Underestimating the fast-paced change of technology can be a dangerous thing. Ask Vodacom and MTN.
It must have seemed natural to define GSM as a mobile communication system operating in the 900 MHz frequency band when their licences were issued in 1993. After all, the companies now say, there was no other band to operate in.
If return on capital [invested in South Africa] becomes unattractive, we have a duty to shareholders to give our capital other priorities. This is not a threat, Mr Chairman, we are certainly not leaving South Africa, but it is an issue.
Stuart White, group public policy director for Vodacom shareholder Vodafone AirTouch
But that definition has now come back to haunt them. It is one of the many complicating factors the two companies have to deal with in their applications to obtain access to the 1800 MHz spectrum from the South African Telecommunications Regulatory Authority (SATRA). Yesterday saw the first day of public hearings by SATRA.
"The question is not if we should get 1800 spectrum," an impassioned Alan Knott-Craig, Vodacom MD told the SATRA panel. "It is if we should get 1800 spectrum right now."
GSM 900, described as "wide but shallow", is a technology that allows larger areas to be covered with fewer base stations and resulting in lower capital costs. The trade-off is lower capacity, and sexy new data services are notoriously capacity hungry.
GSM 1800, on the other hand, is "narrow but deep". The higher frequencies demand more base stations, but the much higher possible capacity makes it attractive in metropolitan areas. 1800 MHz is also the first cross-over point between second and third generation mobile networks. Without access to it, current operators are likely to find it impossible to continue technology development and be left out in the cold when data traffic starts representing a significant revenue stream.
Vodacom and MTN are aware of projections that show data traffic overtaking voice on mobile networks within 36 months. Data services are expected to represent as much as 80% of cellular income in the future.
Both companies have also told SATRA that they are fast running out of bandwidth to accommodate even voice traffic, and need additional spectrum in the 1800 MHz band to accommodate current user growth.
"We are getting to the point where we have made the necessary trade-offs [with quality] and need additional spectrum very soon," says Shane Hibbard, MTN acting GM.
MTN is applying for a 2 by 5 MHz allocation in the Gauteng, Cape Peninsula and Durban-Pietermaritzburg areas, with a 2 by 10 MHz allocation nationally within two years. Vodacom has applied for 5 MHz in the same general geographical areas.
Matter of survival
Getting to the public hearing stage of their applications has not been as straightforward as the operators would have liked the process to be. Correspondence provided by Vodacom legal representatives dates the company's first written application in February last year. Delays in the processing of the application had Vodacom turn to the courts for relief in November last year, risking a confrontation with the Authority. The company says it had no choice. "We can't wait for spectrum. The consumers can't wait for spectrum," Knott-Craig says. His company estimates it needs a nine month lead time to implement 1800 usage in Gauteng, and two years for a nation-wide rollout. By that time it projects significant congestion on its present frequency blocks.
MTN says frequency restrictions are fast becoming a matter of survival, and not only for itself. "Economic growth is often underpinned by ongoing technological expansion and the nature of telecommunications infrastructure," Hibbert says.
Knott-Craig links Vodacom's continued success to the continuation of its rural-development program. "We will cover every square kilometre in this country with more than fifty people living on it," he vows. "But to do this we need coverage in the affluent urban areas to pay for it."
Stuart White, group public policy director for Vodacom shareholder Vodafone AirTouch says not granting 1800 MHz access would be a tax on success. "If return on capital [invested in South Africa] becomes unattractive, we have a duty to shareholders to give our capital other priorities," he told Nape Maepa, SATRA chairman. "This is not a threat, Mr Chairman, we are certainly not leaving South Africa, but it is an issue."
White says his company has more than R20 billion invested in the country.
Not everyone agrees that 1800 MHz, broadband data services are MTN's and Vodacom's birthright. Over the next two days objections and submissions from third cellular licence contenders Nextcom, Khuluma 084 and Cell C, as well as from Telkom and the Internet Service Providers' Association will be heard.
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