RADIO FREQUENCY SPECTRUM:

Procedures & Criteria for Awards when Competing Applications OR Insufficient

Spectrum

Internet ServiceProviders’ Association

AgendaAgenda

General CommentsGeneral Comments– Audit of existing allocationsAudit of existing allocations– Transparency regarding existing allocationsTransparency regarding existing allocations– Expanding allocations in 2.6 GHz & 3.5 GHzExpanding allocations in 2.6 GHz & 3.5 GHz– Spectrum in other bandsSpectrum in other bands– Technology neutrality & spectrum tradingTechnology neutrality & spectrum trading– Competitive vs Comparative AllocationsCompetitive vs Comparative Allocations

Specific Responses to A1-7 and B1-7Specific Responses to A1-7 and B1-7 Excursus – VANS & self-provisionExcursus – VANS & self-provision

ISPA applauds the ISPA applauds the AuthorityAuthority

ISPA welcomes this process as ISPA welcomes this process as a clear indication of an a clear indication of an

intention to start considering intention to start considering competition at an competition at an

infrastructure level & NOT infrastructure level & NOT JUST a services level – within JUST a services level – within the confines of the Electronic the confines of the Electronic

Communications Act Communications Act

Note:Note:

ISPA recognises the two fold nature ISPA recognises the two fold nature of of thisthis process process establish a establish a general processgeneral process for for allocations when there is allocations when there is insufficient spectrum or competing insufficient spectrum or competing applications; andapplications; and deal with deal with specific issuesspecific issues relating relating to 2.6GHz and 3.5GHzto 2.6GHz and 3.5GHz

About ISPA

History– Founded in June 1996, the Internet Service

Providers’ Association (ISPA) was founded by nine ISPs

– Two key motivations for ISPA’s formation: 1. ISPs shared concerns about Telkom’s entry into

the ISP market. 2. To establish the Johannesburg Internet

exchange

About ISPA

Membership– ISPA currently has 128 members– Currently an average of 2-3 new members

join each month– Members are primarily Internet access

providers (including resellers or “virtual” ISPs)

– Since 2001, affiliate membership has been available for ISPs who do not sell access (e.g. content hosting services)

– Most ISPA members are commercial enterprises, but members also include non-profit organisations, individuals and trusts

About ISPA

Membership by category– Large access providers: 13– Medium access providers: 6– Small access providers: 100

The majority of ISPA’s small members (and also a majority of all members) are classified as SMMEs

Honorary members– e-Schools Network, NetDay, SchoolNet SA, TENET

Audit of Existing Spectrum Allocations

Need to audit existing allocations Assess whether being used efficiently or at all Assess whether being used for customer

services or purely for internal purposes (eg wireless backhaul)

ISPA submits the current allocations are grossly inappropriate having regard to minimal current use

Case of “spectrum hoarding” by incumbents to stifle competition

Transparency of Current Allocations

Terms & Conditions relating to current allocations in 2.6 GHz & 3.5 GHz are not publicly available

Unlike allocations such as the GSM and 3G allocations which were part of a public process

Matter of public record, need to be published– Terms & conditions of allocation– Considerations of the Authority before allocating– Cost

New allocations in 2.6GHz & 3.5GHz need to be on substantially similar terms & conditions

Possibly more favourable to new entrants to promote competition

Expanding AllocationsExpanding Allocations

Relating to 2.6GHz and 3.5 GHz Relating to 2.6GHz and 3.5 GHz specificallyspecifically

Technically possible to expand the Technically possible to expand the existing bands to increase existing bands to increase spectrum for allocationspectrum for allocation– Reduce guard bandsReduce guard bands– Minimal expansion into preceding & Minimal expansion into preceding &

succeeding bandssucceeding bands– Critical considering shortage of Critical considering shortage of

spectrumspectrum

Allocations in Other Allocations in Other BandsBands

Start allocating spectrum in other unutilised Start allocating spectrum in other unutilised or underutilised bandsor underutilised bands

WiMAX particularly appropriate for consumer WiMAX particularly appropriate for consumer focussed point to multi-point applicationsfocussed point to multi-point applications

Economies of scale Economies of scale and scope and scope drive CPE drive CPE downdown

Single user applications Single user applications moremore appropriate in appropriate in other bandsother bands

Ofcom approach to allocations of 71-76GHz Ofcom approach to allocations of 71-76GHz spectrumspectrum– Move away from command & controlMove away from command & control– Exclusive flexible rights where scarcity a concernExclusive flexible rights where scarcity a concern– Open access where scarcity less of a concernOpen access where scarcity less of a concern

Technology Neutrality & Technology Neutrality & Spectrum TradingSpectrum Trading

Terms & conditions as open as possibleTerms & conditions as open as possible Promote efficient use of spectrum – allow Promote efficient use of spectrum – allow

secondary controlled marketssecondary controlled markets Liberalisation of spectrum use and Liberalisation of spectrum use and

specifically spectrum trading allows the specifically spectrum trading allows the market to:market to:– Decide allocation to different usesDecide allocation to different uses– Faster flexible accessFaster flexible access– Promote new spectrum efficient technologiesPromote new spectrum efficient technologies– Boost innovationBoost innovation

Criticism – success of harmonised Criticism – success of harmonised spectrum and benefits of economies of spectrum and benefits of economies of scalescale

Secondary MarketsSecondary Markets Mechanism to allow competition where Mechanism to allow competition where

competing allocations - competing allocations - Addition to wholesale Addition to wholesale access by competitorsaccess by competitors

Underused spectrum in other bandsUnderused spectrum in other bands Reuse spectrum allocated if WiMAX hype is Reuse spectrum allocated if WiMAX hype is

not realisednot realised Differentiate Differentiate allocationallocation (to a specific use) (to a specific use)

and and assignmentassignment (to a specific operator) (to a specific operator) Must not be allowed to be used by incumbents Must not be allowed to be used by incumbents

to harm competition to harm competition eg hoardingeg hoarding TDD / FDD debate moot – let process TDD / FDD debate moot – let process

determine but preference to services based determine but preference to services based on Internet protocol stackon Internet protocol stack

Competitive vs Comparative Competitive vs Comparative AllocationsAllocations

No consensus in ISPANo consensus in ISPA– Concern competitive allocation may favour deep Concern competitive allocation may favour deep

pockets and not skill and capacitypockets and not skill and capacity Regarding 2.6GHz and 3.5GHz:Regarding 2.6GHz and 3.5GHz:

– Only comparative allocation appropriate as price Only comparative allocation appropriate as price already determined by cost of existing allocationsalready determined by cost of existing allocations

– Need to ensure deficiencies of past comparative Need to ensure deficiencies of past comparative processes are not repeatedprocesses are not repeated

Auctions still a very appropriate mechanism Auctions still a very appropriate mechanism for for other bandsother bands– May require participants to satisfy criteria eg BEEMay require participants to satisfy criteria eg BEE– Pre-qualification process similar to comparative Pre-qualification process similar to comparative

allocationallocation

Competitive vs Competitive vs ComparativeComparative

Regardless of the process usedRegardless of the process used– Price alone not sufficientPrice alone not sufficient– In 2.6GHz and 3.5 GHz:In 2.6GHz and 3.5 GHz:

Existing spectrum holders should not be Existing spectrum holders should not be allowed to supplement their existing allowed to supplement their existing allocationsallocations

Subsidiaries, affiliates & joint ventures of Subsidiaries, affiliates & joint ventures of existing holders – key criterion existing holders – key criterion must bemust be promotion of competitionpromotion of competition

Should happen as a matter of urgencyShould happen as a matter of urgency If precedes licence conversion – MUST be to If precedes licence conversion – MUST be to

VANS licence holderVANS licence holder

Competitive AllocationCompetitive Allocation ProsPros

– Revelation and use of informationRevelation and use of information– Equity and transparencyEquity and transparency– Avoiding corruptionAvoiding corruption– Reliance on expertiseReliance on expertise

ConsCons– may lead to high licence feesmay lead to high licence fees

High licence fees can impact negatively on universal High licence fees can impact negatively on universal serviceservice

High licence fees can discourage participationHigh licence fees can discourage participation Higher licence fees will mean higher prices to consumersHigher licence fees will mean higher prices to consumers High licence fees favour wealthier companiesHigh licence fees favour wealthier companies

– success depends very much on auction design, which success depends very much on auction design, which can be particularly complicatedcan be particularly complicated

Comparative AllocationComparative Allocation

ProsPros– EquityEquity– Fixed licence feeFixed licence fee– Forecasts matter lessForecasts matter less– Possibility to include social objectivesPossibility to include social objectives

ConsCons– Disclosure of confidential information to Disclosure of confidential information to

competitorscompetitors– Lack of transparencyLack of transparency– Risk of corruptionRisk of corruption– Timing generally longerTiming generally longer

Questions on 2.6 GHz & Questions on 2.6 GHz & 3.5GHz3.5GHz

Questions A1 – 7Questions A1 – 7

Questions B1 - 7Questions B1 - 7

Proposed sub-divisionProposed sub-division

The larger the spectrum The larger the spectrum allocation the higher the allocation the higher the bandwidth for traffic with lower bandwidth for traffic with lower capexcapex

Competition involves multiple Competition involves multiple new entrants but ensures they new entrants but ensures they all have a all have a fighting chancefighting chance

Proposed sub-division of 3.5 Proposed sub-division of 3.5 GHzGHz

Subdivision of the 60MHz of available spectrum Subdivision of the 60MHz of available spectrum into two allocations of at least dual 14 MHz into two allocations of at least dual 14 MHz channels, remainder to be supplemented to form a channels, remainder to be supplemented to form a further usable allocations further usable allocations

Rework allocations Rework allocations for examplefor example::– Telkom 2 x 26 MHz (ie remove 2 x 1 MHz from existing)Telkom 2 x 26 MHz (ie remove 2 x 1 MHz from existing)– Neotel 2 x 26 MHz (ie remove 2 x 1 MHz from existing)Neotel 2 x 26 MHz (ie remove 2 x 1 MHz from existing)– Sentech 2 x 13 MHz (ie remove 2 x 1 MHz from existing)Sentech 2 x 13 MHz (ie remove 2 x 1 MHz from existing)– New national operator A, B & C 2 x 13 MHz eachNew national operator A, B & C 2 x 13 MHz each– Regional operator 2 x 9 MHzRegional operator 2 x 9 MHz

At least 2 national, possibly 1 regionalAt least 2 national, possibly 1 regional

Proposed sub-division of 2.6 Proposed sub-division of 2.6 GHzGHz

Sub-division of the 126MHz of Sub-division of the 126MHz of available spectrum into available spectrum into approximately nine (9) allocations approximately nine (9) allocations of not less than 14 MHz eachof not less than 14 MHz each

Approximately 20% of these to be Approximately 20% of these to be regional and approximately 80% regional and approximately 80% nationalnational

May be able to rework as May be able to rework as suggested previouslysuggested previously

Answers on both 2.6 GHz Answers on both 2.6 GHz and 3.5 GHzand 3.5 GHz

National, regional or both?National, regional or both?– A combination of national & regional allocations to A combination of national & regional allocations to

ensure the greatest number of new entrants with a ensure the greatest number of new entrants with a “fighting chance”“fighting chance”

Allocation mechanismAllocation mechanism– Comparative as price already knownComparative as price already known

Criteria (with no particular weighting or ranking)Criteria (with no particular weighting or ranking)– Efficient use of spectrumEfficient use of spectrum– Public need & benefitPublic need & benefit– Technical considerationsTechnical considerations– Equipment limitationsEquipment limitations– BEEBEE– Reducing costReducing cost– Services based on the IP stackServices based on the IP stack

Policy Imperatives 2.6 GHz & Policy Imperatives 2.6 GHz &

3.5 GHz3.5 GHz

Urgency to ensure infrastructure Urgency to ensure infrastructure competition not just services competition not just services competitioncompetition– Six (6) months idealSix (6) months ideal

Promotion of competitionPromotion of competition Assessment of existing Assessment of existing

assignments assignments (use it or lose it)(use it or lose it) Prevention of interferencePrevention of interference

ExcursusExcursus: VANS & self-: VANS & self-provisionprovision

VANS RegulationVANS Regulation– Reg 490 of 20 May 2005 in GG 27608Reg 490 of 20 May 2005 in GG 27608– No mention of self-provisionNo mention of self-provision– No restriction on self-provisionNo restriction on self-provision

VANS Licence Terms & Conditions promulgated by VANS Licence Terms & Conditions promulgated by RegulationRegulation– 1.1 1.1 b) The Licensee may provide its service by means of

telecommunication facilities obtained from any other person licensed to provide telecommunication services in terms of the Act

– Supremacy of the SA Constitution Right of Freedom of Trade S22

Draft Licence Conversion Framework provides for the allocation of both ECS and ECNS licences to existing VANS

Meaning of word “may”Meaning of word “may” Canons of statutory interpretation

– So- called “Golden Rule”– Ordinary meaning unless at variance with the

intention of statute Intention of statute, VANS may not self-provide until a

date determined by the Minister The Minister determined a date, namely 1 February 2005 Ordinary meaning: may self-provide or lease facilities,

however if leasing facilities these must be leased from holders of licences

Not at variance with legislation – either Telecommunications Act of 2006 (now repealed but in terms of which originally promulgated) or Electronic Communications Act of 2005

Meaning of word “may”Meaning of word “may” There is a need for a provision dealing with the

interpretation of words as peremptory or directory. If legislation [including subordinate legislation] states that a person may do, or is entitled to do, or has or shall have the power, authority or right to do a particular thing, that legislation must be read as implying that that person has the freedom of choice whether or when or how to do that thing. If legislation states that a person must or shall do, or has or shall have the duty, obligation or responsibility to do a particular thing, that legislation must be read as implying that that person has no freedom of choice whether to do that thing and that that thing must be doneParagraph 5.23 of the Law Reform Commission Discussion Paper 112: Statutory Revision: Review of the Interpretation Act 33 of 1957

Internet Service Providers’ Association+27 11 314 7751info@ispa.org.za

http://www.ispa.org.za

Michael Silber – regulatory advisormike@ispa.org.za

Thank you!

Questions:Questions: