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Umsebenzi Online

Volume 15, No. 28, 1 September 2016

In this Issue:


Red Alert

Stop Icasa auctioning off our future, stop corporate capture of our future at Icasa now!

By RedComms Media

Eskom's reluctance to let National Treasury look at its accounts (at least the Gupta-related part of them) may have grabbed media attention as the state-on-state dispute to watch.

But the looming court bid by Posts and Telecommunications' Services Minister Siyabonga Cwele is a fight with more direct and potentially damaging implications for all South Africans.

If Cde Cwele's bid fails, our country and all its people will be hostage to the savage profit-maximisation appetites of a handful of its greediest corporations. So too will the chances of economic development, doing any kind of business and attracting foreign investment.

Cwele is going to court this month, September to block attempts by the telecommunications regulator Icasa to permanently hand over control of broadband data radio frequencies to one or more of the existing mobile network operators.

We know these operators - Cell C, Vodacom, MTN, Neotel, Telkom, and WBS/iBurst - mainly because they are precisely those responsible for creating artificial scarcities in the communications sectors to ramp up the cost of airtime and data to among the highest in the world.

Icasa is essentially proposing auctioning off in five auction "packages" the entire radio spectrum that can be used for high-speed broadband signals. This is due to begin in October and to be wrapped up by the end of this year. The winners will then set about indiscriminately squeezing South Africans at every social and economic level of every cent they can get: indiscriminate because - much as they have done under the benign regulatory eye of Icasa (and predecessor Satra) since 1994 - their exorbitant pricing models ignore your economic status. If you are poor they will force you to use money you need for food; if you are in business, they will be ensuring the funds you have for development go instead to their coffers. The damage to foreign and domestic investment potential - and thus to South Africa's economic development - will be incalculable.

But because communications are essential in our society, we will have to spend it.

Perhaps the most truly horrifying aspect of Icasa's auction plan is that it has imposed a financial threshold on the bidding: if you want to be considered, you will have to demonstrate you can afford the minimum price for one "package": R3-billion. That condition alone excludes everyone but the existing networks. So Icasa is not planning to hand over control of broadband to corporations with a history of super-exploitation by mistake: the reserve price shows it is planning to do it on purpose.

But what is equally horrifying is that the spectrum it is selling legally belongs to the people of South Africa, allocated by the International Telecommunications Union (ITU) to South Africa as a whole - not just to its greediest capitalists.

That is also true of the spectrum now being used by the networks for mobile telephony. And Icasa is also responsible for regulating those - in theory ensuring the networks operators stick to their licence obligations to provide affordable and reliable networks. But Icasa, arguably among the first of the state victims of corporate capture, has sat contentedly by while the network operators fail to upgrade their networks (but not their prices), resulting in terrible service (dropped calls, erratic sound quality, mobile dead zones) at world-beating rates.

Icasa's track record in regulating mobile telephony in the public interest - in a way that serves all South Africans - was to do precisely nothing to stop the rot, as the network operators were transformed into money-making machines, churning out undreamed of profits. It is reasonable to assume it will do the same once it hands over to the same villains a stranglehold on high-speed data networks.

The networks used their exclusive access like a miser who owned the only tap in a drought-wracked village: charging as much as they could for a scarce resource people desperately need.

As the forerunner of corporate capture, Icasa has long accepted that the role of public assets is to feed private capital accumulations, so the decision to sell a public good to the networks is not surprising. Suddenly deciding to do so in July is, however, interesting.

Interesting because it did so just ahead of Cwele's process to table an entirely different plan to Cabinet. And within weeks, it should be noted, of the eventual collapse of attempts by key African National Congress (ANC) representatives to delay approval of the plan by the ANC national executive committee (NEC). Their filibustering in the ANC NEC communications sub-committee succeeded in delaying submission of Cwele's proposal to Cabinet until after the start of the official local government election campaign period. But the sub-committee eventually lost patience and pushed the plan through.

The plan, in the form of a White Paper (a formal government policy position), was prepared after several years of policy reviews and development by a broad ICT Policy Review Panel established by Cwele's predecessors.

The White Paper will, if accepted by Cabinet, set policy on a range of communications issues. And although it is classified until tabled before Cabinet, various discussion documents (Green Papers and the like) suggest it takes a radically different approach, which will not only do much to facilitate a decent and affordable service, but will also significantly lower the cost of high-speed data both for private users and in business, but will also remove one of the inhibitors to foreign investment and domestic re-investment.

The options set out in pre-White Paper documents released by the ICT Policy Review Panel include establishing a Wide Open-Access Network (Woan).

Woan. Remember that word: it could have a very positive impact on your pocket, whether you are rich or poor, a business owner or a factory worker (although not if you are one of the Big Six network operators).

Globally, when governments and regulators were naïve enough to believe that capitalist, market-driven communications sectors would prosper and deliver affordable, ever more efficient networks, providing ever-cheaper services, many used auctions to generate short-term revenue for their national treasuries.

But the resultant exclusive access by a limited number of operators controlling a scarce resource had massive negative consequences. Mergers and acquisitions saw a smaller and smaller number of operators, stifling competition, driving up prices, driving down service provision levels, and extensive vertical integration, with the network operators controlling not only the networks, but also ensuring that only their "products" (message services and so on) had access to sufficient frequency spectrum to succeed, further eroding access (or competition) in the communications market and strengthening the stranglehold by the few.

South Africa has therefore joined a range of nations that have learned the auction lesson and opt for an alternative. Other countries introducing variants of the Woan are: Mexico, Rwanda (a public-private partnership ownership system), Kenya, Russia (where the government is leading network consortium), France, the USA (that's not a misprint), several of the OECD countries, Japan, Singapore and Tanzania.

The Woan idea is to establish a single broadband data network (in our case, presumably consolidating existing networks and constructing new components). This network, either a (public or) public-private partnership or a wholly private operator, is licensed as a wholesale operator only - it operates the network and distributes signals on behalf of operators licensed to use it. The wholesale price is fixed as, for example, is Eskom's wholesale price. The quality of service - the levels of interruptions, dropped transmission and so on - will be the same whichever retail operator a consumer accesses the network through.

All retail operators (MTN, Vodacom and so on are currently both wholesalers and retailers, but will under the new system, be retailers only) will then be judged by consumers purely on the quality of the service and price.

The most notable effect experienced by consumers in countries with Woan systems is to drive down the cost of communication - data and talk - and to raise the standard of the network. It ends infrastructure duplication, in which individual operators cluster their towers and transmitters in affluent areas, and shifts competition from the network, which is common, to the services operators offer.

Various mechanisms linked to Woans have resulted in increased nett investments in network development and penetration. The results are overwhelmingly positive.

Again, looking elsewhere for examples, various mechanisms have been used with success to encourage incumbent operators to integrate existing networks into Woans. The most obvious of these is long-term self-interest. If South Africa's Woan has access to all high-speed data frequencies, any operator staying outside is going to lose the fight for consumers, who will go to the Woan because the system is faster and cheaper.

Only the incumbent operators - robbed of their exclusive access to the village tap, and thus their opportunity for super-exploitation - have opposed it. Oh, and Icasa.

Unsurprisingly, the DA has backed the auction - supporting a process to put into the hands of private profiteers a major asset given to the people of South Africa by an international agency. That may be worth remembering in the 2019 general election, if you are tempted to put your X next to the blue logo.

Not much more surprising is that several of the networks have joined Cwele in opposing the auction in its current form. Their reasons vary, but it is all about the green-backs (i.e. the dollars, or once for all, money): some just want to keep the price down - and lowering the R3-billion reserve price is a good start. Others do not meet even the token BEE thresholds Icasa wants to set (MTN's sudden interest in developing a broad-based mass shareholding seems to be a belated attempt to increase its BEE shareholding).

But, at base, do they want to get their hands on our data frequency spectrum to make even more obscene profits at our expense and the expense of South Africa's economic future? Yes they do. And Icasa, obliged by law to regulate in the public interest, is their enthusiastic partner.

  • RedComms Media

Umsebenzi Online is an online voice of the South African working class