briefing to the joint sitting of the parliamentary
TRANSCRIPT
Briefing to the Joint Sitting of the Parliamentary Portfolio Committees on Communications and Telecommunications & Postal Services
The Licensing Process for High Demand Spectrum
Rubben Mohlaloga
Acting Chairperson
Table of Contents
• ICASA Mandate
• ICASA Strategy
• Government’s Priority Outcomes
• Policy & Legislative Framework
• Spectrum Licensing Regulatory Framework
• IMT Roadmap
• Process - IMT Roadmap to ITA
• Invitation To Apply (ITA)
• Objectives of the ITA
• IMT Spectrum available for award
• Spectrum Availability as % of Population
Coverage
• Spectrum award approach in the ITA
• Spectrum award mechanisms
• Auction: best practice award method adopted
• Auction: types and characteristics
• Auctions - international perspective
• Auction - licensing process
• Proposed licence obligations
• Spectrum Lots Packages (4) to be auctioned
• Process – ITA to Spectrum Award
• Guiding objectives for spectrum assignment
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Organisational Mandate
ICASA is established pursuant to section 192 of the Constitution and in terms of the ICASA Act of 2000
Regulate electronic communications, broadcasting and postal sectors in the public interest
Ensure affordable services of high quality for all South Africans
ICASA is mandated to -
ICASA’s mandate is derived from:
The Constitution, 1996
ICASA Act, 2000
EC Act, 2005
Broadcasting Act, 1999
Postal Services Act, 1998
ECT Act, 2002
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Strategic Goals: 2016-2020
Universal Access to Broadband Services
Access to communications services
at affordable prices
Improvement of organisational service
delivery
Foster national common identity and social
cohesion
SOOGs
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Government’s Priority Outcomes
Outcome 6:
An efficient, competitive and responsive
economic infrastructure network
Outcome 12:
An efficient, effective and development–
oriented public service
Outcome 14:
A diverse, socially cohesive society with a common
national identity
Government Priority Outcomes
Promote competition and networkdeployment for universal broadbandprovision
Ensure that the regulatory frameworkfacilitates the use of ICTs as a platform toprovide increased access to governmentservices
Facilitate the 3-tiers of broadcasting andspecifically focus on a regulatory agendathat:
• Promotes local content• Dissemination of information in
the public interest• Public broadcasting content
across all broadcasting platforms 5
Spectrum Policy & Legislative Framework
Chief Operations Officer (Regulatory Projects Office)
A seamless information infrastructure that meets the needs of citizens, business andpublic sector; and provides access to the wide range of services required for effectiveeconomic and social participation by 2030
100% broadband access to all Citizens by 2020.
Universal download speed of 100 Mbps by 2030
Establish a technology-neutral licensing framework
Promote efficient use of spectrum
Promote open, fair and non-discriminatory access to services
Facilitate competitive market, ensure sustainability of the sector
Ensure universal provision of affordable + quality services
NDP
SA Connect Policy
EC Act, 2005
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Spectrum Policy & Legislative Framework
Chief Operations Officer (Regulatory Projects Office)
The Policy outlines principles for:
Spectrum management to ensure efficient, effective, and transparent use of spectrum
based on fair pricing principles.
Spectrum planning to ensure that all assignments serve the national interest
Spectrum availability for government services, scientific research and emergency services
The Broadcasting Digital Migration Amendment Policy, 2012 sets out parameters andframework for analogue to digital migration
The Policy further confirms the benefits of digital broadcast technologies i.e. they use scarce national radio frequency spectrum resources far more efficiently than analogue technologies.
RFS Policy, 2010
BDM Policy
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Spectrum Licensing Regulatory Framework
Time-line of Frequency Planning Regulations
National Radio Frequency Plan 2013
Radio Frequency Spectrum
Regulations 2011
Frequency Migration Plan 2013
IMT Roadmap2014
Radio Frequency Spectrum Assignment
Plans for IMT2015
Terrestrial Broadcasting Frequency Plan 2013
GG 36321
Update - Terrestrial Broadcasting Frequency Plan 2014GG 38005
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Spectrum Licensing Regulatory Framework
RFS Regulations, 2015
• Establish a frameworkto allocate and assignradio frequencyspectrum
• Sets out standard termsand conditions forspectrum licences
• Establish transparent,fair and efficientprocedures andprocesses for spectrumlicence applications.
• Outlines procedure andcriteria for awardingspectrum licenses forcompeting applications
National Radio Frequency Plan, 2013
• ICASA is required interms of Section 34 ofthe ECA to update theplan
• The updated planincluded, amongstothers, implementationof resolution 232(WRC12) whichallocated spectrum inthe band 694 – 790MHzto Mobile andBroadcasting on a co-primary basis whichmake implementationIMT 700 possible.
Radio Frequency Migration Plan, 2013
• Sets out a review ofmigration plans since1996 to 2012 anddocumented decisionof WRC12.
• Provide for significantamount of spectrumthat could be releasedfor broadband and theneed for advancedplanning
• 649 MHz of spectrumwas made available forInternational MobileTelecommunication
Terrestrial Broadcasting Regulations, 2013 + 2014
• Makes provision forthree (3) DTTMultiplexes duringAnalogue to DigitalMigration per ITUdeadline - 17/06/2015
• Provide for Digital toDigital TerrestrialTelevision for the postmigration process to beimplemented after 17June 2015 as per GE06.
• Makes provision for theseven (7) DTTMultiplexes in the UHFBand in the frequencyrange 470 to 694 MHz
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The IMT Roadmap A key driver for the deployment of IMT bands is critical role that mobile broadband plays in
meeting the objectives of ‘broadband for all’ as encapsulated in the SA Connect Policy
The IMT Roadmap deals with the deployment of inter alia the 700 MHz and 800 MHz
digital dividend bands and 2.6 GHz band to promote universal broadband deployment and:
o summarises the international (ITU) and regional (SADC) perspective on IMT
o indicates timelines for the assignment of IMT spectrum
According to SA Connect Policy the efficient assignment and subsequent use of high
demand spectrum to meet broadband demand is vital and the cost of not releasing the
spectrum timeously is high
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Process - IMT Roadmap to ITA
Draft IMT Road Map - 2014
Final IMT Road Map 2015
Radio Frequency Spectrum Plans -2015
Information Memorandum - 2015
Deliberations and consideration of representations 2016
Invitations to Apply – 2016/17
Spectrum Awards -2017 /18
o Considers a range of technical options andfeasibility studies for IMT usage and migration perband
o Outlines technical solutions for each IMT band
o Outlines detailed technical parameters for eachband
o ITAs for licensing / assignment of specific spectrum bands published in line with sec 31(3) of the ECA
o Consultation process providing information toprospective applicants intending to apply for theradio frequency spectrum licenses within thedesignated ranges
o Sets out options / consider best fit model forlicensing of IMT bands
o Licences awarded and issued11
Invitation To Apply (ITA)
ITA was published on 15 July 2016 (Government Gazette No. 40145 of July2016), subsequent to publication of Information Memorandum.
Closing date for submission of enquiries - 04 August 2016
Closing date for submission of applications – 03 October 2016
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Objectives of the ITA
The main aim of the ITA is licensing of 700MHz, 800MHz and 2600MHz of IMTspectrum to ensure nationwide broadband access for all citizens by 2020 in linewith the NDP and SA Connect Policy.
This can be achieved by:
Increasing universal service and access by ensuring rural connectivity
Give consumers more choice,
Promote Investment in the sector and economic growth,
Ensure quality of service and experience, and
Ensure affordability of services.
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IMT Spectrum available for award
The spectrum prioritized for assignment is as follows:
o2×30MHz in the 700MHz band (703MHz-733MHz/758-788MHz)
o2×25MHz in the 800MHz band (796-801MHz/837-842MHz)
o2×70MHz and 1×25MHz in the 2.6GHz band (2500-2570MHz/2620-
2690MHz and 2595-2615MHz))
This spectrum will be awarded on a national basis covering the entire
territory of South Africa.
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Spectrum Availability as % of Population Coverage
BAND (MHz) Availability as a % of PopulationCoverage
Analogue TV services to be migrated as a % of Population
Coverage
700 77.2% 22.8%
800 89.8% 10.2%
2600 100% 0%
Migration Plan of 22.8% and 10.2% of
Analogue TV services in place.
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Spectrum Availability as % of Population Coverage
DTT Multiplexer Availability as a % of PopulationCoverage
DTT services to be migrated as a % of Population Coverage
Multiplexer 1 (DDT1) 96.76 3.24 %
Multiplexer 2 (DTT2) 89.89 10.11%
Plan in place for the phased migration
of DTT service to allow to release more
IMT spectrum.
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Spectrum award approach in the ITA Historically, the award of spectrum favoured government owned incumbents or was
assigned on a first-come first serve basis. Most of these assignments took place at atime when the increase in demand for spectrum associated with the uptake ofmobile data services and the increased penetration of smartphones and tablets wasnot foreseen
The increased role of mobile in democratising access to communications has madespectrum an invaluable resource with the result that demand for spectrum nowexceeds supply. This has resulted in a paradigm shift in the assignment of spectrumwith the adoption of market based / competitive approaches to spectrumassignment
Assignments through competitive processes is based on different options:
o Beauty contests - where the applicants are judged on their credentials and their plans for theuse of the spectrum but where the price is fixed
o Hybrid arrangements - where the beauty contest is accompanied by a competitive price offer,usually a sealed bid tender
o Auctions - where the actual assignment is done on the basis of competitive price offers involvingdifferent types of auction and possibly different assignments of frequency
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Spectrum award mechanisms
Beauty contest (Advantages Auction (Advantages)
Allows non-financial aspects to be taken into account
Assign spectrum in a transparent manner and treat bidders equally
Auction encourage bidders to bid their true value of spectrum (Knowing the other bidders’ values)
Maximize economic, social benefits and promote competition
Beauty contest (Disadvantages) Auctions (Disadvantages)
Beauty contests are not transparent Can be complex to administer – depends on the design
Open to claims of favoritism May lead to concentrations of spectrum to those with the most money but this issue can be addressed through spectrum caps/reservations
Prone to legal challenge Auctions have the risk of over-valuing the spectrum (HigherReserve Prices)
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Auction: best practice award method adopted
Auctions are globally considered to be the most efficient form for spectrum assignment i.e. the organization that most values the spectrum is likely to bid the highest for it and upon award, use it most efficiently.
However, they may be perceived as favouring incumbents who may be motivated by the desire to exclude competitors. Furthermore, auctions may disadvantage small and new entrants as they may not be able to compete with the financial muscle of established operators.
There is also a concern that high auction prices could undermine the winner’s ability to finance network roll-out (as a result of the so- called winner’s curse).
In order to mitigate the concerns above, a mechanism of shadow pricing can be used. Shadow pricing is a form of administrative pricing in which the price is set according to a predetermined formula intended to mimic the effect of market forces thus estimating what the spectrum would be worth if it was auctioned, either based on international benchmarks of auction pricing in the same band or on auction prices in the same country on adjacent bands. However, such a process is naturally contentious and is in fact mainly used to try and estimate the base price or reserve price for spectrum that is being auctioned.
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Auction: types and characteristics
Auction type Characteristics
First-price sealed bid Bids are submitted confidentially. The highest bidder wins and pays bid amount
Second price sealed bid As above but winner pays second highest bid price
Clock auction The price goes up each round with bidders indicating how many of each type of lot they would like
Simultaneous multiple round auction (SMRA)
Participants can bid on several specific items in each round,with the price increasing with each round
Combinatorial auctions Bidders can submit multiple bids on different combinationsor ‘packages’ of licenses
Combinatorial clock auction (CCA) A “clock” auction for generic lots followed by a second priceauction, then the submission of sealed bids for specificbands.
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Auctions - international perspective
EU Commission plans to coordinate the release of 700 MHz band for mobile services and restrict TV
broadcasting to the sub-700 MHz bands
EU countries in ITU Region 1 have auctioned the 800-MHz digital dividend spectrum and raised significant
amounts:
Germany raised €3,576.5 Million Spain raised €305.3 Million Sweden raised €197.3 Million
Australia (ITU Region 3) raised nearly AUSTRALIAN $2 billion in auction of the 700 MHz ( DD2)
Canada (ITU Region 2) auction of 700 MHz (2014) raised over CANADIAN $5,2 Billion
Brazil (ITU Region 2) auction of the 700MHz spectrum (2014) raised over US $2.39 billion which excludes an
extra US $1.47 billion cost to be paid by the operators for the clearing of the band
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Auction - licensing process
The licensing award process will consist of three stages, as illustrated on the diagram below:
Qualification stageo parties are invited to submit applicationso each Applicant must pay a non-refundable application feeo Application contents must include, amongst others; business plan(s), proof of financial
capability, proof of technical capability and bank guaranteeo Applicant must have a minimum 30% (thirty percent) equity ownership held by persons
from Historically Disadvantaged Groups.
Qualification stage
Auction Stage Licensing stage
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Auction - licensing process
Auction stageoAuctions assign spectrum in a transparent manner
o The format selected for the Auction is Simultaneous Multiple-Round Ascending (‘SMRA’)
o SMRA has been successfully used in inter alia Germany, Sweden, Finland and USA
oAuction rules will be published with the Invitation to Apply
o The Authority will acquire services of the consultant to assist with the auction process
Licensing stageoOnce the payment of the Auction Fee has been received by the Authority, the Licenses
will be issued to the winning Bidders
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Proposed licence obligations
The following obligations are proposed to form part of the license conditions of the Radio Frequency Spectrum License to be issued
Open Access obligationso A Licensee is required to provide open access to a minimum of three Mobile Virtual Network
Operators (3 X MVNO).o MVNO must have more than 51% of ownership held by persons from Historically
Disadvantaged Groups. o A Licensee will have a maximum of three years from the date that the 700MHz/800MHz
spectrum becomes available to provide services in line with the set obligations.
Uplink and throughput obligationso A Licensee must provide data services across the country with an average uplink of 15Mbit/sand the downlink user experience throughput of at least 30 Mbit/s to 100% of the population of South Africa by 2020.
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Spectrum Lots Packages (4) to be auctioned
The spectrum prioritized for assignment is as follows:
o2×30MHz in the 700MHz band (703MHz-733MHz/758-788MHz)
o2×25MHz in the 800MHz band (796-801MHz/837-842MHz)
o2×70MHz and 1×25MHz in the 2.6GHz band (2500-2570MHz/2620-
2690MHz and 2595-2615MHz))
This spectrum will be awarded on a national basis covering the entire
territory of South Africa.
Lots 700MHz 800MHz 2.6GHz
Lot A
(To be awarded through a
separate process)
2 x 15MHz
(703-718MHz/
758-773MHz)
25MHz
(2595-2620MHz)
Lot B 2 x 5MHz
(718- 723MHz/ 773- 778MHz)
2 x 5MHz
(796-801MHz/
837-842MHz)
2 x 20MHz
(2500-2520MHz/
2620-2640MHz)
Lot C 2 x 10MHz
(801-811MHz/
842-852MHz)
2 x 20MHz
(2520- 2540MHz/2640-
2660MHz)
Lot D 2 x 10MHz
(811-821MHz/
852-862MHz)
2 x 20MHz
(2540-2560MHz/
2660-2680MHz)
Lot E 2 x 10MHz
(723- 733MHz/ 778- 788MHz)
2 x 10MHz
(2560- 2570MHz/ 2680-
2690MHz)25
Process – ITA to Spectrum Award
15 August 2016
04 August 2016 and 24 August 2016
03 October 2016
21 October 2016/ 10 November 2016 and 30 November 2016
12 -14 December 2016
17 – 31 January 2017
14 March 2017 to 28 March 2017
o Publication of the Invitation To Apply (ITA) forInternational Mobile Telecommunications
o Deadline for enquiries regarding ITA by Public ando Deadline to respond to enquiries by the public
o Application Date – Opening 09h00 Closing 13h00
o Start of auction to End of Auction including announcement of results
o Payment of Auction Fees and Licences awarded and issued
Publication of list of Applicants and Submission of queries/clarifications to Applicants and Announcement of Applicants qualified as Bidders
Bidder seminar and mock auction
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ISSUE
The matter is currently being considered by the Court due to some different views of opinion on the part of the policy maker
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Guiding objectives for spectrum assignment
Chief Operations Officer (Regulatory Projects Office)
Ensure universal broadband coverage
Facilitate entry by new players into the market
Encourage Transformation in the Sector
Create a stable and sustainable environment for future investment
Adherence to International Standards and Global Best Practice
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