process;
- requiring successful bidders to support the WOAN through procuring, collectively, at least 30% of the WOAN's national capacity on a proportional basis; and
- requiring the WOAN to fulfil various empowerment obligations to assist ICASA in achieving its transformation agenda for the telecommunications sector.
IMT (or high-demand) spectrum and WOAN explained
High demand spectrum refers to specific radio frequency spectrum bands that are in high demand by mobile and wireless operators in the market (telecom operators). In order to ensure that more telecom operators gain access to this high demand spectrum, ICASA has created a policy which requires that a portion of unallocated high demand spectrum be assigned to the WOAN. The WOAN will operate as a single network, built via a consortium, which will sell high demand spectrum to telecom operators on a wholesale basis.
Telecom operators may obtain access to this new high demand spectrum by:
- applying and bidding for radio frequency spectrum in terms of the IMT ITA; or
- applying to form part of the WOAN to be issued radio frequency spectrum by ICASA in terms of the WOAN ITA; or
- waiting for the WOAN to be established and thereafter seeking to licence radio frequency spectrum from the WOAN.
ITA for IMT (or high-demand) spectrum
The ITA for IMT spectrum contains the following key highlights:
- ICASA will auction radio frequency spectrum to eligible licensees in the 700 MHz, 800 MHz, 2600 MHz and 3500 MHz IMT spectrum bands, which will be divided into different lot categories and lot sizes;
- ICASA has set a reserve price for each lot, which ranges from ZAR9.8 million for the 3500 MHz lot to ZAR1.1 billion for the 800 MHz lot;
- Individual licensees will not be able to acquire more than 18% of the total spectrum for IMT assigned by ICASA to date (including historic allocations of high demand spectrum);
- Successful licensees in the IMT auction will acquire a radio frequency spectrum licence valid for 20 years and renewable annually upon payment of a prescribed licence fee;
- A licensee must, within 12 months of being issued with a radio frequency spectrum licence, reach a Level 1 contributor B-BBEE status, and maintain such status for the period of the licence; and
- Licences will be issued on a technology-neutral basis - this aligns with the Competition Commission's recent paper on Competition in the digital economy which recommends that the regulation of telecommunication and broadcasting should not differentiate between digital platform operators and traditional operators, in order to reduce regulatory barriers to entry (see our article on this paper here).
The IMT spectrum ITA also addresses the topic of the temporary spectrum which was assigned during April 2020, in terms of the ICT Covid-19 National State of Disaster Regulations, 2020 (ICT Covid Regulations). Due to the Covid-19 pandemic and subsequent delays in issuing the ITA for high-demand spectrum, the auctioning of the spectrum is expected to be completed by 31 March 2021. As a result, ICASA will continue to make available the temporary IMT spectrum on an interim basis, in accordance with the ICT Covid Regulations.
ITA for WOAN
ICASA has set aside radio frequency spectrum within the 700 MHz, 2600 MHz and 3500 MHz spectrum bands for the WOAN. The WOAN ITA provides for a Radio Frequency Spectrum (RFS) licence to be issued for the WOAN, which will be valid for a period of 20 years, renewable annually upon payment of a prescribed licence fee. The RFS licences will also be issued on a technology neutral basis, as mentioned under the ITA for IMT above.
ICASA has imposed several mandatory requirements for applicants applying for an RFS licence, including that:
- applicants be a consortium of persons;
- applicants have a minimum 70% equity ownership held by South African citizens; and
- applicants be diverse in their ownership structure, having (amongst other characteristics):
- a minimum of 50% black equity shareholding with an equivalent voting power in the applicant;
- at least 20% black women ownership; and
- effective participation by targeted groups, including women, youth and persons with disabilities.
Written by Peter Grealy, Partner, Nozipho Mngomezulu, Partner, Wendy Tembedza, Senior Associate, Karl Blom, Senior Associate, Cindy Leibowitz, Professional Support Lawyer and Ekene Nkado, Candidate Attorney at Webber Wentzel