Perspectives on spectrum: From auctions to COVID-19

Spectrum management will likely feature high on the agenda of regulators, policymakers and operators for 2020. From 5G deployment, through auctions aplenty, to spectrum interventions specific to COVID-19, the allocation, assignment and deployment of spectrum are key issues facing the sector going forward.

The COVID-19 pandemic is already reported to be generating unprecedented volumes of Internet data traffic, in Europe especially, as work-from-home arrangements and online meetings become the norm, and the closure of movie houses, theatres and sports stadia drives families online for entertainment.

As a result, a number of interventions seek to make additional spectrum available to operators and ISPs in order to cope with increased demand for bandwidth and to reach out to those as yet unconnected.

For example, the Federal Communications Commission (FCC) in the US has endorsed a move by subscription-TV provider Dish to make some of its spectrum available to mobile providers T-Mobile, AT&T and Verizon − this at no cost for a 60-day period in order to “support the connectivity needs of Americans” during the pandemic.

Meanwhile, South Africa’s ICASA has already indicated it is engaging with the operators to find ways of offering “spectrum relief” in order to reduce network congestion and ensure consumers have access to education, emergency and other social services. Details are still unclear, but temporary, emergency access to blocks of the high-demand spectrum earmarked for auction is surely on the negotiating table.

Further, ICASA has called upon operators to expedite the deployment of TV white spaces, with a particular focus on reaching remote and rural consumers during the pandemic − regulations governing TV white space were finalised two years ago, and both ICASA and the CSIR have been working with local ISP Indigo Broadband on rolling out the technology.

The practical impact of COVID-19 on ICASA’s planned 2020 auction of high-demand spectrum later in 2020 is still unclear at the time of writing.

With more urgent, immediate pandemic priorities on the table, ICASA is yet to finalise its plans to auction spectrum and license the WOAN. Certainly, if high-demand spectrum is made available to existing licensees − even if only on a temporary basis during the COVID-19 crisis − ICASA’s spectrum auction plans are likely to be pushed down the agenda in the short-term.

ICASA must take care that short-term assignment and temporary fee waivers remain just that: short-term.

Indeed, the uptake of any short-term spectrum concessions is likely to provide a practical proofing ground for how high the demand for spectrum in the mid-5G bands (2.3GHz and 3.5GHz) is likely to be, in a way that desk analysis of the 40-odd responses to ICASA’s draft roadmap will never do, and may well set the stage for the success of a subsequent auction.

But ICASA must take care that short-term assignment and temporary fee waivers remain just that: short-term. Analysts are already speculating that the magnanimous offers of Dish in the US may soon morph into formal leasing arrangements and back-door access to spectrum.

Fortunately for ICASA, South Africa’s auction is still at the planning stage. France’s regulator, ARCEP, midway through the sale of 310MHz of spectrum in the 3.4 – 3.8GHz bands, and having already received stage one bids from its four mobile providers, has had to postpone until the situation stabilises. The fate of the 5G auction in the Netherlands, scheduled to kick off mere weeks from now, remains unclear.

But the sea change in modes of work and leisure that COVID-19 is already driving is only likely to intensify demands for connectivity and the consumption of bandwidth, and thus the pressure on ICASA − and indeed on regulators worldwide − to formalise the assignment of high-demand spectrum in the medium-term.

With that in mind, and with ICASA soon needing to apply its collective mind to finalising the parameters of the forthcoming auction, it’s worth looking at the size and shape of similar auctions elsewhere − of which there are many.

In most cases, unlike in South Africa, these are explicitly 5G auctions. An example is the FCC’s recently completed $4.5 billion auction of millimetre wave spectrum in the 37GHz, 39GHz and 47GHz bands, and its planned auction of some 22 000 county-level licences in the 3.5GHz band.

This is unsurprising, considering the GSMA forecasts (pre-COVID-19 one must caution) 5G connectivity to make substantial inroads into markets in Europe, North America and China to become a substantial platform by 2025 − but with a mere 31 million subscriptions in Africa, heavily concentrated in South Africa.

Most spectrum auctions remain closely tied to universal service obligations (USOs) specifying rollout and coverage in rural areas. This is still considered global good practice, albeit that it likely drives down auction revenues and drives up consumer prices.

For example, mandated base station rollout in specified areas was a key feature of last year’s long drawn-out and overpriced auction for 2GHz and 3.6GHz spectrum in Germany − in the face of vehement opposition from the operators. Similar 4G rural and highway coverage requirements have been imposed by Peru and Brazil, along with open access facilities leasing measures in the latter case.

Interestingly, the UK’s Ofcom has decided not to impose USOs as part of its forthcoming 3.6 − 3.8GHz spectrum auction − but this was in response to a voluntary agreement between incumbent operators to establish a shared rural network with similar coverage and rollout objectives.

That agreement itself is, sadly, not yet public, but the structure appears to have similarities with South Africa’s mandatory WOAN. And, it is an approach that accords with the recent call by the GSM Association for “reasonable expectation of approval for voluntary network-sharing deals” without “implementing mandated sharing agreements”.

Malaysia has adopted a complex, experimental approach for its forthcoming auction, one that will enforce the establishment of a single consortium with similar WOAN-like features, to which it will sell 160MHz of spectrum in the 700MHz and 3.5GHz bands. This measure is combined with a ‘beauty contest’ for spectrum in the range 24.9 – 26.5GHz − an approach now largely discredited − and ‘first-come-first-served’ licensing in the 26.5 − 28.1GHz band.

New Zealand, in an approach that may unintentionally have anticipated some COVID-19 measures, decided to issue short-term licences for some 160MHz of unused spectrum in the 3.5GHz band, for which both indigenous Maori communities and incumbent operators may apply.

The imposition of spectrum caps − to prevent incumbents with deep pockets from hoarding spectrum or squeezing smaller rivals and new entrants out of the market − remains a common feature in spectrum auctions, largely because of its pro-competitive impact.

Similarly, spectrum auctions standardly have reserve prices set, in order to ensure proper value is realised from the sale of this national asset. But, as the GSMA cautions, reserve prices need to be realistic and value-based, rather than designed simply to maximise returns at the expense of rollout and affordable pricing.

In the short-term, regulators like ICASA will need to be preoccupied with managing spectrum in support of the COVID-19 emergency. This will require innovative measures to increase bandwidth by granting licensees additional short-term access to spectrum, to promote the citizen data access that is necessary for public communication about the pandemic and that will facilitate social distancing and self-isolation, and to ensure affordability of that access.

We wait to hear what ICASA has in store on this front, looking for bold, innovative and effective measures.

In the medium-term, regulators will need to pick up the challenge to move ahead with post-emergency spectrum allocation in the context of the changed social and economic environment that will emerge, the outlines of which are still unclear.

This includes, in the case of South Africa, proceeding with the auction of high-demand 4G and 5G spectrum, and ensuring it is a successful auction, to the benefit of operators, consumers and the economy and society at large. The sector − and the whole of South Africa − trusts ICASA will keep its eye on this ball.

* Charley Lewis (Ph D, M Comm − http://www.ICT-Policy.Africa) is an independent analyst and researcher, working in the field of ICT policy and regulation. He undertakes a wide range of policy and regulatory projects, offers ICT sector analysis and advice, does research and writing, and delivers training and facilitation.