A new GSM Association (GSMA) report has warned countries against implementing a wholesale open access network (WOAN) model like the one SA is preparing for.
The research shows WOANs do not deliver on promises to provide better coverage, more competition, or lower prices for consumers - with most failing to get off the ground. GSMA says if SA's government goes ahead with its plans, it could have irreversible repercussions and result in a negative impact on the economy.
The idea of a WOAN was proposed as part of the Department of Telecommunications and Postal Services' (DTPS') National Integrated ICT Policy White Paper, published last year. The White Paper called for a shake-up of the previous policy framework for spectrum allocation in favour of an "open access regime" with the WOAN outlined as a "public-private sector owned and managed consortium".
The DTPS and CSIR are conducting a high-level study on the WOAN's spectrum needs, which finance minister Malusi Gigaba has said needs to be completed by the end of August.
The GSMA report examines the performance of the WOAN model - also known as a single wholesale network (SWN) model - in five markets: Kenya, Mexico, Russia, Rwanda and SA. The report found that out of the five, there was only one where a network had rolled out, "with all other markets plagued by slow progression and delayed and/or cancelled launches".
"Citizens are promised better coverage, more competition, and as a result, more affordable prices. However, research shows that of five countries originally considering this option, only one, Rwanda, has rolled out a network. Although it appears the network hasn't delivered on what was promised," the report says.
GSMA chief regulatory officer John Giusti says some policymakers believe a WOAN can achieve greater network coverage compared to models that rely on network competition; however, GSMA's research demonstrates this is not the case.
"We have found that network competition produces faster and more extensive network coverage, and the examples highlighted in the report indicate little evidence that a SWN/WOAN is likely to achieve this," says Giusti.
"Irrespective of its motives, the [South African] government is putting a lot of faith in an unproven model. The repercussions, if the project goes ahead, could be irreversible and result in a negative impact to the country's economy. The critical role mobile broadband plays in the global economy and, especially, in the economies of developmentally advanced markets like SA, should be carefully considered," the report says.
Failing examples
From the onset, analysts were sceptical about how successful the deployment of the WOAN would be for SA. Following the white paper's release last October, BMI-TechKnowledge said its research had found no case studies where a WOAN similar to the one proposed for SA had worked or shown positive benefits.
The white paper itself admitted other WOANs established in Mexico and Kenya had been done so "with mixed results". GSMA now goes into detail about the issues experienced by nations trying to implement these models, saying the lessons from these countries "should serve as examples to other countries contemplating this route".
It says that in Kenya, the planned SWN, which was supposed to fast-track the roll-out of LTE, stalled due to a complicated negotiation process with a number of stakeholders.
"The initial plans suggested an LTE consortium should cover 98% of the population. That never happened. Although no official announcement has been made, the plan seems to have since been abandoned. This is evidenced both by the lack of mention of the network in recently published draft ICT policy and framework documents, and by the recent assignment of 800MHz spectrum to existing mobile operators," the report says.
In Russia, operator Yota was given the first licence to offer LTE services - under the condition that it would provide wholesale access to other mobile operators. However, the initiative failed as carriers couldn't reach an agreement and went their own way on LTE.
"It looks like a revived plan for a full-blown SWN (similar to Rwanda or Mexico) has also been rejected following the roll-out of LTE services by the Russian mobile operators."
Mexico's project also struggled to get off the ground.
"Out of the original 21 qualified bidders [in Mexico], most struggled with the business case. Also, multiple delays have forced the country's regulator to lower its ambitions on funding and more importantly coverage."
Missed target
Rwanda is the only country out of the five where a network is actually live, but GSMA says it can't live up to expectations. The country's LTE-based network was launched as planned in late 2014 in Kigali through a public-private partnership between the government and Korean operator KT. However, the report found the government is unlikely to achieve coverage, price and competition goals.
"As of July 2016, the network was available in 25 (out of 30) districts, with population coverage estimated at around 30%. The current progress in terms of coverage suggests it is unlikely the original coverage target of 95% will be achieved by the end of 2017. The take-up appears to be limited so far. A failure attributed to the cost of the services."
GSMA says there is also no sign mobile broadband services have become more affordable in Rwanda because of the government intervention.
It says that in practice, government-mandated wholesale networks have been much slower to expand coverage, perform upgrades and embrace new technologies such as 3G and 4G, and they can be expected to prompt less innovation than network competition.
"We are concerned that a move to wholesale networks will harm consumers, as history has demonstrated that network monopolies normally result in high prices and lower investment in infrastructure," notes Giusti.
"We call upon governments looking to implement a SWN or WOAN to instead support the ability of mobile operators to enter into infrastructure-sharing agreements on a voluntary basis and consider how they can apply market-friendly spectrum assignment methods to maximise coverage, using appropriate spectrum licence conditions to extend mobile services to underserved areas," he says.
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