Broadband and data regulations in South Africa

Broadband and data regulations in South Africa
03 Aug 2020

Should data, the internet, the future of communications, bridging the digital divide and other forms of data use be regulated, and if so, how? There are several reasons for regulating data in South Africa. Our history suggests that regulation is required to address coverage, access, price, speed, and that special conditions may be needed to address dominance or market failure. This potted history of data-related interventions indicates that while we talk a lot about data, not a lot is happening in regulation.

The early days

Ten years ago, in 2010, Minister of Communications General (Ret) Siphiwe Nyanda gazetted a determination of what constituted universal access by all areas and communities in South Africa to electronic communications services and network services, and universal provision of services and access to networks (“the 2010 Gazette). [1] In simple terms, the Minister explained what was optimal for consumers to be able to use voice and data networks.

This 2010 gazette set targets for universal access within communities to communications networks and services and specifically required a least one public broadband internet access point in a geographically founded community of up to 10,000 persons; and access to a data network within a range of 2 kilometres from any person residing in a geographically founded community. It also required that this access point be available for at least 12 hours a day and at least during 8am and 6pm, at affordable rates.

Universal service was determined to constitute quality, affordable and usable services to a minimum set of services on either a household or individual basis including a broadband connection. Affordability was defined at a rate (including connection and usage charges, but not subscriber equipment charges) that does not exceed 5% of a household’s expenditure. Data services were to be provided for at least 20 hours a month with a minimum availability of 500MB.

While these may now seem like ridiculous targets, at the time they were extensively researched and consulted on. However no action has been taken by anyone to attempt to reach or enforce these targets.

Some time later

In December 2013, the South African National Broadband Policy or “SA Connect” was published. [2] Data targets were included in this policy which advanced the then 3-year old targets of the Ministerial determination.

Since the first 2 sets of targets in SA Connect are now irrelevant in time, the 2020 target for citizens is useful to consider, being 90% of all citizens having access to broadband of at least 5mbps and 50% of all citizens having access to broadband of at least 100mbps. 100% of all schools were to have received broadband of at least 10mbps, with 80% receiving 100mbps. Targets were also set for health facilities and government facilities.

ICASA’s role is to implement policy as far as it can, acting within the powers it has through primary legislation. This sector is somewhat unique since usually Parliament would give effect to policy through law, but in this case, the Minister can expect ICASA to be more practically involved by imposing licence conditions, introducing regulations, and undertaking inquiries if there is no movement by licensees or less action than required in a particular market.

In the period 2014 to 2016, ICASA took no action in this regard other than to identify a number of schools which it required licensees to provide with white boards and other items including some data, just prior to the national elections.

Another policy

In late 2016, the Minister published a new national policy called the National Integrated ICT Policy White Paper. Much of this policy is dedicated to what can be done with data and internet access – as if it is already ubiquitous. Minister Cwele commented that “cabinet approval marks the latest milestone in South Africa’s journey towards using technology to build “a seamless information infrastructure by 2030 that will underpin a dynamic and connected vibrant information society and a knowledge economy that is more inclusive, equitable and prosperous” as envisaged in the National Development Plan”.

ICASA embarked on a broadband value chain market inquiry in 2017, which is still ongoing in mid-2020. The inquiry is intended to assess the market for broadband, as this is defined by ICASA, and determine if there is market failure. If there is market failure, ICASA must assess which licensees have significant market power, and impose a set of remedies on those licensees. Thus far ICASA appears to be focussing on MVNOs and site ownership as ‘obstacles’ to broadband rollout and while site access is clearly an issue, quite how MVNOs even qualify as a ‘market’ is hard to discern.

Some data market inquiries

It would leave a large gap in this note if we did not mention that government has, through ICASA and the Minister and since 2016, noted its intention to award high demand spectrum (in the 700, 800, 2300, 2600 and 3500MHz bands) to a potential new entrant and successful bidders in an auction. The new entrant is intended to operate only a wholesale network, offering broadband capacity to other licensees.

Licence conditions are to apply to all those who receive high demand spectrum, to require them to allow national roaming and facilities-sharing, and it is proposed that these activities would be ‘cost-based’.

In the meantime, the Competition Commission launched its own investigation in late 2017 into South Africa’s high data prices. After several years of intense scrutiny of documents and interviews with all licensees and those service providers dependant on licensees for wholesale capacity, the Commission determined that data prices are too high for a variety of reasons, including the scarcity of high demand spectrum and charges for access to infrastructure that are not cost-based. The findings focussed mainly on bundles below 1GB, the prices for which are disproportionately far higher than those above 1GB.

The lack of transparency in how pricing is constructed, particularly the effective rate for data, was also criticized. The Commission also noted that the market was skewed in favour of 2 dominant operators in the mobile sector, namely MTN and Vodacom, and that ICASA had failed over the years, to adequately regulate this sector.

Market failure compounded by regulatory failure contributed to the entrenched high market shares of MTN and Vodacom over the long term and the absence of real or sustainable competition since the launch of Cell C in 2001.

What next?

Since the Commission does not regulate this sector, despite the Commission having extracted some promises from mobile operators to reduce prices, it has recommended that ICASA take more direct action in relation to the data sector and particularly those with market power.

What would this look like?

While South Africa has not generally followed the path of regulation adopted by the EU in any form, other than perhaps by way of reference in certain limited benchmarking exercises, the timing of the latest 2020 review of Relevant Markets by the EU which is to consider the 2014 Recommendation, has as its starting point a summary of some of the changes likely to take place (or that are already taking place) in the market. It is perhaps not all that strange that the same sort of changes are taking place in South Africa. These examples are taken directly from a study by WIK-Consult [3], and include, in brief:

  • “Increased (upload as well as download) bandwidth needs for consumers to support future applications, including those in the fields of entertainment [4], home working, eHealth and eLearning, particularly during the pandemic
  • Increased bandwidth, symmetry and quality requirements for connectivity to businesses, public institutions, schools and hospitals to support digital applications, cloud computing and the processing of big data. With the focus shifting to applications and software, large businesses may also increasingly purchase connectivity as part of a bundle of “IT” services
  • The move towards all-IP [5] and switch-off of the PSTN [6] network
  • The migration from copper to Very High Capacity (VHC) fibre [7] and cable networks. Switch-off of copper networks is expected to be completed in many countries within the next decade. During this period, there is likely to be an increased focus on supporting Gigabit connectivity via fibre and/or wireless solutions in rural areas
  • The launch of 5G mobile and fixed wireless services, alongside Internet-ofThings/Machine-to-Machine (IOT/M2M) applications in various fields, which are expected to develop in the coming years. Increased bandwidth demand and new applications will also drive the need for increased fibre connectivity to base stations and densification of the network
  • Specialisation by some operators in infrastructure (including wholesale only models) as a response to economies of scale in the access segment and the increased diversity and competition in the service segment. Other network operators may however seek to maintain a presence or enter downstream service markets (for content, cloud applications, IOT) as part of a vertically integrated strategy
  • [In areas or Member States where horizontal splits between infrastructure and services do not occur,] [8] we can expect increased trends for convergence between fixed and mobile networks (driven by the investment requirements associated with 5G), and increased pressure for network sharing and/or access to dark fibre, in areas where the limits of viable duplication are reached.”

Access to physical infrastructure, the creation of a wholesale access platform, and differentiation between wholesale capacity and high-quality wholesale capacity are just some of the regulatory initiatives being considered. Interestingly, Europe considers the importance of fixed wireless access (FWA) alongside 5G. The Recommendation notes that “5G FWA is likely to be able to serve the needs of less demanding business users and use-cases, but is unlikely to provide an alternative to dedicated connections that are likely to be required for high-end business use, public institutions, educational facilities and hospitals.”

Having very little in place right now means that ICASA and the Minister can truly take on board international best practise or at least take it into account in crafting South Africa’s own regulatory response to the needs of consumers and stakeholders in the data communications market. Indeed, the proposals noted in the Recommendation closely mirror those suggested by the Commission to ICASA, and those noted by ICASA in its early musings on a spectrum auction.

The starting point for regulation where ICASA is concerned, is supposed to be what is in the public interest, and what will promote competition is often associated with the public interest. The public is no doubt interested in cheaper data prices and high-speed data services although if you don’t have flushing toilets, high speed data is probably the least of your concerns. Would it make sense, then, to return to the 2010 type of considerations and overlay those with our (realistic) expectations? Should we separate out what we expect from government, and what we should expect from service providers? And then should we divide what we expect from larger operators (with more resources, including spectrum and sites) from what we expect from smaller ones?

The outcome might look like the table below, which uses the following terms –

Urban: defined as anywhere that is not ‘rural’, with some exceptions for peri-urban areas

Rural: any place through which a national road or main provincial road travels, and all geographically founded communities with up to 10,000 inhabitants (StatsSA might be able to improve on this definition if this 2010 analysis has changed)

Government: what Government must ensure/contribute

Large licensee: any licensee with a market share of 25% or more by revenue

Small licensee: any other licensee

 

Area

 

Government

 

Licensees

 

Large licensees

 

Small licensees

 

 

Urban

 

Permitting on an expedited basis on similar conditions in every municipality

 

 

Licence condition

 

Access by any person, with a minimum download speed

 

Access by any person

 

Access to public sites

 

Licence condition

 

 

Cost-based pricing for all wholesale capacity

 

 

 

Rural

 

Expedited permitting on similar conditions in every municipality

 

 

Licence condition

 

100% coverage

 

 

 

Aggregated demand (all government and public offices)

 

 

Undertaking by government to benefit the WOAN for at least 5 years from date of licensing

 

 

Cost-based national roaming and facilities-leasing

 

 

 

 

 

Availability of secure government-sponsored access points

 

 

Legislation or regulation

 

A high-speed connection at each access point

 

 

To contribute to this conversation, contact [email protected] or click the “Send a legal query button” below.

Footnotes:

[1] Gazette 32939 of 8 February 2010.
[2] Gazette 37119 of 6 December 2013.
[3]Future electronic communications product and service markets subject to ex-ante regulation: A recommendation on relevant markets, accessible at https://op.europa.eu/en/publication-detail/-/publication/e044874f-b752-11ea-bb7a-01aa75ed71a1/language-en/format-PDF/source-search
[4]Key drivers of bandwidth demand for entertainment in the coming decade are likely to include the shift away from linear broadband TV to IP-TV and video streaming, the use of AR and VR in the context of gaming and the proliferation of devices.
[5] Internet Protocol
[6] Public Switched Telephone Network
[7] Although there is an upgrade path for both copper (G.fast and successor solutions) and cable (to DOCSIS 4.0), these require increased deployment of fibre towards the end-user
[8] The square-bracketed portion does not apply in South Africa.

See also:

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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