Open-access wireless networks and spectrum assignment - Open... · TD-LTE Time Division Long Term Evolution TVWS TV white space (spectrum) ... Open-access wireless networks and spectrum

Final report #5 for DTPS and

GTAC

Open-access wireless

networks and spectrum

assignment

9 December 2014

Robert Schumann, Janette Stewart,

Russell Matambo

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.

Open-access wireless networks and spectrum assignment

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Contents

1 Executive summary 1

2 Introduction 9

3 International models for open-access wireless networks 11

3.1 Australia 11

3.2 Kenya 15

3.3 Tanzania 18

3.4 Rwanda 19

3.5 UK 22

3.6 USA 24

3.7 Summary 26

4 IMT and ICASA’s draft IMT roadmap 28

5 Spectrum requirements for an open-access wireless network 35

5.1 Type of spectrum assignment (licence, licence exempt, lightly licensed, white space) 35

5.2 Choice of frequency band 38

5.3 Spectrum packaging 41

5.4 Decisions in deploying a new open-access wireless network 49

6 Other options in spectrum licensing to facilitate a broadband development agenda 56

6.1 Measures aimed at facilitating further network roll-out 56

6.2 Measures aimed at improving affordability/quality of services and competition 65

7 Future trends and 5G 70


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Copyright © 2014. Analysys Mason Limited has produced the information contained herein for

the Department of Telecoms and Postal Services (DTPS) and the government Technical

Advisory Centre (GTAC). The ownership, use and disclosure of this information are subject to

the Commercial Terms contained in the contract between Analysys Mason Limited and GTAC.

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http://www.analysysmason.com/


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Abbreviations used

Note that abbreviations for companies’ names are not included.

ACCC Australian Competition Consumer Commission

CA Communication Authority (of Kenya)

DSO Digital Switchover (of terrestrial TV broadcasting)

EU European Union

FCC Federal Commission of Communications (USA)

FDD Frequency Division Duplexing

FTTC Fibre To The Cabinet

FTTP Fibre To The Premises

FWA Fixed Wireless Access

GPON Gigabit Passive Optical Network

GPS Geographical Positioning System

GSM Global System for Mobile Communications, also called 2G

ICASA Independent Communications Authority of South Africa

IMT International Mobile Telecommunications

ITU International Telecommunication Union

LTE Long-Term Evolution (also called 4G)

LTE-A Long-Term Evolution Advanced

MIMO Multiple In, Multiple Out (antenna technology)

MNO Mobile Network Operator

MVNO Mobile Virtual Network Operator

NBN National Broadband Network

NGA Next-Generation Access

ORN Olleh Rwanda Networks (Rwanda)

PPP Public–Private Partnership

PTS Post & Telestyrelsen (Sweden)

RAN Radio Access Network

TDD Time Division Duplex

TD-LTE Time Division Long Term Evolution

TVWS TV white space (spectrum)

UMTS Universal Mobile Telecommunications System (a 3G technology)

Open-access wireless networks and spectrum assignment | 1

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1 Executive summary

This document is the fifth deliverable from the study of market structure of the

telecommunications sector in South Africa and the implementation of South Africa Connect1 that

Analysys Mason is undertaking for the Department of Telecommunications and Postal Services

(DTPS) and the Government Technical Advisory Centre (GTAC).

It considers international experience in operating open-access wireless networks, appropriate

models for allocating or awarding spectrum, including packaging of spectrum, options for

leveraging urban-appropriate spectrum for rural fixed-wireless access, and the possible

involvement of the government in operating an open-access wireless network. Aside from

considering the launch of a new open-access wireless network, we also consider other options for

improving the coverage and competitiveness of wireless markets. All of this analysis is set in the

context of ICASA’s plans for internationally harmonised IMT spectrum and future evolution of

wireless standards towards 5G.

Summary of findings on the feasibility of an open access wireless network for South Africa

Connect

The key findings from our analysis as presented in this report on the feasibility and scope for open

access wireless networks are as follows:

The technical distinction between public cellular mobile and wireless broadband spectrum is

becoming less relevant in the marketplace, although it is still strategically relevant in terms of

the services being delivered and related competition issues. However, technology neutrality is

being recognised in many markets internationally where spectrum licence conditions are being

liberalised to allow MNOs to select the appropriate technology and generation of technology

(i.e. 2G/3G/4G), based on market demand and to meet business needs. Accordingly, in terms

of the spectrum allocation requirements for an open-access network, international market

developments suggest that a spectrum band harmonised for IMT use will be suitable for

delivery of wholesale wireless broadband services, irrespective of whether the open-access

network is fixed-wireless access (FWA) or a mobile broadband offering.

International experience in designing successful wholesale open-access wireless networks is

light, and networks of this sort that are being established are still in their infancy. There are

risks attached for government and for private investors. In countries where a specific company

has been created to operate a national broadband network (including a wireless network, as in

Australia for example), significant funding is required to achieve its stated goals.

1 Department of Communications, South Africa Connect: creating opportunities, ensuring inclusion. South Africa’s

broadband policy, 6 December 2013. Referred to in this report as “SA Connect”.


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Alternative forms of intervention might be funding of wireless infrastructure only in the most

remote areas (with tighter coverage obligations in one or more IMT licences to incentivise

MNOs to provide coverage), or encouragement of network/RAN sharing. Other measures such

as MVNO and national roaming can improve the choice of service providers in the market, but

are unlikely to address coverage issues.

In terms of the choice of spectrum for an open access wireless network to use, consideration is

needed as to whether the service is an FWA one, or a mobile one. In general, for services to

mobile devices, lower-frequency spectrum planned in accordance with internationally

harmonised band plans is generally favoured over higher bands, to provide a more cost-

effective coverage to wider geographies. 800MHz spectrum has been highly valued by mobile

operators in Europe (and internationally, sub-1GHz digital dividend bands in either the

700MHz or 800MHz range tend to attract significant interest and bids, if the frequency

arrangement aligns with international recommendations). Operators are often prepared to pay

large premiums regardless of whether conditions to meet coverage objectives are placed on

800MHz spectrum licences. Accordingly, an appropriately designed coverage obligation –

or obligation of wholesale access on one or more 700/800MHz spectrum package – could

be considered as an alternative to setting aside spectrum for an open-access wireless

network if the intention is for the network to deliver mobile broadband services. This is

further described below.

If the open-access wireless network is to provide an FWA service, then the disadvantages of

using non-harmonised spectrum are less relevant and bands with lower economies of scale,

such as the 450MHz band, might be suitable. However, this should ideally be confirmed

through further cost–benefit analysis, taking account of the type of delivery (i.e. FWA or

mobile broadband) that is envisaged. The choice of band also depends on the bandwidth

available, however, and we note that there is insufficient 450MHz spectrum available for

this, on its own, to meet the SA Connect requirements in terms of network throughput

and speed.

More generally, if policymakers believed that a new wholesale open-access network (not

based on one of the existing networks) were desirable, at least three major decisions

would need to be taken that would have a significant impact on the likely impact and

viability of the proposed network:

— Will the service be designed to attract FWA, or mobile customers?

— Will the service be restricted to rural areas or rolled out nationally (including metros)?

— Will the network receive government support or not?

This leads to eight possible operating models for the proposed network, shown in Figure 1.1.

Our qualitative assessment against the criteria of avoiding market distortion, minimising

government cost, maximising take-up and impact, and viability, suggests that rural-only

models are likely to be most appropriate, and that there are potentially viable templates for

both FWA and mobile systems in Australia, South Africa, Tanzania, and in existing shared


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network joint ventures in numerous countries. However, all of these models involve

considerable risk, and without government investment they are likely to provide only partial

coverage to currently unserved areas.

Figure 1.1: Flow chart showing the various options for an open-access wireless network in South Africa

[Source: Analysys Mason, 2014]

Note: This figure is reproduced in larger format in Figure 5.4.

Summary of alternative options

As noted in this report, an alternative way of achieving the government’s targets for broadband

availability might be to promote various industry-led approaches within the mobile broadband

market. These are likely to be favoured by MNOs. Possible alternatives to an open access wireless

network in South Africa have also been reported in work carried out by consultants on behalf of

the GSM Association2.

A summary of our findings in in terms of alternative options to the creation of an open-access

wireless network is as follows:

One of the key industry-led approaches to extend the reach of mobile networks beyond

the area commercially feasible for a single operator is radio access network (RAN)

sharing between two or more operators. This is becoming more widespread in many

countries, although consolidation into a single national wholesale wireless provider is not yet

occurring. The existence of network-sharing arrangements makes it easier to meet coverage

obligations (in markets where these are being included in 4G licences). However, although

RAN sharing might extend coverage into some areas where it would have otherwise been

unfeasible, it is unlikely to result in coverage/availability issues being fully addressed (i.e.

universal coverage is not guaranteed), unless specific incentives or obligations exist to cover

rural areas. Nevertheless, government funding in truly under-served areas could be

implemented to complement industry-led roll-out to the remaining areas.

2 For example, the study on assessing the case for single wholesale networks in mobile markets, available at

http://www.gsma.com/.

FWA or mobile?

Rural only or

national?

Government

support or not?

Rural only or

national?

Government

support or not?

Government

support or not?

Government

support or not?

NBN Co model

(Australia)

Shared Network

Tanzania model

(Tanzania)

Government-

sponsored

national FWA

network model

Rural-only

mobile network

without

government

support model

Wireless ISP

model

(South Africa)

Olleh Rwanda

Networks model

(Rwanda)

Clearwire model

(USA)

Smile model

(TZ, UG, NG,

DRC)

FWA

450MHz or

2.6/3.5GHz

Mobile

700/800MHz

Rural

only National

Rural

only National

Government

supportNot

Government

supportNot

Government

supportNot

Government

supportNot

1 82 3 4 5 6 7


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Coverage obligations within 4G licences can be designed to require one or more MNOs to

extend network reach into harder to serve areas, and/or to provide coverage in specific

locations (depending on how the coverage obligation is formulated). Where regulators in other

countries have imposed a 4G coverage obligation on one MNO, this can incentivise other

operators to follow suit by providing similar coverage. This is not always the case, however, as

the Swedish case study in our accompanying report on International experience in broadband

market structure demonstrates. This is potentially because in the Swedish case the not-spots

were identified by the regulator (as being particularly hard-to-reach areas), whereas in other

markets (e.g. the UK) the coverage obligation extends to the majority of the population but

excludes the most remote areas, which are addressed separately (in the UK case, via a

procurement to install masts in rural areas for joint use by all MNOs). In the German case

study, although not-spots were identified by the regulator, the obligation to reach these was

shared among MNOs (whereas in Sweden one operator had to cover all hard-to-reach areas).

This is the most likely reason why the German approach has been more successful than the

Swedish one.

Imposing an obligation to host MVNOs on operators with coverage objectives may allow

competition objectives to be achieved despite the limited availability of spectrum.

It is noted that in most cases, the minimum throughput that regulators have defined for 4G services

as part of a coverage obligation is somewhat lower than the speeds that would be expected from

next-generation fixed network access (e.g. fibre or well-designed FWA). We also note that the

minimum speeds in the coverage obligations ICASA indicates in the draft IMT roadmap fall short

of the SA Connect requirements. Therefore, although 4G services are expected to improve the

availability of mobile broadband in countries where 700MHz and 800MHz licences are awarded,

mobile broadband networks are not expected to offer a serious competitive challenge to fibre

broadband; nor are they likely to achieve the speeds, coverage, reliability and performance

expected of fixed wireless broadband networks. This is partly due to the economics of 4G network

build, as well as for technological reasons.

Also, and although not explicitly discussed in this report (see the report in this series on

“Implications for policy, licensing and regulation” for more on spectrum charging), it is worth

mentioning the government revenue impacts of any of the measures described here in relation to

conditions attached to MNO licences. The revenue generated from a spectrum award is an

important contributor to the national fiscus and possibly also to specific broadband initiatives. It

should be recognised, however, that mobile operators are willing to pay for spectrum in proportion

to the supernormal profits that can be extracted due to the scarcity of that spectrum. In a

hypothetical world in which spectrum supply was infinite, spectrum would have no value, because

the threat of market entry would force prices down to the efficient cost of delivering mobile

broadband services. As a consequence, a more competitive mobile broadband market results (all

other things being equal) in lower spectrum valuations by operators. This is the reason why

policymakers should strive to place as much spectrum in the hands of as many operators as

possible, but it also points to the inevitable reduction in government revenue resulting from such

policy.


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Imposing obligations on spectrum also tends to reduce government revenue from spectrum awards,

in a relatively predictable way that is related to the cost of complying with the obligation (e.g. the

cost of building network in deep rural areas). Prudent policymaking suggests that this revenue loss

should be estimated by the regulator prior to awarding the spectrum, and the cost compared with

that of other options for achieving the same outcome (such as direct grant funding).

However, spectrum award mechanisms that reduce the price paid by operators for spectrum below

what they would have paid in a competitive process do not necessarily guarantee that operators

will set aside the resulting cash savings for roll-out. Operator incentives are not altered simply by

varying the amount of sunk cost incurred in purchasing spectrum. As a result, the competitive

dynamics resulting after spectrum award are more important for achieving coverage and pricing

targets than the mechanism of the award. Put another way: offering operators spectrum at low

prices does not lead to low broadband prices.

Conclusions from this report

From this summary, our conclusions from the analysis presented in this report are as follows:

There is insufficient experience around the world to suggest what may constitute best

practice in wholesale open-access wireless networks. Emerging projects (such as those in

Australia and Rwanda) may yet develop best practice, but such networks face significant

organisational and strategic challenges, and it should be noted that the Australian example is

limited to FWA-style access rather than full mobile access.

Competition issues between an open-access wireless network and existing MNOs 4G

plans need to be considered, particularly in the context of use of sub-1GHz spectrum

(where market demand might outstrip supply) and if the open-access network will

deliver services to mobile devices. This is because existing mobile operators will have

legitimate concerns if the government funds a network that will compete on the same terms as

the MNOs’ networks, since the government-funded network might be in a position to roll out

services more quickly, or to a wider population, causing market distortions. There will also be

concerns if sub-1GHz spectrum in harmonised bands is set aside for a Government-led

network, particularly if only needed for rural areas, due to the high value of 700/800MHz

spectrum for commercial 4G use, and the potential loss of economic benefits (such as

government revenue, and consumer and producer surplus).

More widely available urban-appropriate spectrum (notably 2.3GHz, 2.6GHz and

3.4GHz) could be leveraged to provide broadband in rural areas only if the aim were to

provide FWA-style service rather than full mobile broadband (as is the case in Australia,

for example). These bands have the benefit of offering more bandwidth, and so the

throughput/speed that can be achieved from networks using these bands may be higher.

If spectrum is being assigned to an open-access wireless network, it will require an

exclusive assignment or a wholesale obligation on another licensee with an exclusive


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assignment (i.e. licence-exempt, light-licensed or TVWS spectrum is not suitable). Although

further analysis would be required to confirm the precise amount of spectrum that would be

required for SA Connect, our view (based on the capabilities of LTE-A technology and the

speed targets set for SA Connect) is that 2×10MHz is only a minimum requirement (for a

lightly loaded network delivering data-only services in rural areas) and that further spectrum

will be required in order to meet SA Connect speed targets up to 2020 and beyond.

Accordingly, use of the 450MHz band on its own is not sufficient to meet the SA Connect

requirements (as suggested by ICASA), although it could be used in combination with other

bands.

As a means to mitigate spectrum scarcity and related competition issues, ICASA could

investigate reserving a specific lot in the 700/800MHz spectrum award for a commercial

network that would have an obligation to provide wholesale access on regulated terms

(including prices) to other operators. For example, wholesale access obligations could be

attached to one or more licences in the planned IMT award process, along with a specific

coverage obligation. This would enable participants in the award to value the spectrum

accordingly, if parts of the band(s) being offered carried a coverage obligation.

We assume (although it is not clear in the roadmap) that ICASA intends to award all available

IMT spectrum in a single process. This type of award process is complex, but provides greater

flexibility for ICASA to design award rules which allow for (but do not guarantee) an overall

efficient outcome, taking account of the needs of SA Connect and other demands such as

emergency services use. Awards spread over time – for example, if bands are awarded within

successive individual processes – enable more flexibility to changing circumstances, but the

outcome of later awards is highly dependent on what happened in earlier ones (e.g. new entry

is more difficult, and operators may not achieve the optimal spectrum packages that they

require for 4G). From the SA Connect perspective, it would seem appropriate to follow a

single IMT spectrum award process, with any specific measures the Government

subsequently decides are necessary to support an open-access wireless network (e.g. set aside

of spectrum) incorporated into this award.

Ultimately, the preferred approach for improving coverage and market conditions will

depend on the capabilities of ICASA and DTPS. In order of increasing requirement for

decisive and rational involvement from them, the options are:

— Imposing coverage obligations on at least one of the spectrum lots awarded

— Imposing coverage and wholesale obligations on at least one of the spectrum lots

— Reserving spectrum for a new open-access wireless operator with coverage obligations

(based on one of the models shown in Figure 1.1).

Links to other reports produced within this study

Finally, it is worth observing to what degree the issues discussed in this report are dependent or

independent of various other topics considered in this and the accompanying reports. This has


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implications for whether questions around spectrum policy need to be addressed concurrently with

resolutions for these other issues, or whether (as industry is clamouring for) spectrum can be

awarded before other issues are resolved. In the bullet points below, we consider the extent to

which we believe considerations around spectrum are dependent on other issues:

The role of SOCs and government agencies. The major SOCs operating in the telecoms

sector are Telkom, Broadband Infraco and Sentech. Our analysis in this report suggests that

the activities of an open-access wireless network should be circumscribed, focusing on rural

areas and possibly based on FWA rather than a full mobile service. Neither Sentech nor

Broadband Infraco has demonstrated sufficiently strong performance to warrant its

appointment as the operator of an open-access wireless broadband network, and indeed

Sentech recently returned funds to National Treasury after failing to agree a plan to roll out a

wholesale FWA network. Telkom already operates several wireless networks, with limited

success, and there is little reason to favour it through spectrum policy. Restructuring of any of

these entities will take time and may have an uncertain outcome, and it would be risky to make

spectrum policy and spectrum award decisions that depend on a successful and speedy

outcome.

ICASA’s capabilities. Improving ICASA’s monitoring of networks, dispute resolution,

coverage studies and wholesale market oversight will help to ensure the effectiveness of

spectrum policy, and operators should be expecting more rigorous oversight from ICASA in

the near future when they acquire new spectrum. Spectrum policy and spectrum awards should

be made on the assumption that ICASA’s capabilities and resourcing will improve, but that its

focus may be confined to a small number of key areas in the medium term. The process of

awarding spectrum should therefore be used to identify which capabilities are important in

achieving policy goals, but this should not delay the award.

Open access definition and implementation. A policy decision on whether to introduce

some form of open access – whether from a new entrant or from obligations on existing

operators – will need to be made prior to spectrum award. Furthermore, the cost of complying

with any coverage obligations is likely to vary widely depending on what action is taken to

ensure open access to aggregation and backbone fixed networks. The issue of open access to

fixed backhaul networks is unlikely to be resolved before spectrum is awarded, so bidders are

likely to make pessimistic assumptions about the costs of complying and therefore pay less for

spectrum. While achieving a lower revenue from the spectrum award is unfortunate, it should

not cause a delay in awarding the spectrum. This problem could be mitigated by moving as

quickly as possible towards implementing a solution for lowering the cost of rural backhaul.

Revised market structure. A decision on spectrum award does depend critically on whether

policymakers believe that one or more new wireless entrants are required in the market (which

could be either mobile or FWA operators). A change to fixed market structure has little

relevance to the award of spectrum.


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Aggregated demand from the public and potentially private sectors. Aggregated end-user

demand (e.g. from schools, clinics and government offices) would increase the viability of

networks in some currently under-serviced areas. Government attempts to stimulate consumer

demand would have a similar effect, if successful. Both of these would increase the proportion

of South Africa’s population reached by commercial mobile and fixed-wireless broadband,

making it correspondingly easier for operators to achieve any coverage obligations and

therefore increasing the likely revenue to government from the award of spectrum. Uncertainty

regarding the outcome of demand aggregation and stimulation should not, however, delay

spectrum award.

We therefore conclude that the only critical issues which need to be resolved prior to awarding

high-demand spectrum are the conditions (of coverage and wholesale open access) that may be

imposed on the spectrum awarded, and whether a change in wireless market structure is desirable

(notably through new entrants, whether mobile or FWA). Still important but not critical are

demand aggregation and stimulation, and the success of ensuring cost-effective open-access fixed

backhaul networks in rural areas, both of which may lower the cost of reaching rural areas with

wireless broadband and thus increase government revenue from a spectrum award. The spectrum

award process, and decisions regarding spectrum obligations, should in turn be used to determine

ICASA’s regulatory priorities. In our view these are the only significant interactions between the

high-demand spectrum award and other policy issues.


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2 Introduction

This is the fifth deliverable from the study of market structure of the telecommunications sector in

South Africa and the implementation of South Africa Connect3 that Analysys Mason is

undertaking for the Department of Telecommunications and Postal Services (DTPS) and the

government Technical Advisory Centre (GTAC).

The objective of the study is to advise on the most appropriate market structure arrangements and

reform options that will support attainment of the broadband targets identified in SA Connect

specifically, and the efficient functioning of the telecoms sector in South Africa more generally.

This project primarily focuses on the “Digital Future” pillar of the SA Connect policy, which aims

to consider the viability and competitive impact of open-access fibre and wireless broadband

networks.

This document addresses element 3.1.7 of the terms of reference for the study (which is to advise

on open-access wireless networks, including implications for spectrum allocation), and considers:

International experience and best practice in transitioning to, and then operating, an open-

access wireless network, including the investment required by the public sector and structure

of the network.

The most appropriate model for spectrum allocation, taking account of South Africa’s

development agenda (and specifically the need for balancing revenue objectives and

affordability of infrastructure investment).

Options to leverage urban-appropriate spectrum for broadband in rural areas.

Optimum configuration of spectrum packages.

Alternative options within spectrum licences that might deliver similar coverage/availability

benefits to those of a wholesale wireless network.

This report should be read in conjunction with the third deliverable from the study, titled “Models

for open-access national broadband networks”, which deals more broadly with structural models

for open-access networks, considerations of wired and wireless coverage, regulation and

governance. In this report, we specifically address issues relating to creation of open-access

wireless networks, including international experience and the implications on radio spectrum –

both in terms of the assignment of suitable spectrum and the impact of this assignment on other

players within the market which may have interests in acquiring the same or similar spectrum

(most likely to be the South African mobile network operators).

3 Department of Communications, South Africa Connect: creating opportunities, ensuring inclusion. South Africa’s

broadband policy, 6 December 2013. Referred to in this report as “SA Connect”.


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The remainder of this document is laid out as follows:

Section 3 describes international experience in defining and operating open-access wholesale

wireless networks

Section 4 reviews ICASA’s draft IMT roadmap and explains the context of IMT technology

developments

Section 5 considers what type and quantity of spectrum may be necessary to create an open-

access wireless network in South Africa

Section 6 reviews other options that may be used to achieve broadband development agendas

such as increasing network coverage and improving quality and affordability of services

Section 7 considers, in the context of SA Connect’s targets over the next 15 years, how the

next generation of mobile technology (5G) may change wireless broadband markets.


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3 International models for open-access wireless networks

This section of the report describes international experience in setting up and operating open-

access wireless networks, including the structural models needed to create them and the different

roles that government can take to support private sector entities.

In particular, we are aware of a number of international examples where mobile or wireless

broadband networks are being established or are being proposed by policymakers with some

degree of wholesale provision included. However, although this approach has been proposed in a

number of markets, it has been implemented in relatively few to date.

In the following section we describe proposals, and plans, to implement open-access wireless

networks in Australia, Kenya, Tanzania, Rwanda, the UK and the USA.

3.1 Australia

Market overview Telstra is Australia’s incumbent fixed operator, with a 46.2% market share

of total fixed broadband subscribers as of March 2014 (equating to

~2.8 million subscribers).4

As of June 2014, Australia has an estimated fixed broadband penetration of

69.8% of households. Due to Telstra’s reluctance to open up its network at

reasonable cost, other operators have countered by rolling out their own

networks. Optus, iiNet (and its subsidiaries Internode and Adam Internet),

TPG Telecom and M2 Communications are among the most prominent

alternative fixed broadband service providers with their own infrastructure.

However, even after multiple consolidation activities in the Australian

market, Telstra remains the largest player

Australia’s mobile broadband market has similarities to the fixed broadband

market, with Telstra commanding 52.5% of subscribers as of March 2014,

followed by Optus Mobile (30.8%) and Vodafone Hutchison Australia

(16.7%)4 – the latter a merger of two previous independent operators.

To provide a next-generation broadband network, the Australian government

originally attempted to select a company to build a nationwide fibre/wireless

network via a procurement process. The process was subsequently cancelled

after a network provider failed to emerge (since ACCC could not reach

agreement with Telstra regarding the roll-out requirements). The government

then changed its approach and decided to form a public–private partnership

company to install the National Broadband Network (NBN). The NBN will

4 Country Report: Australia, TeleGeography (2014).


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be delivered using a range of technologies including fibre (to the premises)

where feasible, wireless broadband and satellite.

Why an open-

access wireless

network is being

proposed/created

The NBN is an Australia-wide project to update the existing fixed line

phone and Internet network infrastructure for next-generation broadband.

The aim is to make available to the market fast broadband services from a

range of providers, and to close the digital divide by ensuring a minimum

level of broadband services is available to homes and businesses across

Australia. A mix of technologies is being used to serve different segments of

the market, including Gigabit passive optical networks (GPON)/fibre to the

premises (FTTP), fixed wireless and satellite. The fibre infrastructure is

being designed to provide downlink speeds of up to 100Mbit/s to 93% of

premises in Australia. The remaining premises will be served by either

wireless or satellite technologies, at speeds of up to 12Mbit/s. The overall

network is being designed, built and operated as a wholesale-only, super-

fast broadband network, with the wireless segment operating only in areas

outside of fibre coverage.

The wireless segment of NBN Co’s network consists of TD-LTE

technology, currently designed to use 2.3GHz spectrum. The satellite

portion of the network involves the leasing of capacity from two interim

satellites i.e. IPSTAR and Optus Satellite. In the meanwhile, NBN Co is

developing two long term satellites that will deliver services over the Ka

frequency band. These satellites are scheduled to launch in 2015, although

the NBN Co fixed wireless and satellite review suggests that they may only

be launched in 2016 considering the inherent risk of satellite launches.

Structural model After the initial procurement exercise to select a company to build an open-

access network failed, a wholly owned independent company called

NBN Co was established by the government in 2009 to build and administer

the network. This was established using a model described as a government

Business Enterprise. NBN Co is a government-owned and funded

corporation, reporting to two government ministers: the Minister for

Finance and Deregulation, and the Minister for Broadband,

Communications and the Digital Economy. The corporate structure of NBN

Co includes a Chief Executive who reports to a number of executive and

non-executive board members. The company is independent of Telstra or

any of the other established fixed network providers across the country, and

so wholesale network access agreements are necessary between NBN Co.

and existing providers to exchange services.


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Target

geographical reach

and users

The non-fixed line footprint of the NBN CO is estimated to be cover about

1 020 000 premises by 2021.5 The objective of the network is to provide

coverage across the entire country, although fibre will form the majority of

the network in built-up areas, it is anticipated that wireless technology will be

used in rural areas where it is too costly or impractical to roll out FTTP. It is

noted that the most remote areas may not be reached by wireless either and so

a further fall-back in the form of a satellite connection exists for the most

remote premises (about 4% of premises).

Estimated capital

costs

The most recent corporate plan for 2012–15, released in August 2012,

identified the total project capital cost to be AUD37.4 billion (USD33.49

billion). The non-fixed-line capital cost is estimated to be AUD3.5 billion in

the 2012–2015 Corporate Plan. This relates to capital expenditure over the

2011–2021 period for two “long-term” satellites, approximately 1400 fixed

wireless towers, and the Interim Satellite Service (ISS). An undisclosed sum

is allocated to additional base stations and the associated spectrum in areas

where NBN Co does not have coverage. NBN Co is to be funded entirely by

government equity until its cashflows are sufficient to secure supplementary

private debt.

Spectrum

assignment model

The Australian wireless market is fully liberalised, with spectrum auctions

being used for the primary assignment of spectrum, and secondary trading

between spectrum owners permitted. Spectrum is administered by the

Australian Communications and Media Authority (ACMA). The spectrum

that NBN Co is using to implement the fixed wireless portion of the

wholesale broadband network is in the 2.3GHz (2302–2400MHz) band. In

2011, ACMA auctioned licences for remaining packages within this band to

be used by wireless broadband providers (this followed awards of spectrum

in this band in previous years for multipoint distribution services in urban

areas. The remaining packages offered in the 2011 auction covered rural and

remote areas of Australia not covered by the original multipoint distribution

award. Forty different regional lots were auctioned. NBN Co won 24 lots in

the auction, with Telstra (incumbent mobile operator) and BKAL being the

other auction winners. NBN Co had also previously purchased rights to use

2.3GHz and 3.4GHz spectrum from an existing licensee (Austar, a

subscription TV provider). Using a combination of the spectrum purchased

from Austar and the spectrum acquired in the ACMA auction, NBN Co was

able to acquire sufficient spectrum within the regions where it was required

for the wholesale wireless network. It is noted that ACMA has also

auctioned licences to use the 700MHz band in recent years; however, NBN

5 NBN Co (2014), Fixed wireless and satellite review, available at

http://www.nbnco.com.au/content/dam/nbnco/documents/NBNCo_Fixed_Wireless_and_Satellite_Review_07052014.pdf.


Ref: 2001462-405c .

Co did not participate in this process, since the government had indicated

that although it expected NBN Co to obtain suitable spectrum for its fixed

wireless access (FWA) service on commercial terms, it should not compete

in the 700MHz auction. The ACMA 700MHz award led to the 700MHz

band being awarded to the existing mobile network operators (MNOs) in

Australia.

Benefits/

advantages of the

proposed network

NBN Co will provide an FWA service by deploying Time Division Long

Term Evolution (TD-LTE) technology delivered to fixed antennas at

customer premises. The TD-LTE network will be deployed using the

spectrum NBN Co has acquired in the 2.3GHz and 3.4GHz bands. This

offers the benefit of using a globally harmonised equipment standard that

has the backing of major 4G equipment vendors. These bands might also be

particularly suitable for provision of the NBN Co network since both the

2.3GHz and 3.4GHz bands are typically packaged in unpaired spectrum lots

suitable for Time Division Duplex (TDD) technology, which is better able

to support asymmetric traffic loads. For example, the network could be

configured to provide more capacity on the downlink than the uplink in

order to achieve the target download speeds of the wholesale network. With

the intention that customers will be connected to the network using a fixed

antenna, rather than via a mobile device, there is the potential for network

coverage to be improved, and the cost of roll-out to be reduced, since the

fixed antenna offers an antenna gain that will improve the propagation path

to the premises from the base station. The downside of this is that it requires

antennas to be installed at each of the premises to be connected, and

oriented in the right direction to receive services from the base station.

Risks/drawbacks The government faces some significant implementation risk as the timelines

and funding requirements are constantly changing. Originally, the 2011–13

corporate plan had pegged the forecast equity funding requirement at

AUD27.5 billion (USD24.59 billion). This was revised upwards by 10.5%

to AUD30.4 billion (USD27.18) in the 2012–15 corporate plan.6 Further, a

strategic review7 of NBN Co released in December 2013 highlighted that

the original plan was running three years behind schedule and the peak

funding requirement over the project was estimated to be AUD28.5 billion

(USD25.56 billion) higher than expected. This highlights the need for

accurate projections in the planning stage.

The government also faces some investment risk by taking an equity funding

approach to the NBN. There is some uncertainty as to how the government

6 NBN Co (2012), Corporate Plan 2012–2015, available at http://nbnco.com.au/content/dam/nbnco/documents/nbn-

co-corporate-plan-6-aug-2012.pdf.

7 NBN Co (2013), Strategic Review, available at http://www.afr.com/rw/2009-2014/AFR/2013/12/12/Photos/cf89acce-

62d4-11e3-810f-3adddacaf5d6_NBN-Co-Strategic-Review-Report.pdf.

http://nbnco.com.au/content/dam/nbnco/


Ref: 2001462-405c .

can exit its investment in the NBN. The high cost of the network may make it

difficult to find buyers for the privatisation of the NBN.

3.2 Kenya

Market overview Kenya has an extremely low fixed broadband penetration of about 1% of

households.8 Being the only mass-market retail fixed access operator in

Kenya, Wananchi (Zuku) dominates the market with a 49% share of

subscribers. Other major fixed broadband operators include Liquid Telecom

Kenya, Orange/Telkom Kenya, AccessKenya and Safaricom with market

shares of 18%, 11%, 11% and 7% respectively, mostly addressing the

enterprise market. The leading fixed broadband service is cable (41.1%),

followed by fibre (26.7%), fixed wireless access (18.9%) and DSL (13.3%).

Mobile broadband in Kenya has a penetration of 29.7% of population.8

Safaricom is the dominant player with a market share of 73% followed by

Airtel and Telkom Kenya (Orange Kenya) with market shares of 18% and

9% respectively.8 Though it launched 3G services in 2008, Safaricom (the

operator with the widest coverage) only provides 3G coverage to 61% of the

population as at Q1 2014. Operators have been slow in deploying 3G

networks, focusing their deployments on major cities, as demand for mobile

broadband has not been high in Kenya. The low demand is mostly a

function of low ICT literacy in the country, an issue the government is

seeking to address through numerous initiatives.

A large portion of the Kenyan market is therefore un-connected by any form

of broadband service.

Why an open-

access wireless

network is being

proposed/created

The government of Kenya is proposing the roll-out of a 4G network on an

open-access basis in order to improve the availability of broadband services.

It intends to have the existing operators participate in this roll-out by

forming a consortium. The 4G network is planned to be rolled out as part of

wide objectives and efforts to increase Internet’s contribution to economic

growth through increased availability and use of broadband services.

As well as promoting universal access, the network may also go some way

to address the scarcity of spectrum for existing mobile operators. Currently,

3G network coverage is low despite operators having been awarded licences

in 2007. Safaricom, the operator with the most extensive 3G coverage, only

provides coverage to 61% of the population as of March 2014. Through a

single coordinated roll-out of 4G, the government can make sure that it has

8 Analysys Mason estimate, 2014.


Ref: 2001462-405c .

control over the coverage roll-out of the network in order to tailor this to its

universal service objectives.

Structural model The government has chosen to pursue a single, wholesale open-access LTE

network roll-out. By reserving 700MHz and 2.6GHz spectrum for the

wholesale network, the government is aiming to secure the participation of

the private sector in a coordinated mobile broadband roll-out. Originally the

wholesale network was aimed to be a public–private partnership (PPP) with

the government, Safaricom, Orange/Telkom Kenya, Airtel, yu mobile,

Kenya Data Networks (now Liquid Telecom Kenya), MTN Business,

Alcatel-Lucent and Epesi Technologies.

Delays in deployment have resulted in Safaricom exiting the consortium and

lobbying for a spectrum auction to allow it to roll out its own 4G network.

On its departure, Safaricom cited concerns about the state taking too long in

preparing a shareholder agreement. This delay is likely to be partly a result

of the complexity involved with agreeing a shareholder structure and

operational and funding details between a large number of parties.

Another reason for delay is understood to be the issues that are being faced

in Kenya in relation to releasing digital dividend spectrum (i.e. the 700MHz

band), as a result of delays to the digital switchover (DSO) from analogue to

digital terrestrial television. Although digital switchover planning in Kenya

started well ahead of many other African countries, the process was

subsequently delayed by legal action between government and three media

groups which feel the licensing process for digital broadcast signal

distribution illegally excluded them.

The media groups’ challenge has proceeded to the Supreme Court and

caused repeated delay of the switch-off of analogue TV. Digital Kenya is

now publicly advising digital switchover will re-start in September 2014.9

Since the uncertainty caused by the legal auction has halted the ASO

process, the corresponding digital dividend release has also been delayed.

Target

geographical reach

and users

Although no implementation plan has been developed yet, the network is

anticipated to provide coverage to the entire country.

Estimated capital

costs

Initial estimates suggest that the wholesale network will cost up to

USD500 million.10

The government envisioned that this cost would be split

across the various consortium members.

9 See http://digitalkenya.go.ke/news-updates/58-digital.

10 See http://www.rethink-wireless.com/2013/11/08/safaricom-quits-shared-lte-project-kenya.htm.


Ref: 2001462-405c .

Spectrum

assignment model

The Communications Authority of Kenya (CA) has the legal mandate to

regulate spectrum, issue licences and determine spectrum fees. The CA

typically assigns spectrum on a first-come first-served basis, with fees set

administratively based upon expected demand. No auctions or beauty

contests are carried out.

Currently, it is not evident how CA plans to assign 4G spectrum. It is

envisioned that this network will have the highest priority in any assignment

of 4G spectrum, and the government has explicitly indicated that its

contribution to the consortium will be in the form of spectrum. A

government task force was assigned to study spectrum sharing at the end of

2013, indicating that the government may be considering alternative 4G

measures.

Benefits/

advantages of the

proposed network

A key benefit of the network to operators and end users is expected to be a

reduction in the cost of network roll-out since it will avoid the need for

multiple mobile operators to install their own masts and base station

equipment. A single network means that duplication of infrastructure is

eliminated, resulting in less money being spent on network roll-out at a

macro level. Further, since the network is being rolled out by a consortium,

each operator potentially needs to invest a fraction of the cost it typically

requires for nationwide coverage. With sufficient regulation and assuming

the network is run efficiently, these cost savings can be transferred to the

end user through lower prices.

Further, the network, if designed and regulated appropriately, may improve

the level of competition in the market. An open-access network means that

entrants require less capex to provide 4G services. An open-access network

provides operators with the same level of coverage limiting the sources of

differentiation to services and pricing.

An advantage to the government is that the wholesale network is likely to

reduce the digital divide if it is designed to cover a wide section of the

population and if network costs can be managed such that the network

achieves its stated roll-out objectives. This wholesale network is planned to

provide nationwide population coverage implying that all inhabitants of

Kenya will have access to broadband. The only outstanding issue that the

government would have to address is stimulating demand in the rural parts

of Kenya.

Risks/drawbacks Difficulty in coordinating the consortium has resulted in significant delays

to network roll-out. It was originally planned that the roll-out would be

complete by 2015, yet no work has been commenced. These delays have

resulted in Safaricom exiting the consortium and requesting that the


Ref: 2001462-405c .

spectrum be auctioned.

With only one nationwide 4G network, there is also a risk that competition

on mobile broadband pricing will be ineffective, if operators do not have

sufficient incentives both to enter into agreements to use the network and to

provide competitive services. Service differentiation might also be affected,

and problems that typically arise with monopoly service provision (quality,

responsiveness, pricing) would have to be guarded against, potentially by

the regulator.

3.3 Tanzania

Market overview Fixed broadband penetration in Tanzania was 0.58% of households as at

June 2014. The larger operators include: Tanzania Telecommunications

Company Ltd (TTCL), Benson Informatics, iWay Africa and Smile

Communications Tanzania, with market shares of 58.6%, 5.2%, 2.4% and

1.4% respectively. The rest of the market is fragmented across a number of

small players. The market is dominated by DSL (69.4%) and fixed wireless

access (25%), while cable and other technologies play a small part (5.5%).

Wireless broadband penetration was 7.0% of population by June 2014. The

major providers in the wireless broadband market include Airtel Tanzania,

Millicom Tanzania (Tigo), Vodacom Tanzania and Zanzibar

Telecommunications (Zantel) with respective market shares of 22.1%, 3.9%,

58.0% and 16.1%. All these operators currently offer 3G services. Vodacom

provides the broadest 3G coverage with an estimated 70% of the population.

4G services are in their infancy with Tigo currently offering a mobile 4G

service, Vodacom conducting trials and Smile offering a fixed wireless LTE

solution.

Why an open-

access wireless

network is being

proposed/created

Shared Networks Tanzania (SNT, previously known as Rural Netco) is an

open-access wireless network deployed by Ericsson (which has since

divested its share). It has the objective of helping mobile operators expand

their services to rural areas where they previously had limited coverage.

Structural model It not clear what the structural model for the SNT is. However, Ericsson, the

network vendor, played a significant role in the network. Other participants

include the United Nations Development Programme (UNDP), the World

Bank, Swedfund and the Swedish International Development Cooperation

Agency (SIDA). Ericsson exited the investment once it considered the

deployment model to have been proven.

At the time of writing, only two operators (Vodacom and Tigo) were using

SNT services. Vodacom has suggested that other mechanisms for sharing


Ref: 2001462-405c .

roll-out costs – notably assigning regions to each operator to cover, with

national roaming available reciprocally – may be preferred.

Target

geographical reach

and users

SNT is reported to be aiming to cover 52 000km2 of rural Tanzania. When

SNT was launched in July 2013, it had a coverage of 35 000km2.

Estimated capital

costs

No information.

Spectrum

assignment model

The Electronic and Postal Communications (Radio Communications and

Frequency Spectrum) Regulations, 2011, govern spectrum assignment in the

Tanzanian telecoms market. Spectrum is allocated using a ‘beauty contest’

process through a competitive tender process. The regulator, TCRA, has the

authority to re-farm spectrum to accommodate changes in technologies and

use of spectrum.

SNT is currently using its 900MHz spectrum for 3G services. 4G services

are currently being offered on 800/1800/2600MHz assignments held by the

respective mobile operators.

Benefits/

advantages of the

proposed network

SNT is designed to help bridge the digital divide in Tanzania. It is reported

that SNT’s network is being designed to provide up to 7.2Mbit/s download

speeds using 3G and 3.5G technology over 800MHz spectrum. Offering this

network on a wholesale basis ensures that the rural communities are not

excluded.

Risks/drawbacks While SNT offers broadband coverage in rural areas, it does not influence

the level of use by members of the rural communities. It is likely that some

further demand stimulation activities may be required. This leaves the

wholesale operator vulnerable to low demand and also to competing

operator-driven initiatives, such as shared reciprocal access.

3.4 Rwanda

Market overview With most of its population living in rural areas, Rwanda has very low

broadband penetration rates. The fixed broadband penetration as at June

2014 was at 0.5% of households.11

The key players in the fixed broadband

market are MTN Rwanda, Broadband Systems Corporation and Liquid

Telecom with estimated market shares of 89.2%, 5.3% and 3.8%

respectively.12

Rwanda’s fixed broadband services are offered primarily

11

Analysys Mason estimates, 2014.

12 TeleGeography Country Report, 2014.


Ref: 2001462-405c .

through WiMAX, with limited use of fibre and DSL. Liquid Telecom has

recently announced investment in Rwanda of RWF24 billion (USD35

million) to fund further installation of fibre optic cables.13

The mobile broadband penetration rate was 7.7% as at June 2014. The key

players in this market are MTN Rwanda, Millicom Rwanda and Airtel

Rwanda with respective market shares of 50.2%, 34.5% and 15.3%.

Currently, at least 71% of the population have access to 3G services. The

low mobile broadband penetration rate is reflective of the relatively high

cost of access and low broadband-capable device penetration.14

Government is the major shareholder in Broadband Systems Corporation

(which holds 5.3% broadband market share) through the Rwanda

Development Board. It does not have any further ownership in the

telecommunications sector, having sold Rwandatel to Liquid Telecom in

2013.

Why an open-

access wireless

network is being

proposed/created

The government of Rwanda has teamed up with KT Corp of Kenya to build

a an open-access wireless 4G network through a joint venture called Olleh

Rwanda Networks (ORN). The national broadband policy15

cites the need to

expand coverage and access to broadband and offer higher speeds as the

core reasons for the creation of the network. Realising that the private sector

has achieved limited coverage and take-up, the government believes that a

state-owned 4G operator would do a better job than licensing private

operators. ORN’s objectives are in line with the Vision 2020 of Rwanda that

aims to convert Rwanda’s economy from an agrarian economy to an

information-rich, service-oriented and knowledge-based economy by 2020.

Structural model ORN is a joint venture between the Rwandan government and KT Corp of

South Korea. It is the only 4G infrastructure company in Rwanda. There is

no indication of how the equity is split between the two parties.

ORN is a pure wholesale operator, independent of any other operator. Airtel

Rwanda is reportedly16

offering services on ORN, with SIM cards selling

for USD28.40 and data from USD4.25 per GB.

Target ORN aims to achieve 95% population coverage on its LTE network by

13

See http://www.newtimes.co.rw/section/article/2014-09-24/181213/.

14 Research ICT Africa reports that only 19% of adults had Internet-capable mobile devices in 2012. See

http://www.researchictafrica.net/presentations/Presentations/2012%20Calandro%20Stork%20Gillwald%20-%20Internet%20Going%20Mobile-%20Internet%20access%20and%20usage%20in%20eleven%20African%20countries%20.pdf.

15 See

http://www.myict.gov.rw/fileadmin/Documents/Policies_and_Rugulations/ICT_Polices/National_Broadband_Policy.pdf.

16 TeleGeography, “KT Corp-backed ORN to unveil open-access LTE network on 1 September”, 26 August 2014.

http://www.myict.gov.rw/fileadmin/Documents/Policies_and_Rugulations/ICT_Polices/National_Broadband_Policy.pdf

http://www.myict.gov.rw/fileadmin/Documents/Policies_and_Rugulations/ICT_Polices/National_Broadband_Policy.pdf


Ref: 2001462-405c .

geographical reach

and users

2017. A trial of LTE in 32 locations concluded in July 2014 and commercial

service commenced on 1 September 2014.

Estimated capital

costs

USD140 million funded by KT Corp while the Rwandan government

provides existing 3000km of fibre backbone, spectrum and a wholesale-only

licence.17

The existing fibre backbone connects all the country’s 30 districts.

It is reported that additional debt and vendor financing will be sourced by

ORN to support these equity investments.18

Spectrum

assignment model

The Rwanda utilities regulatory authority (RURA) is responsible for issuing

spectrum. It awards spectrum to operators on a beauty-contest basis. It is

understood that ORN has been assigned spectrum in the IMT800 band.19

Benefits/

advantages of the

proposed network

ORN is planning to roll out 4G to 95% of the population. This is

significantly higher than any other operator has achieved with 3G. Using the

wholesale network, the existing MNOs can provide services to segments of

the population that may have remained unserved otherwise. A government-

led roll-out thus ensures that more people are included. ORN has recently

selected Nokia Networks to provide the 4G radio and core network.20

Under the joint venture, the State did not spend any money to roll out the

network. The State managed to leverage its fibre-optic backbone network

assets in order to achieve the required objective. It must be noted that

Rwanda is a very small country with a high population density,21

thus

reducing network roll-out cost.

The higher speeds associated with a 4G network, combined with the

coverage of ORN, are likely to help the government achieve its Vision 2020.

By 2017, the target is that 95% of the population will have access to 4G

mobile broadband, compared to 7.7% that currently have access to 3G.

Risks/drawbacks There is a risk that the network will be under-utilised if service providers do

not use it and/or if there is limited take-up of services (for example, due to

affordability). With most of its population living in rural areas, Rwanda

currently has a SIM penetration of only 54%. Money and effort may be

required from the government in order to stimulate sufficient demand to

ensure that the network is fully utilised.

17

See http://www.telegeography.com/products/commsupdate/articles/2014/09/10/orn-selects-nokia-networks-as-sole-

supplier-of-lte-network/.

18 See http://allafrica.com/stories/201408250089.html.

19 See http://www.orn.rw/index.php?id=9.

20 See http://company.nokia.com/en/news/press-releases/2014/09/04/rwanda-to-get-its-first-commercial-lte-network-

with-managed-services.

21 It has 2.2% of South Africa’s land area and 22.2% of South Africa’s population.


Ref: 2001462-405c .

ORN faces pricing challenges, in that its cost base will be high due to its

wide coverage while it may have to compete with mobile operators in

economically-viable areas. This may result in ORN only selling services in

unprofitable areas.

KT Corp is at risk of being exposed to a long payback period on its

investment in the 4G network. Though the SIM penetration is expected to

grow, it is still rather low and there is little indication that the data

consumption on the 4G network will grow as fast as the SIM penetration is.

It might be a while until KT Corp starts to earn a significant return on its

network.

3.5 UK

Market overview Fixed broadband penetration in the UK at the end of June 2014 was 83.7%.

The main fixed broadband operators are BT Group, BskyB, Virgin Media

and TalkTalk, with market shares of 33.0%, 23.4%, 20.2% and 18.8%

respectively. BT is currently rolling out a next-generation, fibre-to-the-

cabinet (FTTC) service across the majority of the UK, although this will not

reach all rural areas. To provide next-generation access (NGA) in rural

areas, a government-led project called Broadband Delivery UK (BDUK)

was established to distribute government funding to rural areas for NGA

roll-out. To date, all of the regional procurement exercises completed using

BDUK funding have resulted in contracts being awarded to BT. This has

meant that BT’s fibre network will now be extended to further areas of the

UK beyond those initially proposed by BT on commercial grounds alone.

BT is also expected to roll out wireless technology in some remote areas, as

well as to use broadband satellite services.

At the end of June 2014, mobile broadband penetration in the UK was

97.6%. The major mobile broadband operators are EE, O2 UK, Vodafone

UK and Hutchison 3G UK. These have market shares of 30.3%, 22.9%,

27.9% and 15.5% respectively. Each of these operators are currently

offering both 3G and 4G, following award of 800MHz and 2.6GHz

spectrum licences in 2013, and liberalisation of 2G (1800MHz) spectrum for

4G use. To extend mobile broadband services to the most remote areas of

the UK, the government has established a Mobile Infrastructure Project

(MIP), which is using GBP150 million funding to establish mobile masts

and backhaul in rural areas. Existing MNOs can install their own base

station equipment on these masts to provide services.

There have been various unsuccessful attempts to launch FWA services in

the UK using various spectrum bands. In 2003, the UK regulator, Ofcom,


Ref: 2001462-405c .

auctioned licences to use the 3.4GHz band for FWA services. Although

licences were offered regionally, all regional licences were subsequently

taken up by UK Broadband, a subsidiary of Hong Kong-based

telecommunications company PCCW. Although the licences initially

limited UK Broadband to providing FWA services, the licence conditions

have subsequently been liberalised such that UK Broadband can use mobile

technology and offer services to mobile devices, if it so chooses. UK

Broadband recently launched a wireless broadband services aimed at retail

customers in London, although the company has also indicated an intention

to provide wholesale access to other mobile operators.

Why an open-

access wireless

network is being

proposed/created

Although it was awarded spectrum in 2003, there have been significant

delays to UK Broadband using its spectrum. Over the past decade, the

company launched various small FWA trials and networks mainly serving

government offices. At the end of 2012, UK Broadband launched retail LTE

service in London, positioned as a fixed wireless solution using TD-LTE

technology. UK Broadband announced the launch of a wholesale service

shortly after launching the retail service. This is entirely a commercial

decision by the operator to offer wholesale service on its LTE network. To

date, however, it is understood that there has not been any take-up of the

wholesale service from any of the mobile operators, and the service that UK

Broadband has recently launched – Relish Broadband – is a retail offer to

broadband customers in parts of London.

Structural model UK Broadband is owned entirely by Hong Kong-based company, PCCW,

and it was a commercial decision of the company to design and build an

LTE network to provide wholesale network access.

Target

geographical reach

and users

UKB is currently only offering services in parts of London, branded as

‘Relish Broadband’.22

Estimated capital

costs

No information has been published about the levels of current investment,

although indications are that UK Broadband has committed further

investment in order to roll out to 45% of the UK population, if the regulator

Ofcom extends its current spectrum licences (due to expire in 2018).

Spectrum

assignment model

Spectrum has in the past been allocated through an auction process. UK

Broadband has been allocated two 20MHz blocks in the 3480–3500MHz

and 3580–3600MHz ranges.

Benefits/

advantages of the

UK Broadband’s wireless network seeks to provide competition to fixed

broadband providers in London (particularly targeting customers who do not

22

See https://www1.relish.net/.


Ref: 2001462-405c .

proposed network wish to have a telephone line bundled with their broadband service),

although there is limited information available on how many commercial

customers the network has gained (for some time the network operated in a

‘trial’ model). UK Broadband advertises download speeds of up to 50Mbit/s

and upload speeds of up to 5Mbit/s on its LTE offering. Other operators in

the UK are offering up to 24Mbit/s on DSL (the most commonly used

technology and up to 100Mbit/s on BT’s fibre network

Risks/drawbacks UK Broadband does not help achieve any developmental goals in the UK,

which are being provided through the government-led BDUK and MIP

projects for the fixed and mobile markets respectively. The limitation of this

network is that it has a very low coverage and offers services in London and

Reading, which are highly competitive to begin with. As noted earlier, there

are a variety of fixed broadband services offering similar or better

broadband speeds in these areas. However, UK Broadband has committed to

making further investment in the network if its spectrum licence is extended,

which might include further roll-out and a mobile virtual network operator

(MVNO) agreement with a UK MNO to provide UK-wide coverage.

3.6 USA

Market overview As at June 2014, fixed broadband penetration is 90.7% of households. With

16 operators, the fixed broadband market is highly competitive. The largest

operator Comcast has a market share of 19.5%, followed by AT&T (15.1%),

Time Warner Cable (11.0%), Verizon Communications (8.3%),

CenturyLink (5.5%) and a host of other smaller operators holding the

remainder. At the end of 2013, over half (52.2%) of the connections were

cable, followed by DSL connections that represented 29.6% of the market.

Fibre makes up 7.3%, while the rest of the services consist of satellite,

WiMAX and other fixed wireless technologies.

Mobile broadband penetration as of June 2014 is 92.1% of population. Four

major operators provide mobile broadband services: Verizon Wireless,

AT&T, Sprint Corporation and T-Mobile US with market shares of 38.1%,

30.8%, 18.0% and 11.7% respectively. The remaining 1.4% of market share

is shared across a number of smaller operators. Subscriptions to mobile

broadband services in the USA are split almost equally between 3G and 4G,

with 53% of subscribers using the former and 47% the latter.

Why an open-

access wireless

network is being

LightSquared is a private company that seeks to develop a wholesale 4G

LTE wireless broadband communications network across the USA. The

LTE network will be combined with satellite services to ensure nationwide

geographical coverage. LightSquared’s business model involves operating


Ref: 2001462-405c .

proposed/created as a wholesale-only broadband provider. LightSquared aims to promote

competition and improve the geographical coverage of high-speed mobile

broadband.

Clearwire is another private 4G wholesale operator in the USA. Since July

2013 it has been wholly owned by Sprint, a retail mobile operator.

Structural model LightSquared is a privately held operator that is owned by the private equity

company Harbinger Capital Partners. It is currently in bankruptcy protection

with a proposal for Harbinger’s equity to be diluted or destroyed. It operates

completely independently of any other service providers in the USA.

Clearwire is separate from its parent Sprint, and services 6.6 million

wholesale and 1.5 million retail subscribers. Sprint accounts for nearly all

the wholesale subscribers.

Target

geographical reach

and users

LightSquared aims to achieve nationwide geographical reach through a

combination of LTE and satellite (where the LTE network has no coverage).

At its peak Clearwire covered 130 million people across 80 markets,

following launch of pre-WiMAX services in 2004 and WiMAX in 2008.

Estimated capital

costs

In 2010, Nokia Solutions and Networks (NSN) announced that they had

won a USD7 billion contract to roll out LightSquared’s LTE network. It is

reported that only 51% of the deal value is allocated for capital expenditure,

while the rest is allocated to services.23

Notably, LightSquared has

experienced some financial problems resulting in the company filing for

bankruptcy in 2012. The accumulated losses since the bankruptcy filing are

reported to have amounted to USD1.51 billion.

Clearwire’s investment is unknown.

Spectrum

assignment model

Spectrum is managed by a variety of agencies in the USA:

The Federal Commission of Communications (FCC) manages spectrum

assignments to non-federal users

The National Telecommunications and Information Administration’s

Office of Spectrum Management manages the federal government’s use

of spectrum

The Interdepartment Radio Advisory Committee (IRAC) assigns

frequency to government users and maintains a database of frequencies

allocated to federal users

The Federal Aviation Administration’s Spectrum Engineering Services

23

See https://gigaom.com/2010/07/26/lightsquareds-planned-lte-network-may-never-shine/.


Ref: 2001462-405c .

secures, manages and protects all civil aviation radio frequency

spectrum resources.

LightSquared was assigned spectrum in the 1525–1559MHz and 1626.5–

1660MHz bands by the FCC in 2004. Originally earmarked as satellite

spectrum, LightSquared successfully lobbied to allow a ground component

(terrestrial network) to be deployed in the same spectrum. This assignment

caused some contention with GPS providers due to the interference with the

GPS-allocated spectrum in the immediately adjacent 1559–1610MHz band.

Clearwire uses 2.5GHz spectrum. It originally rolled out a WiMAX network

but has since switched to LTE.

Benefits/

advantages of the

proposed network

The potential benefits of this network have allowed LightSquared to garner

some political support. The proposed design of LightSquared’s network

ensures 100% geographical coverage of the UK. LightSquared’s ambition is

to promote service competition instead of infrastructure competition in the

US mobile sector. A number of congressional leaders have expresses their

support for LightSquared’s request for approval from the FCC,24

and even

the Chair of the FCC expressed support for the venture.

Clearwire’s wholesale ambitions have been largely overtaken by its

acquisition by Sprint, to which it provides most of its wholesale services.

Risks/drawbacks Launch delays have resulted in LightSquared having to file for bankruptcy

in 2012. The company is reported to have made accumulated losses of

USD1.51 billion since the late 1990s. The delays are mainly a result of GPS

operators moving to block LightSquared’s launch due to reported

interference between LightSquared and GPS frequency bands.

Clearwire was moderately successful as a wholesale operator – and indeed

signed up several of LightSquared’s customers after that company’s

collapse. However, its acquisition by Sprint suggests the wholesale model

was not optimal.

3.7 Summary

As the case studies highlight, a number of proposals have been made to establish open-access

wireless networks in different countries around the world, although our understanding is that all of

these are still in planning at present, and there are no full implementations. The closest to market is

NBN Co in Australia but, as our case study highlights, the government in Australia is facing some

24

See http://www.cnet.com/news/lightsquared-strums-up-political-support/.


Ref: 2001462-405c .

significant implementation risks with the project being behind schedule and in need of additional

funding.

Where proposals for open-access wireless networks have been made by governments, these are

either motivated by universal broadband objectives (such as those of SA Connect), or by a concern

that competition is lacking in the mobile market, negatively affecting coverage, price or other

factors. In countries such as Kenya, specific affordability and availability issues exist as regards

ICT take-up and literacy, such that there is a desire for the government to take leadership in

creating a 4G network as a means of improving network availability and use in accordance with

wider government objectives.

Some of the case studies also highlight a variety of other measures being possible within the 4G

mobile market to address concerns of coverage or availability of wireless broadband services. For

example, the UK government has focused on incorporating a coverage obligation within one

800MHz licence to encourage roll-out of services to rural areas, but has also intervened to fund

installation of masts and associated site facilities in the most rural parts of the UK, which will be

available for use by all of the UK’s MNOs. Interventions such as these, which focus on addressing

only the most rural areas – relying on competitive forces to bring coverage to the rest of the

country’s population – are typically less risky than the large-scale wholesale wireless approach

being pursued in countries such as Australia. This view is supported by a study25

conducted by

Frontier Economics for the GSM-Association (GSM-A) on the rationale for single wireless

networks (SWN), which concludes that infrastructure competition has always worked better than

single networks in the mobile market and furthermore, that significant economic benefits can be

attributed to competing infrastructures existing in the mobile market in many countries around the

world.

We conclude that there is insufficient experience around the world to suggest what may constitute

best practice in wholesale open-access wireless networks. Emerging projects (such as those in

Australia and Rwanda) may develop best practice. However, Analysys Mason has previously

identified26

some of the challenges for full wholesale open-access operators: service and pricing

flexibility; ease of governance; fairness and cost allocation; strategic agility; ability to forecast and

plan; level of commercial risk; and regulatory support. Full wholesale open access is only one of

the options available for reducing infrastructure costs, however, and successful examples exist of

other options such as passive infrastructure sharing and small joint ventures.

25

Frontier Economics (2014), Assessing the case for Single Wholesale Networks in mobile communications, available

at http://goo.gl/Ui3cH9.

26 Analysys Mason, “Wholesale mobile broadband: what could go wrong, and how it could be fixed”, March 2013.


Ref: 2001462-405c .

4 IMT and ICASA’s draft IMT roadmap

This and the next section discuss the spectrum implications for South Africa of setting up an open-

access wireless network. This includes consideration of spectrum assignment options in terms of

suitable bands and spectrum packaging within those bands, within the context of the draft

International Mobile Telecommunications (IMT) roadmap recently published by the Independent

Communications Authority of South Africa (ICASA).

What is IMT

Before considering spectrum issues in more detail, this section briefly presents an overview of the

relevance of ICASA’s IMT proposals to the government’s broadband targets.

IMT is the ITU’s terminology for internationally harmonised and standardised mobile broadband

technologies. The ITU’s work on IMT systems began more than a decade ago, when the ITU was

responsible for coordinating a worldwide vision for third-generation mobile telecommunications

(3G), referred to at that time within the ITU as IMT-2000. The more generic term ‘IMT’ was

introduced once 3G systems had been implemented in many markets, since, by this time, mobile

technology was evolving beyond the original IMT-2000 standards to include 3.5G capabilities, and

subsequently 4G. More recently, a further era of the ITU’s IMT systems – IMT-2020 – has been

introduced, referring to the early-stage research and pre-standardisation activity now underway

around the world towards definition of a next-generation, ubiquitous wireless broadband system

(5G). 5G is briefly considered in Section 7.

As well as coordinating IMT technology definition internationally (with the standards themselves

being specified in detail within established standardisation bodies such as the Third Generation

Partnership Project, or 3GPP), the ITU has also defined the spectrum requirements for successive

generations of IMT system in various ITU-R recommendations and reports. Successive World

Radio Conferences (WRCs) have considered spectrum issues for IMT and various mobile bands

have been identified globally as being intended for IMT use. IMT technology standards such as the

3GPP standards are therefore designed to operate within the frequency bands that the ITU has

identified for this purpose. Harmonisation in this context refers not only to the frequency band

(e.g. the 800MHz band), but also the frequency arrangement within the band (e.g. paired or

unpaired, and the channel spacing).

The frequency bands that the ITU has identified globally for IMT use include spectrum originally

used in different parts of the world for 2G mobile systems (e.g. in the 850MHz, 900MHz and/or

1800MHz bands), as well as bands assigned for 3G (primarily within the 2GHz range, from 1920–

1980MHz and 2110–2170MHz), and a series of additional bands that regulators are now typically

awarding for 4G use. The most prominent of the additional bands now being assigned globally for

4G use include the 700/800MHz (so-called ‘digital dividend’), 2.3GHz, 2.6GHz and 3.4GHz

bands.


Ref: 2001462-405c .

Although IMT-2000 and IMT are technologies optimised for the delivery of voice and data

services to handheld mobile devices, the same technologies can be used to provide wireless

broadband services to homes and businesses, as replacement for a fixed broadband connection. In

particular, 4G mobile technology, standardised as Long Term Evolution (LTE),27

is gaining

economies of scale both for provision of services to smartphones (i.e. ‘mobile broadband’) as well

as for provision of wireless broadband services to homes and businesses.

Wireless broadband services to homes and businesses using LTE can be achieved either by

transmitting directly to smartphones or tablets/laptops equipped with 4G data cards, or by

configuring the technology in a way similar to traditional FWA networks, where base stations are

positioned to communicate with directional antennas installed on the rooftop of customer

premises. As an alternative to use of a rooftop antenna for FWA, wireless broadband services

using LTE can also be provided using portable antennas that can be placed on a customer’s

window-sill, for example. Although these concepts are similar to many proprietary FWA

technologies that have existed in the past, use of IMT technologies such as LTE for FWA-type

broadband services can be more cost-effective, since LTE has gained significant economies of

scale through global deployments for mobile broadband, and these economies of scale can be

exploited for wireless broadband. These economies of scale have been absent from previous

generations of proprietary FWA technology (as well as for semi-standardised products such as

WiMAX), which have typically been more expensive and complex to deploy, with a more limited

choice of vendor solutions. Therefore, there is increasing market interest in using LTE for FWA-

type services, and this is evident from the rural broadband networks being deployed in various

countries around the world that are using LTE for wireless component (e.g. as in the rural

broadband initiative in New Zealand and the national broadband network in Australia).

Selection of the most appropriate wireless technology to provide an open-access network within

the context of the SA Connect objectives will depend on the structural model for the

implementation of the network, as described in the previous section (for example, if a

procurement-led approach is used, it is most likely that bidders will specify themselves which

technology they would wish to deploy, whereas if a government-funded project is set up, the

government may need to choose the technology itself). Regardless of how this choice is made, it is

very likely that, considering the choice of wireless technologies in the market at present, a 4G,

IMT-based technology would be chosen. Although a non-harmonised spectrum assignment could

be considered to deploy an IMT-based network (i.e. in a band not identified globally for IMT use),

the cost of re-developing IMT-technology to operate in non-harmonised spectrum would likely

result in global economies of scale being foregone (making this option as expensive as proprietary

FWA technology has been in the past). Other impacts of not using harmonised spectrum would be

a more limited supplier base for radio network infrastructure, and a much more limited choice of

end-user devices.

Therefore, an open-access wireless network to achieve the SA Connect objectives would most

likely need to use spectrum from one of the frequency bands identified globally by the ITU-R for

27

Within standards published by the Third Generation Partnership Project, or 3GPP.


Ref: 2001462-405c .

IMT use. Within South Africa, the future use of these frequency bands – both the ones already in

use in South Africa for 2G/3G plus new bands that the ITU has identified for IMT-based systems -

are currently under consideration by ICASA. ICASA has set out considerations in relation to

future use of IMT spectrum in the recently published draft IMT roadmap. This includes proposals

for award of licences in 450, 700/800MHz and 2.6GHz spectrum as well as re-configuration of

existing mobile bands at 850MHz and 900MHz – replacing earlier proposals on some of these

bands, which have been modified in light of market developments and/or new information in

relation to co-existence and re-location possibilities.

Specific proposals within the recently published draft IMT roadmap relevant to meeting South

Africa’s broadband development objectives, and to SA Connect, are further discussed in the next

section.

ICASA’s IMT roadmap

The spectrum needed to deploy an open-access wireless network for SA Connect is linked to

ICASA’s plans for making spectrum available for 4G since, as noted above, there is less

distinction in the market place now between mobile and wireless broadband systems, and 4G

spectrum might be used to provide wireless broadband services to homes and businesses due to

convergence of technologies around the LTE standard. Hence, even though ICASA’s plans are

structured largely within the context of the South African mobile market, the considerations raised

in relation to how much spectrum might be available, and in which bands, is relevant to achieving

the government’s broadband objectives.

In line with many other governments worldwide, ICASA intends to assign spectrum for the launch

of 4G services in South Africa, both by assigning new spectrum to existing MNOs or to new

players (although any specific measures that might be put in place to support a new player are not

addressed in the draft IMT roadmap), and by enabling existing players to re-use existing 2G/3G

spectrum for 4G. 4G networks will potentially be provided by MNOs using Long-term Evolution

(LTE) technology standardised by 3GPP, or its successor, LTE-Advanced (LTE-A). ICASA’s

draft roadmap aims to ensure that 4G spectrum in South Africa will be released in frequency bands

that are broadly consistent with the approach used across the rest of ITU Region 1, of which

South Africa is a part, as well as being in line with global trends.

ICASA, along with the government in South Africa, will be responsible for determining the policy

and framework for award of 4G licences in due course. At present, the draft roadmap presents

views on how different bands might be made available, without specific details on individual

licences on offer, or the conditions attached to those licences.

In South Africa, MNOs currently have access to a combination of 850MHz, 900MHz, 1800MHz

and 2GHz bands, which are all paired frequency bands, typically used by different generations of

frequency division duplex (i.e. 2G and 3G FDD) mobile technologies.28

In addition, Telkom has

28

Successive generations of mobile technology (i.e. 2G, 3G and 4G) have included both FDD and TDD modes of

operation, suitable for deployment in paired and unpaired spectrum bands respectively. The GSM standard for 2G


Ref: 2001462-405c .

access to spectrum in the 2.3GHz and 3.4–3.6GHz bands, which are typically considered to be

unpaired bands, for time division duplex (TDD) technology.29

The three MNOs also have access to

a small amount of 3G unpaired spectrum in the 2GHz range. This is illustrated by the diagrams

below.

Figure 4.1: MNO/wireless network operator spectrum holdings in paired IMT frequency bands in South Africa

[Source: Analysys Mason, 2014]

Figure 4.2: MNO/wireless network operator spectrum holdings in unpaired IMT bands in South Africa [Source:

Analysys Mason, 2014]

A number of the bands identified globally for IMT systems are therefore currently in use by either

2G/3G or wireless broadband licensees. To liberalise these bands for 4G use, and to assign new 4G

mobile, and CDMA2000 used in the 850MHz band in South Africa, are examples of FDD technologies. The international standard for 3G defined by 3GPP incorporates both FDD and TDD components, although the former is more widely used than the latter. 4G also incorporates both FDD and TDD modes, which are more closely integrated than the previous 3G FDD and TDD modes were, with a view to increasing take-up of TDD technologies, which lagged in the 3G era.

29 It is noted that in South Africa at present, the 3.4–3.6GHz spectrum is assigned as a paired rather than an unpaired

band.

11

11

11

12

12

12

15

12

5

12

12

15

15

28

15

15

28

0 5 10 15 20 25 30 35 40 45 50 55

Telkom

Neotel

WBS

Vodacom

MTN

Cell C

GSM 900 band (900MHz)

GSM 1800 band (1.7 - 1.8GHz)

CDMA 2000 band (800MHz)

2.6GHz band

3G band (1.9/2.1MHz)

3.6GHz band

Paired spectrum (2×MHz)

10

5

60

15

500 5 10 15 20 25 30 35 40 45 55 660 665 670 675

Vodacom

MTN

WBS

Telkom 600

GSM 1800 band (1.7 - 1.8GHz)

3G band (1.9/2.1 GHz)

2.3GHz band

2.6GHz band

3.6GHz band

Unpaired spectrum (MHz)


Ref: 2001462-405c .

spectrum (primarily in the 700, 800 and 2600MHz bands), a number of considerations are relevant,

which are summarised below.

Figure 4.3: Summary of considerations on current IMT assignments raised in the draft IMT roadmap [Source:

ICASA, 2014]

Band/service Issues raised in draft IMT roadmap

900MHz (2G/GSM) Although MNOs have had access to 900MHz spectrum for some years

for 2G mobile use, the assignments are fragmented between operators,

which makes them unsuitable for deployment of the more recent 3G/4G

mobile standards, which typically operate in contiguous spectrum blocks

of multiples of 2×5MHz. Therefore, the current 900MHz assignments are

not compatible with deployment of 3G/4G systems unless re-configured,

which limits the scope for MNOs to migrate from use of 2G technology to

3G/4G in the 900MHz band in line with best practice internationally.30

Accordingly, there are strong market and efficiency reasons for ICASA to

consider re-aligning the current 900MHz assignments to provide each

MNO with a contiguous block suitable for 3G/4G use.

850MHz (2G/CDMA) Neotel has spectrum assigned in the 850MHz band for its CDMA

network. However, the 850MHz band overlaps both with a part of the

900MHz band that is harmonised in some other parts of the world (mainly

Europe) for use by GSM-Railway (GSM-R) systems, and with the

proposed new 800MHz ‘digital dividend’ band. Accordingly, shifting the

current Neotel assignment slightly could enable assignment of spectrum

for GSM-R in South Africa as well as removing the overlap with the

internationally harmonised IMT800 band that is being created through the

digital dividend.31

2.3/3.4GHz (wireless

business systems)

Telkom has spectrum assigned in the 2.3GHz and 3.4GHz bands,

originally intended for fixed wireless access (FWA) wireless business

system services. Both of these bands are now harmonised for mobile

(IMT) use. The current 3.4–3.6GHz assignments (of both Telkom and

Neotel) are in a paired configuration, whereas the preferred global

arrangement for mobile use in these bands in accordance with recent

ITU recommendations is unpaired.

To address these issues, ICASA has made a series of proposals in the draft IMT roadmap, as

follows:

30

This process is often called ‘re-farming’ and refers to the migration from GSM-based networks to either 3G using

WCDMA technology in the 900MHz band (UMTS900) or 4G using OFDMA technology (LTE900). Around the world, many 900MHz operators are choosing to deploy UMTS900 rather than LTE900 at present due to better handset availability for UMTS900; but this picture is changing rapidly and the 900MHz band is very suitable for 4G deployment if configured in contiguous blocks suitable for LTE use.

31 Digital dividend refers to the spectrum released from migration of analogue terrestrial television to digital terrestrial

television (DTT) services. Originally, many countries in ITU Region 1, of which South Africa is a part, had planned their digital dividend to be created in the 800MHz band, and this is the band that many European regulators have awarded licences for over the past few years for 4G in Europe. In other world regions (e.g. the Americas and Asia), the digital dividend band is in the 700MHz range. ICASA originally proposed to award 800MHz licences in South Africa, in line with Europe. However, the World Radio Conference in 2012 (WRC-12) identified a potential 700MHz mobile band for IMT use in ITU Region 1, which European regulators as well as regulators in Africa and the Middle East are now considering implementing (either along with, or in addition to, the 800MHz band). The recent IMT roadmap from ICASA proposes assignment of both 700MHz and 800MHz bands.


Ref: 2001462-405c .

Re-alignment of the 900MHz band into contiguous blocks per MNO, to facilitate a market-led

migration from GSM to UMTS/LTE technology in that band.

Shifting of the assignment to Neotel in the 850MHz band to accommodate a possible

assignment of spectrum for GSM-R, and to avoid overlap with the planned new 800MHz

band.

Award of new licences to use 700MHz and 800MHz digital dividend bands – by awarding

both bands (rather than just the 800MHz band, which ICASA had originally proposed), there

is potentially 2×63MHz of paired spectrum to be awarded, for 4G use.

Migration of WBS (which operates the brand iBurst) spectrum from the 2.6GHz to the 2.3GHz

band, to make way for award of new licences in the 2.6GHz band for 4G use in accordance

with the internationally preferred paired frequency arrangement.

Award of one or more licences to use the 450MHz band for IMT-based systems. Although this

band is not used widely internationally for this purpose, it can be used. In the draft IMT

roadmap, ICASA proposes that this band could be assigned to a national wholesale wireless

network operator to provide rural coverage to achieve the government’s SA Connect plans.

Alternatively, ICASA notes that the 450MHz band could be of interest for provision of digital

mobile broadband systems for public safety (an alternative to this might be for public safety

users to be assigned spectrum from within the 700/800MHz bands).

Although ICASA’s proposals make reference to the spectrum needs for rural broadband network

in the context of using the 450MHz band in particular, it is noted that, in theory, an open-access

wireless network providing wireless broadband services could use any of the IMT frequency bands

discussed in ICASA’s draft roadmap. However, bands below 1GHz are likely to be of most

interest given the cost savings of deploying infrastructure in these bands compared to in higher

bands (further discussed in the next section).32

In terms of the options available for use of bands below 1GHz, it is noted that, instead of the

450MHz band, wireless broadband services in rural areas could also be provided using the

700/800MHz spectrum is being released as a result of the migration from analogue to digital

terrestrial television and that ICASA intends to assign for mobile broadband use. In particular, this

could be more feasible now that ICASA intends awarding licences to use both 700MHz and

800MHz bands as a result of digital migration (unlike in the original plans where licences were

only planned in the 800MHz band). This increases the amount of spectrum potentially available

for award, from around 2×30MHz that would have been available in the 800MHz band alone, to

2×63MHz if both the 700MHz and 800MHz bands are awarded. However, this spectrum is likely

to be in high demand for use by MNOs in South Africa, and may also be of interest for use by

32

It is noted that the cost savings depend on the network configuration and the type of receiving device. Although

substantial cost savings are generated by using sub-1GHz frequencies for services to mobile devices (which typically have a zero antenna gain), an FWA service typically transmits signals to a fixed antenna mounted on a rooftop or the wall of a building. This antenna will have some gain, offsetting the increased propagation loss in higher bands. Thus, the use of higher bands is less disadvantageous for rural coverage when delivering a fixed wireless service than when delivering a mobile service.


Ref: 2001462-405c .

other services – specifically in the context of public protection and disaster relief (PPDR) and

mobile broadband services for the Emergency Services.

In this section, we discuss possible models for spectrum assignment for an open-access wireless

network in South Africa, including the type of spectrum award, the spectrum bandwidth and

packaging. This takes account of the international precedents for award of IMT spectrum and

ICASA’s plans to align with these as described above, as well as how the different spectrum bands

that ICASA is awarding licences for might need to be packaged to facilitate open-access wireless

network operation.


Ref: 2001462-405c .

5 Spectrum requirements for an open-access wireless network

There are three primary considerations relating to spectrum requirements: the type of spectrum

assignment (e.g. licensed, licence exempt, lightly licensed or use of white space), the choice of

frequency band, and the packaging considerations (i.e. spectrum per operator) within each band.

These are described below.

5.1 Type of spectrum assignment (licence, licence exempt, lightly licensed, white space)

An open-access wireless network will require access to suitable radio spectrum in order to provide

the access wireless link between the base stations within the network and the premises of the users

that the network is providing broadband access to (e.g. a home or a business). In addition, the

network might also require access to spectrum for backhaul purposes, that is, to link individual

base stations into the network. Various frequency bands are available to provide backhaul links,

which are typically microwave point-to-point links. Given that there are typically various choices

of spectrum for microwave point-to-point links (i.e. for fixed links in bands such as 15GHz,

23GHz, 26GHz, etc.), and that there is not usually a scarcity in supply of fixed link spectrum, we

assume that an open-access wireless network operator will be able to obtain suitable backhaul

spectrum via a direct award from ICASA. Spectrum for backhaul purposes is not considered

further in this report therefore, and we instead focus in the remainder of this section on the

‘wireless access’ part of the network, i.e. to provide the wireless link between the base stations and

the users’ premises.

For this, there are various models for spectrum assignment, broadly falling into three types of

frequency band: exclusively licensed bands, licence-exempt (unlicensed) bands, or a model using

assignment that is part way between licence and licence exempt, often referred to as ‘lightly

licensed’. These models are internationally recognised and are illustrated in the figure below.


Ref: 2001462-405c .

Figure 5.1: Methods of assigning/managing spectrum [Source: Analysys Mason, 2014]

The proposals for award of IMT spectrum licences referred to in ICASA’s IMT roadmap fall

within the ‘licensed’ approach to making spectrum available, which is the model usually applied

for mobile spectrum. The exception to this is a specific proposal from ICASA to reserve spectrum

in the 2.6GHz band for a ‘Managed Spectrum Park’. This is a novel concept that has been used in

some other countries around the world (e.g. New Zealand) as a means of enabling low-cost access

to spectrum with a view to encouraging innovative use. Operators using a Managed Spectrum Park

would typically pre-register to use the available spectrum, with concurrent use being permitted

between multiple systems. Accordingly, this is similar to the light licensed approach in the

diagram above.

It is noted that, rather than using licensed spectrum for the open-access wireless network, an

alternative might be to use licence-exempt spectrum, which would typically mean using one of two

bands available currently for this type of use – the 2.4GHz band, or the 5GHz band.

Licence-exempt spectrum relates to spectrum that is available for anyone to use without a licence

and spectrum over which use by certain approved devices (e.g. short-range devices, or SRD) is

allowed. Such spectrum is very popular for a limited number of uses, chiefly Wi-Fi wireless

networking. Wireless local area network technologies that are in widespread use (i.e. Wi-Fi, or

IEEE802.11 a/b/d/e/ac systems) use these bands.

In South Africa, licence exempt spectrum in the 2.4GHz and 5GHz bands is commonly used by

licensed carriers including mobile operators (who in the past have used this for fixed links when

suitable backhaul spectrum was difficult to obtain), by Wi-Fi hotspot operators such as AlwaysOn

and Project Isizwe, and by a number of wireless ISPs serving small towns and rural. The latter

Lightly licensed

New licensed spectrum is

typically awarded by

auction

Usually closely linked to

service type (e.g. cellular

mobile, TV broadcasting,

satellite)

Exclusive use, long-term

security of tenure is

implied

Simple, rules-based

access is employed

(e.g. power levels,

duty cycle,

bandwidth)

Small cells and short

ranges are typical

deployments

‘Best-efforts’ quality of

service is implied

Implies some form of

regulatory control within a

shared spectrum band (e.g.

systems must be registered

in a database, and there

may be a licence fee)

Quality of service is largely

on a best-efforts basis

(similar to unlicensed)

Spectrum licensing models

Licensed Unlicensed


Ref: 2001462-405c .

have generally used a small number of high sites and fixed antennas mounted at customer premises

to offer a fixed broadband substitute service.

As the spectrum is freely available for anyone to use (albeit with some restrictions on what

services can be deployed), service providers have only limited control over quality and coverage.

Similarly, ICASA and the government have fewer levers that they can use in terms of regulating

the service that is delivered in licence-exempt spectrum, because users of this spectrum need not

obtain specific spectrum rights (and in fact can be private users such as Wi-Fi in the home,

wireless doorbells, car alarms, etc.). Beyond the traditional Wi-Fi spectrum and uses, the licence-

exempt category of spectrum access also potentially covers the use of ‘white spaces’ left by high-

power broadcast use.

TV white space, or TVWS, refers to a method for different wireless technologies to access the

gaps that exist in the spectrum used for terrestrial TV.33

Various technologies could be used within

the frequency gaps. These gaps can be sufficiently large (both in terms of bandwidth and the area

they cover) that they could potentially be shared among various, alternative wireless services.

Typically, these other wireless services will be low power in nature, due to the need to avoid

interference with one another and with DTT services that have a primary status within the UHF

band. As a result, national regulatory authorities (NRAs) that have commenced authorisation of

TVWS use – such as in Singapore, the UK and the USA – have tended to propose that devices can

access white spaces on a licence-exempt (i.e. unlicensed) basis, in accordance with defined

technical parameters (since wireless applications of a low-power nature makes them well suited for

operation under a licence-exempt framework). In South Africa, TVWS trials have already been

carried out to inform the regulatory process in terms of how the white spaces might be made

available for re-use. Our understanding is that ICASA is considering a registration-based usage

with automated coordination (i.e. using a geo-location database to ensure that protection

requirements for DTT are met). The registration-based usage might suggest that companies are

granted short-term leases to use the TVWS, similar to licensed spectrum. However, since it is

likely that multiple concurrent registrations might be granted, this suggests a model more similar

to the ‘lightly licensed’ approach in our diagram above.

In many countries around the world, spectrum in the 5.8GHz range can be used on a lightly

licensed basis, and is often used for wireless broadband provision. However, lightly licensed

spectrum shares many of the characteristics of truly unlicensed spectrum use in that services are

‘best effort’ based (although with a lightly licensed model, there is some scope to coordinate

frequency use to improve quality of service).

For SA Connect, if an open-access wireless network used either licence-exempt or lightly

licensed/TVWS spectrum, it would share its spectrum with an unspecified number of other

systems. The implication of this is that the network would be operated on a ‘best efforts’ basis,

with no guarantee of quality of service, or minimum throughput. Given that the government’s

33

These gaps occur because of the large coverage area of TV transmitters, particularly in networks planned in a

multiple frequency network (MFN) configuration, where networks cannot use the same frequency for TV transmission in adjacent regions, without interference.


Ref: 2001462-405c .

broadband objectives define specific speed targets, we assume that networks operating on a ‘best

efforts’ basis are not suitable to achieve these objectives, since a minimum speed cannot be

guaranteed.

Accordingly, we assume that use of best-effort spectrum is not a suitable model for spectrum

assignment to meet the government’s objectives from the open-access network. This conclusion

may be different in a number of years, once light licensing spectrum management has matured

further in a way that use can be better coordinated.

Therefore, it is assumed that exclusive (licensed) spectrum will be needed for the network.

This suggests the network will require access to one of the bands that ICASA discusses in the IMT

roadmap (since other licensed spectrum is not harmonised for IMT use, noting our assumption that

a network providing wireless broadband services will most likely use IMT-based technology).

In the next section we discuss the implications of this in more detail, in the context of spectrum

packaging considerations for IMT bands (i.e. what bands are most suitable, whether an open-

access wireless network would require access to paired or unpaired spectrum, and the amount of

spectrum it would need, in different bands, to achieve different coverage/speed goals).

5.2 Choice of frequency band

In this section we examine which frequency band(s) may be required to support a wholesale open-

access wireless network in South Africa. We conclude that a network aiming to deliver fixed

wireless access services to rural areas could use lower value or unharmonised spectrum such as

450MHz or 2.6GHz, but a full mobile broadband service would need at least some 700/800MHz

spectrum and would likely encounter serious competition challenges in large areas of the country.

When planning the launch of 4G/IMT services, network operators in the mobile market typically

consider use not just of new spectrum bands (e.g. 700/800MHz and 2.6GHz), but also the existing

bands used for 2G/3G (e.g. 850, 900, 1800 and 2100MHz), which can be re-farmed for 4G use.

The combination of bands chosen for 4G will depend on the operators’ needs for coverage and

capacity within their network. Typically, operators choose to deploy a portfolio of spectrum for

4G, combining bands below 1GHz, optimised for coverage, with bands above 1GHz, which are

suitable to provide more capacity within areas of the network requiring this.

The reason for this is that different spectrum bands have different physical properties in terms of

the way that radio signals propagate, which affects the number of base stations needed to cover a

given area.

One of the key differences between different IMT spectrum bands is the difference in cell radius

due to different radio propagation characteristics in bands below 1GHz (e.g. 700/800/900MHz)

and bands above (e.g. 1800/2100/2300/2600/3400MHz). In general, lower frequencies propagate


Ref: 2001462-405c .

more readily than higher frequencies.34

This reduces the theoretical number of cells required by a

single operator to cover the territory, and thus reduces a significant part of the operator’s capital

and operational network costs. Bands below 1GHz are also typically in greater demand because of

greater scarcity compared with above 1GHz (since more bandwidth exists above 1GHz, meaning

that more operators can be accommodated with larger spectrum assignments per operator). As an

example, the spectrum auctions in France, Germany, Italy, Portugal, Spain, Sweden raised an

average of EUR0.549 per MHz per population in the 800MHz band and only EUR0.076 per MHz

per population in the 2.6GHz bands.

As well as there being differences in propagation conditions between different frequency bands for

LTE, there are also differences in equipment economies of scale, and in device availability. For

each LTE and LTE-A band, the device ecosystem as currently seen around the world is heavily

influenced by how many countries have adopted different 4G bands, with the most popular bands

for 4G deployment at present being 700/800MHz, 1800MHz and 2600MHz. How this may

develop into the future is unclear, although it is likely that some bands will remain more popular

than others.

With these considerations in mind, the value that MNOs will place on IMT spectrum available in

South Africa will vary by band, with 700/800MHz spectrum being likely to attract the highest

value. The 2.6GHz band is of value for deployment in urban areas. Other bands such as 2.3GHz

and 3.4–3.6GHz are typically less valuable for MNOs (since the propagation characteristics of

these bands are less favourable and the device eco-system is less well developed). Despite poorer

propagation, however, these higher frequency bands are increasingly being used in rural areas (e.g.

in Australia) for fixed wireless service, where the use of directional antennas compensates for

poorer propagation. The wider bandwidth available at these higher frequencies is also beneficial in

improving the speed and quality of the delivered service, whereas in the bands below 1GHz,

bandwidth is limited and hence the peak speeds that can be achieved from networks that only use

low-frequency spectrum are more limited.

Other than 700/800MHz, the other band in spectrum below 1GHz available for IMT use is the

900MHz band. Although in theory this band has similar properties to 700/800MHz, in practice the

availability of 4G devices to use 900MHz spectrum is currently more limited – mainly because

many MNOs around the world still use this band for 2G or 3G, rather than 4G. In the context of

SA Connect, it is also noted that the 900MHz band is already fully assigned in South Africa to the

existing MNOs and as such is not available for re-assignment (unless ICASA adopts one of the

less favoured approaches it has suggested, which would free up an additional 5MHz).

It is also noted that the current configuration of spectrum in the 900MHz band may need to be re-

considered between MNOs in the context of seeking to obtain spectrum packages aligned with 4G

needs. The timescales to achieve this are uncertain and may not match those of SA Connect.

34

This improved propagation can also cause problems. For example, 450MHz spectrum propagates over substantial

distances, which has in some circumstances caused interference problems between cells in a cellular network. As a result, previous applications of this spectrum have typically been for low-bandwidth wide-area applications, like emergency or public services.


Ref: 2001462-405c .

In terms of what spectrum options exist for SA Connect, it is mostly likely that spectrum in bands

below 1GHz – other than 900MHz – are better suited to achieving a rural wireless broadband

coverage objective than bands above 1GHz. However, ICASA will wish to avoid setting aside

spectrum for SA Connect in bands that are highly valued for mobile broadband use, such as in the

700/800MHz range, without a detailed analysis of the justification for this, since this would forego

the potential economic benefits of this spectrum being used within the mobile market. In other

words, the opportunity cost of 700/800MHz spectrum or revenue foregone by not awarding this to

the highest bidder is likely to be very high, and this would need to be explicitly justified through

an examination of what an open-access operator would be prepared to pay and what the public

value of an open-access network would be. Careful definition of the type of open-access wireless

network being deployed would also be required since competition issues will be somewhat less if

the open-access wireless network is fixed wireless access (FWA) style, rather than mobile.

This is possibly one of the motivations for ICASA having proposed that spectrum in the 450MHz

band might be used to support SA Connect, since this band is likely to be of lesser value to MNOs.

This is primarily because it is not widely used around the world for LTE/LTE-A and hence does

not benefit from economies of scale or a ready availability of smartphones and other devices for

mobile broadband services. It is noted that it might be more feasible for the 450MHz band to be

used for an FWA network, however, given that the availability of mobile devices is not a concern

when the network is designed to transmit to antennas on rooftops. However, although an

assignment of spectrum at 450MHz for SA Connect might overcome some of the competition

issues that would arise if an alternative assignment in the 700/800MHz bands was made, the

additional cost of procuring non-standardised base stations to operate in a band such as 450MHz

might make the investment required in this band more costly than in the alternative 700/800MHz

range.35

Conversely, proportionally fewer base stations will be needed to deploy a network using

the 450MHz band compared to 700/800MHz (and considerably more base stations would be

needed if other bands were used, such as 2.6GHz or 3.4–3.6GHz). We also note that the

interference environment in the 450MHz band is reportedly worse than it is expected to be in the

700/800MHz range, where terrestrial TV services are being cleared to provide exclusively

available spectrum for mobile. Hence, there are various technical, and commercial, trade-offs

existing.

The propagation disadvantage in higher bands and the need for significantly more base stations in

these higher bands means that bands such as 2.6GHz or 3.4–3.6GHz would not be ideally suited to

achieving the SA Connect objectives, in our view. However, it is noted that some other national

broadband networks, notably NBN Co in Australia, do use higher frequency bands, however (in

NBN Co’s case, the 2.3GHz band is used). We understand this is because the Australian

government indicated that NBN Co was not expected to participate in the award of 700MHz

spectrum given its value (and scarcity) for mobile broadband use. The issue of scarcity in the

700MHz band is less of a concern in South Africa, however, now that ICASA plans to make both

the 700MHz and 800MHz bands available (potentially simultaneously), meaning that there might

35

This is because the 450MHz band is not yet included in 3GPP standards (as of Release 11, the most recent

version). However, we understand that this may change and that it might be incorporated into future releases.


Ref: 2001462-405c .

be sufficient bandwidth to accommodate potential MNO requirements and those of SA Connect

(depending on what requirements exist in relation to spectrum for the emergency services).

Accordingly, we expect that the main options for spectrum for SA Connect exist in the bands

below 1GHz, either in the 450MHz band (proposed by ICASA as most suitable) or in the

700/800MHz bands.

We would expect that further cost-benefit analysis is needed by ICASA to confirm which of these

options is most suitable, given the trade-off we have noted above in relation to the number of base

stations versus the degree of harmonisation/economies of scale. In particular, if an assignment of

700MHz or 800MHz spectrum was considered for SA Connect, this would give rise to

competition issues with commercial 4G use, which would need to be carefully evaluated.

Conversely, an assignment of 450MHz, whilst creating fewer competition issues, might be sub-

optimal for SA Connect if infrastructure and devices are not readily available. In the absence of a

detailed analysis, however, our view is that a fixed broadband substitute open-access wireless

network (i.e. FWA style) could be reasonably based on 450MHz spectrum – possibly in

conjunction with a higher band (e.g. 2.6GHz or 3.4GHz). This would be particularly suitable if the

network is delivering services in rural areas only, since we understand from ICASA’s analysis that

the 450MHz band will not be available nationally for some time due to the need to re-locate

existing users (and that, initially, spectrum will only be available in rural areas). Conversely, an

open-access wireless network intended for delivery of mobile broadband services should be based

on a harmonised IMT band that is widely used in other markets such as 700/800MHz in order

make it more easily accessible to users with mobile devices. However, this network would directly

compete with existing MNOs, leading to various business and competition challenges, as

identified a number of the case studies (e.g. Rwanda, Kenya, Tanzania).36

5.3 Spectrum packaging

As well as considering what frequency band is most suited to achieving the SA Connect objectives

for an open-access wireless network, consideration is also needed as to how much spectrum is

needed within a given band, and its configuration. This is because IMT spectrum is typically

configured either in a paired or unpaired way and because LTE technologies can make use of

spectrum packages of different sizes. The amount of spectrum and the way it is configured has

implications in terms of the services provided and the cost of network deployment, as well as the

availability of devices.

We conclude that at least 2×10MHz of spectrum will be required in the short term and likely

2×20MHz in the longer term to support the targeted speeds, assuming a lightly loaded data

network. For a network designed to carry significantly more subscribers or to carry voice as well

as data services, 2×10MHz of spectrum would be insufficient. In that case, the 450MHz band on

36

It is noted that existing MNOs will typically have 2G and 3G networks operating alongside 4G mobile broadband, to

support voice services, whereas an open-access wireless network for mobile broadband is assumed to support data services only. Hence in the absence of voice it will not be in direct competition with MNOs’ business. However, this will become less relevant as voice is gradually migrated from 2G/3G networks to use voice over LTE, or voice over Wi-Fi.


Ref: 2001462-405c .

its own would not be a suitable option, since that band can only accommodate a maximum of

2×10MHz. An FWA-style operator could use unpaired spectrum in fairly loose combinations, but

a mobile operator would require IMT-harmonised paired spectrum.

Bandwidth options are typically in multiples of 5MHz for all LTE-based wireless networks (e.g.

between 2×5MHz and 2×20MHz). Larger bandwidths (e.g. 2×20MHz per operator) are more

feasible to accommodate in higher frequency bands where there is more bandwidth available (e.g.

1800MHz or 2.6GHz). For the 700MHz and 800MHz bands, smaller assignments such as

2×10MHz per network might be considered (in Europe, some networks have been assigned only

2×5MHz of 800MHz spectrum).

Spectrum packaging considerations are further discussed below.

Paired and unpaired bands

LTE networks are able to operate using spectrum at various frequencies as noted above. As well as

deciding on what spectrum bands are to be used for 4G, regulators must decide on the format that

the bands will be arranged in for licensing.

This is largely because, whilst a greater degree of harmonisation on 4G spectrum exists in certain

regions (e.g. within Europe), there is considerable variation in the availability and format of

spectrum for LTE around the world. This is reflected in the 3GPP standards for 4G equipment,

which supports operation in multiple bands (over 40 in total, which includes different

configurations for the same frequency bands). The LTE standard also has two modes of operation:

frequency division duplex (FDD) operating in paired spectrum, and time division duplex (TDD)

operating in unpaired spectrum.37

To date, FDD deployments have been more widespread,

particularly within Europe, although use of TDD is increasing, particularly within parts of the

Asia–Pacific region and particularly for non-handset use (i.e. for modems, dongles and tablets).

The main paired frequency bands supported by the 3GPP standards for LTE FDD operation are:

700MHz

800MHz

900MHz

1800MHz

2100MHz

2600MHz (although as noted in ICASA’s IMT roadmap, this can also be used unpaired).

Bands that are included in the 3GPP specifications for LTE TDD use are at 2.3GHz, 2570–

2620MHz and 3.4–3.6GHz.

37

FDD systems use one range of frequencies to transmit from base station to end user (downlink), and a completely

different set of frequencies to transmit from end user to base station (uplink). Hence transmissions can occur simultaneously in both directions (frequency duplexing). TDD systems share a single range of frequencies between uplink and downlink, with each party taking coordinated turns to send and receive (time duplexing).


Ref: 2001462-405c .

Whilst all of the above bands are likely to be used for LTE in the future in different parts of the

world, there are constraints in terms of the availability of devices capable of operating in some of

the bands (as discussed previously). As noted previously, paired bands, and particularly the paired

bands below 1GHz, are usually the most valuable bands from an MNO’s perspective.

This is primarily because operators are able to deploy fewer base stations to meet a stated coverage

objective using lower frequency spectrum, rather than the configuration of bands as paired or

unpaired. However, there are some technical reasons why FDD technology in paired spectrum is

more suited to providing wide area coverage – primarily because TDD systems are prone to intra-

cell and inter-cell interference between the uplink and the downlink. Thus, it may be that in larger

cells, the increased time needed for the signal to propagate between the base station and the user

(due to the longer range of the cell) might mean that interference occurs between adjacent

timeslots. This reduces the efficiency of the system (requiring increased guard times to be used).

Therefore, it is more common that FDD is used to provide wide-area coverage, and TDD is used in

capacity hot-spots, or indoors. Since paired spectrum has traditionally been planned in bands

below 1GHz, it is therefore more common for FDD technologies to be used in bands below 1GHz,

and TDD technologies are more commonly used above 1GHz.

However, this is changing somewhat with 4G, and TDD networks are increasingly being

considered both for outdoor/wide-area and indoor use. This may be because, within the 4G

standard, the FDD and TDD modes of use have been designed with similar performance objectives

in mind. For example, TDD technology is being used to provide rural broadband services in

Australia where NBN Co will deploy a TD-LTE network in 2.3GHz spectrum.

We note that there could be some benefit in using TDD technology for delivery of wireless

broadband services. For example, the development of TD-LTE offers scope for much increased

flexibility in the use of spectrum since an asymmetric configuration is possible between uplinks

and downlinks (for example, so that more capacity is assigned in the downlink direction).

However, this is only an advantage if the service is purely a data one (since if voice is also

required, this requires symmetric capacity).

With 4G, there is also increasing scope for TDD and FDD modes to be used together in the same

network. Historically, unpaired spectrum has only been used by TDD-only networks, particularly

those using WiMAX. These networks have tended to serve niche sections of the market, and have

not gained the same economies of scale or widespread deployment as FDD-based 2G/3G networks

have done, largely because paired spectrum suitable for FDD use was the main medium for

3GPP/IMT services in the 2G/3G era (i.e. GSM/UMTS). However, the commitment of large,

previously FDD operators to TD LTE opens the prospect of operators being able to use TDD and

FDD spectrum in a single network, addressing devices able to work with both types of spectrum.

This in turns provides opportunities for existing MNOs to get access to more spectrum by

including TDD in their portfolio (e.g. for licensed-spectrum hotspots), and for holders of TDD

spectrum to address a broader base of devices and users because more subscribers have TDD-

compatible devices.


Ref: 2001462-405c .

Accordingly, whether spectrum is configured as FDD or TDD is probably less relevant to

SA Connect than the choice of band. What is important, however, is that the configuration is

harmonised with other regions, to benefit from network and device economies of scale. Assuming

harmonised spectrum is used, then the cost of the radio part of the network will be largely

dependent on the choice of frequency band (and the coverage and capacity requirements of the

service) since this will determine the number of base stations required. In this context, it is likely

that use of a lower frequency band (e.g. below 1GHz) will require fewer base stations, and will

therefore represent a more cost-effective solution for SA Connect. However, the bandwidth

available below 1GHz is likely to be more limited and hence further spectrum above 1GHz might

be required, if the open-access network is intended to cover high, as well as low, capacity areas

(i.e. urban and rural). If intended only for rural coverage (and assuming fixed broadband

technology such as fibre is used in urban areas), then less capacity is needed for the wireless

network and therefore the bandwidth limitation below 1GHz ceases to be of concern.

What might be more relevant, therefore, is the choice of band below 1GHz, noting that ICASA has

indicated that spectrum is available either in the 450MHz band, or in the 700MHz and 800MHz

bands. Whilst the latter bands are being planned in accordance with internationally harmonised

band plans, it is not clear that this is the case for ICASA’s plan for the 450MHz band. This might

give rise to additional costs if the band is to be used for an LTE-based network and is not

configured in a harmonised way (which we understand will be a paired 450-458/462-470MHz

configuration although this is not currently included in the 3GPP specification). However, we note

that ICASA has indicated that the 450MHz band might be assigned as unpaired spectrum. ICASA

makes the argument that the 450MHz spectrum is particularly suitable for SA Connect because the

spectrum is likely to be available in rural areas ahead of urban areas (since there is a need to first

migrate existing users from the band, to make it available for IMT use).

It is not clear why ICASA has suggested that an unpaired configuration is used. Although the band

is not widely used around the world for IMT systems, we note that countries where it is being

proposed for IMT use (e.g. Brazil) a paired configuration is more commonly considered. If the

450MHz band is to be further considered for use by SA Connect, we recommend further

consideration is given to this point, and whether the band should be assigned in a paired, rather

than an unpaired way.

Amount of spectrum needed

The typical amount of spectrum allocated to a mobile operator, per band, for 4G deployment varies

between 2×5MHz and 2×20MHz, in addition to the 2G and 3G spectrum that the operator is

already using for voice and 2G/3G mobile data services. It is noted that most regulators around the

world have, or are planning to, liberalise 2G/3G licence conditions (i.e. make the licences

technology neutral) so that operators can deploy 4G technology within 2G/3G spectrum, as well as

in new 4G bands. Therefore, a mobile operator will typically hold a portfolio of spectrum for 4G,

incorporating 2G/3G bands as well as newly assigned 4G spectrum.


Ref: 2001462-405c .

It is typically the case that wider contiguous 4G bandwidths per operator (e.g. 2×20MHz) can be

more easily accommodated in higher frequency bands (e.g. 1.8GHz or 2.6GHz). Bands below

1GHz have less bandwidth available overall, such that the contiguous assignment per operator is

usually 2×10MHz, rather than 2×20MHz. This affects the peak capacity and peak downlink data

speed achievable using a lower frequency network layer. However, operators are typically

deploying multi-frequency networks for LTE, incorporating lower and higher frequency layers,

which means that higher speeds can be accommodated in areas covered by the higher frequency

overlay. This is because, if the base stations are widely spaced, this may mean that network

performance perceived by the end user is variable, depending on proximity to the base station.

Hence, in areas where network traffic loading is higher, the use of higher bands with more base

stations provides the most geographically uniform capacity and performance.

Although LTE typically operates in channel widths up to 2×20MHz, LTE-A incorporates a feature

called carrier aggregation (CA), enabling up to five carriers to be aggregated giving a total

bandwidth of 2×100MHz. Combined with the use of multiple in-multiple out (MIMO) antenna

technology, this enables LTE-A to achieve peak speeds significantly higher than those of LTE

alone. The actual speed depends on the category of LTE device being used, and the bandwidth that

the operator has available. LTE-A expands and enhances LTE so that a peak downlink rate of

1Gbit/s and a peak uplink rate of 500Mbit/s can be achieved within the most recent LTE-A

standard (although downlink speeds in excess of this are already being trialled in accordance with

planned future releases of the LTE-A standard). Achieving a 1Gbit/s peak speed requires a

bandwidth of 100MHz – noting that operators in South Africa apart from Telkom all hold less than

50MHz of downlink spectrum – and 4×4 MIMO technology, which is the most advanced

configuration of LTE-A standardised at present. Furthermore, since the maximum bandwidth

currently supported by LTE is 20MHz, carrier aggregation is required to support a bandwidth of

up to 100MHz. This can be the aggregation of multiple carriers within the same band, or in

different bands, although the LTE specification does not support all combinations of frequency

band for carrier aggregation and so it requires a careful choice of bands to ensure that the selected

configuration is supported within currently available infrastructure and devices.

We note that recent reports suggest that Telkom will launch an LTE-A network in South Africa

using its 2.3GHz spectrum, which it is reported will “ultimately” achieve peak speeds of 3Gbit/s.38

However, these speeds are not achievable in the market at present, since current devices do not

support this, and the technology required to achieve these speeds (8×8 MIMO) will not be

included in the 3GPP standards until Release 12 (due around 2015). Currently, most LTE networks

deliver a maximum of 150Mbit/s downlink speed and the most advanced LTE-A networks can

deliver 300Mbit/s39

– although it should be noted that real-world end-user speeds are a small

fraction of these maximums.

The amount of spectrum needed for an open-access wireless network for SA Connect will

therefore depend on the scope of what the network is to deliver, including supported speeds,

38

See http://techmoran.com/south-africas-telkom-start-intalling-lte-across-country/#sthash.8krsWbcE.oPftk2mW.dpbs.

39 See http://techn4all.com/nokia-sends-to-3-78-gbit-s-data-over-lte-advanced-connection/.


Ref: 2001462-405c .

coverage and capacity. If the network were to be the only 4G infrastructure deployed in

South Africa (e.g. as in the Kenya case study described in the previous section), then it would be

necessary to assign sufficient spectrum to the network to accommodate all envisaged 4G use.

Therefore, all available 4G spectrum might be assigned for a wholesale operation in this scenario

(since the network would need to accommodate the traffic needs of all 2G/3G MNOs and wireless

broadband operators).

However, we understand that this is not the case and that ICASA intends awarding 4G spectrum to

existing MNOs, with a separate assignment potentially being set aside for SA Connect. Hence we

assume that multiple, competing 4G infrastructures will be deployed by MNOs to accommodate

their traffic needs and so the capacity needed in the open-access wireless network is only to

address the SA Connect broadband coverage target and not to accommodate all envisaged mobile

broadband traffic. Furthermore, if we assume that wireless will only be used in areas where fixed

broadband technology will not be cost effective, this suggests that spectrum is only required to

support an open-access wireless network operation outside of urban areas. Assuming therefore that

the open-access wireless network primarily requires spectrum for rural coverage, it follows that the

capacity needed in rural areas is less than in urban areas (since there are fewer subscribers per

cell). Accordingly, it is likely that the network will require less spectrum overall than would be

required by an established MNO. As noted previously, we also assume that a network for SA

Connect will be required primarily for data traffic (i.e. not voice) and hence the network does not

need to be designed to support voice traffic on top of data (which would increase the spectrum

requirement).

In terms of the speeds to be supported, we note that the shorter-term requirement for SA Connect

(i.e. the 2016 target) is 5–10Mbit/s, rising to 100Mbit/s by 2020 and 1Gbit/s by 2030.

Comparing this to the speeds that can be achieved in different LTE bandwidths, the LTE-A

standard aims to support downlink peak spectrum efficiency of 30bit/s/Hz per cell (assuming 8×8

MIMO antenna configuration). Average spectrum efficiency is the aggregate throughput of all

users in a given bandwidth. The target average spectrum efficiency for a 4×4 MIMO antenna

configuration (which is achievable currently) is 3.7bit/s/Hz.40

This would translate to the following

average efficiencies being achieved in different bandwidths. It is noted that this is an average and

that not all users in the cell would achieve this speed (since speeds vary over the cell, with users at

the cell edge obtaining lower throughput than those closer to the base station).

Figure 5.2: Average spectrum efficiency of LTE-A in different bandwidths [Source: Analysys Mason, 2014]

Bandwidth Average efficiency (Mbit/s/cell)

5MHz 18.5

10MHz 37

20MHz 74

40

See http://www.rohde-schwarz.com/en/applications/lte-advanced-3gpp-rel.11-technology-introduction-application-

note_56280-42753.html.


Ref: 2001462-405c .

Given that the average speed that individual users in a cell will receive is lower than the cell

average (since multiple users will be using capacity within the cell simultaneously), it would be

recommended that, as a minimum, a 10MHz downlink assignment (i.e. 2×10MHz spectrum

package) is needed for SA Connect initially, to aim for the 2016 speed targets.41

This assumes a

lightly loaded network with no voice traffic.

To achieve the 2020/2030 speed targets, however, additional spectrum (e.g. 2×20MHz or more)

will be required in future years.

Packaging of low and high frequency bands

As is widely discussed in many published reports, mass-market full service operators require a

suitable spectrum portfolio: Low-frequency spectrum (<1GHz) offers better in-building coverage

and reach whilst high-frequency spectrum, more plentiful, offers high capacity and high peak

bandwidth. Operators therefore need a cross-section of spectrum suitable for their business model

(niche vs. mass market).

Conversely, the needs of an open-access wireless network for SA Connect, particularly if used to

cover rural areas only, are likely to be met using one IMT band rather than requiring a portfolio of

bands. As noted above, we would expect the network to require a minimum of 2×10MHz of

spectrum, but this would need to be increased to 2×20MHz and more in later years if the

2020/2030 target speeds are to be achieved.

Accordingly, the 450MHz band on its own (as proposed by ICASA) will not support the

SA Connect requirements, although this band could be used in combination with other bands

(e.g. above 1GHz) to achieve the required capacity, quality and speeds.

The maximum amount of spectrum available in each of these bands is summarised below.

Figure 5.3: Available bandwidth per IMT band in accordance with ICASA’s draft roadmap [Source: Analysys

Mason, 2014]

Band Amount of spectrum / availability

450–470MHz (450MHz band) 2×10MHz paired, or 20MHz unpaired available for award

703–733/758–788MHz (700MHz band)42

2×30MHz paired, plus 15MHz unpaired (within the

duplex gap) available for award

790–820/832–862MHz (800MHz band) 2×30MHz paired available for award

876–880/921–925MHz Reserved for GSM-R

880–915/925–960MHz (900MHz band) 2×35MHz paired – currently assigned to three MNOs

1710–1785/1805–1880MHz (1800MHz

band)

2×75MHz paired – currently assigned to six operators

(MNOs and wireless broadband providers)

41

It should be noted that it is unclear whether this amount of spectrum is available in the 450MHz band.

42 ICASA notes that an additional 2×3MHz could be available, but this is less useful since it requires devices to

accommodate a dual-duplexer, which has cost and availability implications for devices.


Ref: 2001462-405c .

Band Amount of spectrum / availability

1920–1980/2110–2170MHz (2.1GHz band) 2×60MHz paired – currently assigned to four

MNO/wireless broadband operators, although ICASA is

proposing to make a further 2×30MHz of spectrum

available by converting existing satellite spectrum to

terrestrial

2300–2400MHz (2.3GHz band) 100MHz – 60MHz assigned to Telkom and 20MHz to

SMMT. Remaining 20MHz might be used to re-locate

WBS spectrum from 2.6GHz

2500–2570/2620–2690MHz (2.6GHz paired

band)

2×70MHz paired available for award, if WBS spectrum is

re-located to the 2.3GHz band

2575–2615MHz (2.6GHz unpaired band) 40MHz unpaired (or 50MHz including guard bands, only

usable for indoor user)

3400–3600MHz (3.4GHz band) 200MHz unpaired spectrum potentially available

(although some might be reserved for a ‘Managed

Spectrum Park’)

In terms of how each band might be packaged, ICASA has provisionally indicated that:

The 450MHz band could be awarded as paired or unpaired spectrum, and could accommodate

SA Connect, emergency services or both.

700MHz and 800MHz spectrum could be offered as four lots of 2×15MHz or six lots of

2×10MHz.

2.6GHz spectrum could be offered as seven lots of 2×10MHz or three lots of 2×20MHz and

one lot of 2×10MHz (or a combination thereof) and one unpaired lot of 50MHz.

3.4GHz spectrum could be offered in multiples of 20MHz unpaired lots.

ICASA has yet to publish details on how it intends to bundle these lots together for award. MNOs

might have a preference for lots to be bundled (e.g. 700MHz plus 2.6GHz), although this depends

on the award format (in many European 4G awards, for example, bundling of lots has not been

pre-determined by the regulator and MNOs have been able to select packages from each band, up

to any specified cap).

From the perspective of SA Connect, it would potentially be preferable if bands are not packaged

together, since it is unlikely that a wireless network if deployed only for rural coverage would need

a combination of the bands being offered. As noted previously, although ICASA has indicated the

450MHz band being a possibility to accommodate SA Connect, it might be desirable for a cost–

benefit analysis into other options (e.g. 700MHz or 800MHz) to be considered before confirming

this.

Further clarity will be required on the precise objectives of an open-access wireless network within

SA Connect (i.e. its coverage, the customers it is to serve, and the minimum speed per customer)

in order to confirm the best choice of packaging.


Ref: 2001462-405c .

5.4 Decisions in deploying a new open-access wireless network

These are eight potential options that DTPS may choose from to develop a new-entrant wholesale

open-access wireless network (see Figure 5.4). Each of these options has been evaluated on the

basis of the potential market distortion that may arise, the cost to the government, potential take-

up/impact of such a network, and the viability of pursuing such a network. It must be noted that

the following options have the underlying assumption that the network will be rolled out by a new

entrant, rather than through imposing obligations on existing network operators (which is

considered in the next section). We also assume that the network will be operated wholesale-only

with open access; a retail entity could potentially be operated at arms-length without significantly

changing43

the conclusions. The models and examples discussed below include both wholesale and

retail operators, because of the limited number of examples available.

We believe that in establishing such a wholesale network, the following decisions need to be made

(as illustrated in Figure 5.4 on page 54):

Will the service be designed to attract fixed wireless access (FWA), or mobile customers? As

discussed earlier in this section, this decision has an impact on the type of spectrum required. It

also has a significant impact on the use of the service: an FWA service is primarily for household

or business use and typically requires use of a modem or dongle and laptop – and may use a

directional antenna to improve signal, coverage, and throughput – while mobile use is based on

being able to receive the service with no more than a standard handset and no additional antenna.

FWA services typically use lower-value spectrum44

such as 2.3GHz or 450MHz, while fully

mobile services use higher-value spectrum such as 700MHz, 800MHz or 900MHz.

It would be possible for the network to offer both FWA and mobile service, but we believe

there is limited opportunity for synergies (such as cost savings or revenue enhancements) that

make a combination of the two services more viable than each alone.

SA Connect is not explicit on whether the open-access wireless network it envisages is

intended to be FWA or mobile. There are indications of this network being used both to

provide service to schools and clinics (which would suggest an FWA network) and to serve

consumers (suggesting a mobile network). Since a mobile network has greater flexibility it

could be inferred that this is what was intended in that document.

Will the service be restricted to rural areas or rolled out nationally (including metros)?

Rolling out in rural areas limits the duplication of infrastructure and the wider competitive

impact (which may be desirable if the network is publicly funded, or undesirable if the aim is

to change the whole market structure), but also limits the return on investment that the network

can create, since the subscriber base in rural areas will be relatively small. Success of a rural-

43

The inclusion of a retail division would permit greater control over the commercial success of the network by

creating a vehicle for increasing and responding to consumer demand. However, it may increase the likelihood of accusations of discrimination which would require oversight from a regulator and/or shareholder.

44 By lower value we mean lower market value, i.e. based on the price that other market players would be willing to

pay for access to bandwidth in this frequency range.


Ref: 2001462-405c .

only network will be strongly influenced by the success of government interventions to

stimulate demand, and on somehow preventing other operators from rolling out in those areas.

Does the network receive government support? Government support could take the form of

investment or non-monetary support that is not offered to other operators. It is noted that a

competitive process to award spectrum to a new entrant would not be regarded as bringing

government support, even if the spectrum were reserved for non-incumbents, unless other

support was also offered (e.g. preferential access to radio sites, government ownership of part

of the network, capital or operational investment or other subsidy that might enable the

operator to enter the market more quickly than it otherwise could). Government support

requires evaluation of the value or money and affordability of the support, and evaluation of

the possible competitive distortions that might arise. Without government support, coverage of

targeted unserved areas may not be economically viable and there is a high possibility of

failure (either financial, or in terms of reaching targets).

Each of these questions has two possible answers, leading to a total of eight possible options. The

eight options for establishing a wireless wholesale-only network are as follows (where relevant

named after similar example networks we are aware of):

Option 1:

NBN Co model

This model entails the use of an FWA network with government funding

that operates exclusively in rural areas. An example of this scenario is

NBN Co in Australia, whose mandate is to provide a nationwide wholesale-

only broadband network using fibre technology in urban areas, wireless in

rural areas (based on TD-LTE in the 2.3GHz band), and satellite in very

remote areas. Because the impact of such a wireless network is limited to

rural areas where there is very little or no fixed or mobile broadband supply,

this option would not cause significant market distortion.

Considering the initial cost to meet end-user equipment requirements and

the need for reliable electricity, the take-up of FWA in rural areas of South

Africa will most likely be limited to high-end homes, schools, clinics and

offices. Limited demand for FWA services in rural areas reduces the

viability of this option, even if it is the only network operating in these

areas. This increases the level of government funding required to keep the

network sustainable, compared with the costs estimated for the NBN Co

deployment (around R50 billion cumulative loss in the period 2011–2021 to

cover around 1 million premises).45

Option 2:

Wireless ISP model

This is similar to Option 1 (in that the service is targeted at specific areas of

the country), but there is no government subsidy for the roll-out. A lack of

government support makes the business case even less viable for a network

operator in this scenario.

45

NBN Co, Fixed Wireless and Satellite Review: Final Report, May 2014.


Ref: 2001462-405c .

There are wireless ISPs (WISPs) around South Africa that successfully

operate this model on a small scale, suggesting that the model can work in

some areas. It could be argued that Under-Serviced Area Licensees

(USALs) fall into this category, although they did receive initial government

support. However, of the 14 USALs licensed between 2001 and 2007, it is

believed only one is still operational in 2014. The lack of ongoing financial

support, delayed implementation of asymmetric termination rates and

restrictions on the geographical area in which they can operate have been

cited as the key reasons for their failure.46

A key difference between the WISPs and the USALs is that the former have

the freedom to focus their services on areas where a viable business case

exists, while the latter were mandated to cover entire districts which were

identified as under-serviced. Without government support, therefore, it

would not appear viable to achieve full coverage of under-serviced areas

using the USAL model.

Option 3:

Government-

sponsored national

FWA network

This model involves the deployment of a national FWA network with

government support. We are not aware of existing examples of this type.

This option will cost the government considerably more than a rural-only

network, especially in the build-out phase, since the network must be

dimensioned to provide national coverage and the capacity required to serve

areas of higher demand. However, while take-up in rural areas will remain

low, the higher take-up expected in urban areas may improve the

sustainability of this option, since revenue arising from urban areas with

higher demand may potentially cross-subsidise the lack of demand in rural

areas. Of course urban take-up is critically dependent on the competitive

environment and whether any retail operators choose to use the network.

However, there may be a higher level of market distortion than in the rural-

only options, since the network will operate – with government support – in

areas where there are already fixed and mobile broadband operators.

Option 4:

Clearwire model

Clearwire in the USA is an example of a national privately funded FWA

network, but as noted earlier Clearwire primarily serves a single retail

operator and it does not have deep rural coverage obligations. This option is

similar to Option 3, but without any government support. The lack of

government support reduces the viability of the option but also reduces the

cost to the government and the potential for market distortion. It may be

difficult to ensure that such a privately-owned network complies with deep

rural coverage policy aims.

46

Source: Interviews with industry stakeholders.


Ref: 2001462-405c .

Option 5:

Shared Networks

Tanzania model

In Tanzania, the licensee Shared Networks was initiated by Ericsson and

jointly owned by several existing mobile operators; in this case the

‘government funding’ arose from international developmental agencies

rather than the national government. This option distorts the market more

than the equivalent FWA option, as mobile broadband infrastructure tends

to be more prevalent than FWA networks in rural areas, and hence a

subsidised network might gain market share against an established

commercial one, or against planned commercial deployments, unless the

network is restricted to entirely unserved areas. As this option has fewer

end-user constraints in the form of initial costs of receiver equipment and

the need for electricity, we expect it to achieve higher take-up than Option 1

above. However, if adopted in South Africa, we would expect significant

concerns to be raised by established MNOs, which are poised to launch

similar 4G networks in some rural areas once ICASA makes suitable

spectrum available.

Option 6:

Rural-only mobile

network without

government support

We are not aware of examples of a commercially-driven rural-only mobile

network, reflecting the non-viability of such an approach, although in

various countries such as UK or Sweden one or maybe two shared mobile

infrastructures operate in rural areas (compared to multiple infrastructures in

urban areas). The benefit of there being only one mobile infrastructure in

rural areas for all MNOs to use is that network costs can be shared amongst

existing operators meaning that areas that would not be commercially viable

for an MNO to cover independently can become viable if costs are shared.

However, usually the creation of a single infrastructure comes about through

cooperation between existing MNOs in a market – who may create a jointly-

owned wholesale subsidiary – rather than creation of a separate, rural-only,

network provider.

Option 7:

Olleh Rwanda

Networks model

This option entails deployment of a national mobile network with

government support. The recently launched Olleh Rwanda Networks (ORN)

and the proposed wholesale LTE networks in Kenya and Mexico provide

some examples of this kind of network.

This option is likely to create significantly higher market distortion than the

others. This is because existing MNOs’ mobile broadband is already widely

used for broadband access in many areas, and they are likely to continue

using current and new spectrum holdings to compete directly with any new

wholesale operator. The existing MNOs, working only in commercially

viable areas, are likely to be very competitive and are likely to wish to roll

out their own infrastructure in urban areas rather than make use of a shared

network. These operators are therefore likely to use the new network only in

unviable areas.


Ref: 2001462-405c .

Other service providers – necessarily with small, MVNO-like subscriber

bases – might use the network nationally, but may be discouraged by the

lack of “backward compatibility” if the network does not also offer GSM

and UMTS using 900MHz and 2100MHz.

This option is likely to pose a significant cost to the government, and would

need careful regulation to avoid the government-subsidised network causing

market distortion (e.g. by gaining a first-mover advantage in the market

through availability of government funding or other assets such as sites) but

this may be mitigated by the higher take-up. It may be viable, but success

depends on numerous aspects of a highly dynamic market, such as: other

operators’ strategies, future spectrum releases, technology changes (like

white spaces and light licensed spectrum), cost of backhaul and aggregation

in rural areas, and device developments.

To mitigate the competition risk in this option from multiple 4G networks

being rolled out, reducing the take-up of the shared network, both the ORN

and Kenyan wholesale network have been (or are proposed to be) awarded

exclusive access to LTE spectrum in the digital dividend bands, which will

give them the advantage of a cheaper network roll-out and ensure that the

network is used by existing MNOs. The GSMA recently published a paper47

arguing that losing the benefits of competition outweighs the benefit of

saving costs in such a “single wholesale network”.

Option 8:

Smile model

This option has similar characteristics to Option 7. It may be viewed as a

straightforward new-entrant model (like Telkom Mobile), but with a

wholesale-only obligation and an extensive coverage target. However, the

lack of government support may severely reduce the viability or at least the

speed of roll-out of this option as it is rather costly to roll out mobile

infrastructure in rural areas and an independent operator may be unable to

fund this. In light of the significant competitive challenge expected from

existing mobile operators in some areas, the lack of government support

means that such an operator is unlikely to succeed.

Smile’s operations in four African countries are similar to this, but do not

have deep rural coverage targets and are actually marketed as an FWA

service, despite using valuable 800MHz spectrum. LightSquared in the USA

is similar but uses a combination of terrestrial and satellite technologies,

which are more like an FWA service.

Analysys Mason’s evaluation of how these eight models compare with one another is provided in

Figure 5.4.

47

Frontier Economics for GSMA, Assessing the case for Single Wholesale Networks in mobile communications,

September 2014.


Ref: 2001462-405c

Figure 5.4: Flow chart showing the various options for an open-access wireless network in South Africa [Source: Analysys Mason, 2014]

FWA or mobile?

Rural only or

national?

Government

support or not?

Rural only or

national?

Government

support or not?

Government

support or not?

Government

support or not?

NBN Co model

(Australia)

Shared Network

Tanzania model

(Tanzania)

Government-

sponsored

national FWA

network model

Rural-only

mobile network

without

government

support model

Wireless ISP

model

(South Africa)

Olleh Rwanda

Networks model

(Rwanda)

Clearwire model

(USA)

Smile model

(TZ, UG, NG,

DRC)

FWA

450MHz or

2.6/3.5GHz

Mobile

700/800MHz

Rural

only National

Rural

only National

Government

supportNot

Government

supportNot

Government

supportNot

Government

supportNot

1 82 3 4 5 6 7


Ref: 2001462-405c

Figure 5.5: Analysys Mason evaluation of the various options for open-access wireless networks in South Africa [Source: Analysys Mason, 2014]

1. NBN Co

model

(Australia)

2. Wireless

ISP model

(South

Africa)

3.

Government-

sponsored

national FWA

network

4. Clearwire

model (USA)

5. Shared

Networks

Tanzania

model

(Tanzania)

6. Rural-only

mobile

network

without

government

support model

7. Olleh

Rwanda

Networks

(Rwanda)

8. Smile

model (TZ,

UG, NG, DRC)

Market

distortion

Government

cost48

Take-up/

Impact

Viability

Total (out of

16) 9 12 6 8 11 10 5 4

Similar

example(s)

NBN Co

(Australia)

Wireless ISPs

and USALs

(South Africa)

No example Clearwire

(USA)

Vodafone +

Chorus (New

Zealand);

Shared

Networks

(Tanzania)

No example, but

similar to existing

operators

sharing networks

Olleh Rwanda

Network

(Rwanda);

Proposed

wholesale LTE

network (Kenya)

Smile (Tanzania,

Uganda, Nigeria,

DRC);

LightSquared

(USA)

Key: = Least favourable; = Low– medium; = Medium;

= Medium–high;

= Most favourable

48

“Government cost” does not only refer to the absolute cost of building the network; it also includes potential subsidies required for operational expenditure. The cost to government may

be mitigated by the revenues generated from operation of the network.


6 Other options in spectrum licensing to facilitate a broadband

development agenda

Noting that the international precedents for creating and operating open-access wireless networks

suggest some risks towards moving to a wholesale wireless operator providing capacity to other

entities, in this section we discuss a number of other possible regulatory measures that could be

considered to facilitate South Africa’s development agenda in terms of improving the availability

and affordability of broadband services. These largely focus on alternative spectrum packaging

and licensing options within the planned IMT spectrum award to incentivise network roll-out to

targeted areas, and/or to address competition concerns to improve affordability of services. We

provide some further case studies in this section to demonstrate some approaches that have been

used.

Some of these measures are designed to facilitate infrastructure roll-out in unserved areas (e.g.

roll-out obligations, use-it-or-lose-it spectrum conditions, new market entry/set aside of spectrum

packages, RAN sharing), whereas others are intended to improve availability/competition between

services (e.g. national roaming, mandating access for mobile virtual network operators).

6.1 Measures aimed at facilitating further network roll-out

Coverage obligations

Coverage from mobile networks can be achieved through a combination of incentives, resource

allocation and targeted obligations. Competition provides strong incentives for operators to have

broadly matching coverage footprints in areas where there is sufficient traffic, although it may not

be sufficient to ensure full contiguity of coverage. Resource allocation is important, as low-

frequency spectrum has better propagation characteristics. Finally, regulators routinely place

coverage obligations as a condition to operators that hold spectrum rights.

In the South African context, mobile coverage is well established in urban areas but is not

ubiquitous, with ‘not-spots’ existing where the revenue opportunity is weak. There is therefore

limited incentive for the existing operators to fill these coverage gaps within the current

competitive environment even with new spectrum, unless a specific coverage obligation is

attached to their licence. However, it is noted that ICASA has signalled an intention to include

coverage obligations within spectrum licences for IMT in its draft roadmap, and has indicated

possible obligations that might be defined per frequency band. As currently drafted, these do not

match the speed targets of SA Connect, however.49

As discussed previously in this report, mass-market mobile operators require a suitable spectrum

portfolio to provide nationwide coverage and capacity: low-frequency spectrum (<1GHz) offers

49

See Section 10 of the draft IMT roadmap.


Ref: 2001462-405c

better in-building coverage whilst high-frequency spectrum, more plentiful, offers high-capacity

and high-peak bandwidth. Operators therefore need a cross-section of spectrum suitable for their

business model (niche vs. mass market). Given that low-frequency spectrum offers better

coverage, regulators that have included a coverage obligation within 4G licences that is aimed at

improving the availability of services in less populated areas have typically attached this obligation

to licences for spectrum below 1GHz. For example, in Europe, regulators have specified coverage

obligations within 800MHz licences in various ways.

Some examples of different approaches are summarised below.

► Germany multi-band auction

In May 2010, Germany concluded a spectrum auction across four bands: 800MHz, 1800MHz,

2100MHz and 2.5GHz. A total of 360MHz was on offer at this auction. To ensure rural coverage,

BNetzA, the regulator, imposed a coverage obligation on each of the three offered 800MHz

licences with the following terms:

Operators were required to roll out coverage to at least 90% of rural areas that were previously

under-served before operators could roll out in more populated areas. These under-served

areas were identified by BNetzA based on areas where fixed and/or 3G mobile broadband

services did not currently reach.

Information relating to minimum speed attached to the coverage obligation is not publicly

available.

A phased approach to the roll-out was to be adopted. The country was divided into different

regions according to population size. Operators were required to prioritise the regions with the

lowest population size before they could start serving areas with larger population size.

The coverage obligation only required one operator to roll out services in each of the under-

served areas, leaving it up to operators to coordinate on rolling out the rural coverage, avoid

network duplication and ensure that all identified areas would have access to at least one

network.

Despite this coverage obligation, it is evident that operators highly valued the 800MHz spectrum.

Although only 60MHz of spectrum in the 800MHz band was available for auction in accordance

with the harmonised European band plan for the 800MHz band that assigns spectrum in a

2×30MHz paired configuration, EUR3.576 billion revenue was raised from the 800MHz band,

representing over 80% of the total revenue raised at the auction (EUR4.384 billion).

Since only three 800MHz licences were offered (i.e. three lots of 2×10MHz per operator) one of

the four 3G operators, E-Plus, failed to secure any spectrum in this band. In 2012, two years after

the auction, BNetzA announced that the coverage obligation on the 800MHz band had been met.

Telefónica has recently made a bid to acquire E-Plus in order to raise its competitiveness against

the larger operators, Telekom Deutschland and Vodafone Germany. The new entity would result in

larger spectrum holdings and market share than the other operators. This merger was approved by

the EU subject to commitments made by the new entity: renting out up to 30% of the merged


Ref: 2001462-405c

company’s network capacity, divesting some spectrum in the 2.1GHz and 2.6GHz bands and

offering wholesale 4G services to all interested parties in the future.

► Sweden 800MHz auction

The Swedish regulator, PTS, auctioned spectrum in the 800MHz band to three operators in 2011.

This generated SEK1.754 billion (EUR200 million) plus a SEK300 million (EUR34.2 million)

commitment by one of the operators to expand coverage to remote areas of Sweden.

The commitment to cover remote areas attached to the highest block is an interesting feature of the

Swedish auction. Net4Mobility, a shared network company between operators Tele2 and Telenor,

is obliged to serve remote homes and businesses on a list to be issued by the regulator.

Net4Mobility will be required to serve 25% of premises on the list in 2012 and 75% of the

premises in 2013. Thereafter, the company will be required to add coverage for specific premises

until the SEK300 million commitment has been exhausted. The throughput requirements for the

remote service specify a nominal speed of 1Mbit/s or better to a fixed terminal with a directional

antenna (with an average speed of at least 750kbit/s over a 24-hour period and at least 500kbit/s in

the busiest four-hour period). Net4Mobility is, however, permitted to use a frequency band other

than 800MHz if this is demonstrably less expensive, suggesting that there may be scope for the

company to subcontract some or all of the remote coverage obligation to Net1.

However, despite this being viewed as a positive approach by the regulator to encourage mobile

broadband roll-out to the most remote areas of the country, by the end of 2013, Net4Mobility had

failed to meet its coverage objective, having covered only 139 of the 628 premises identified by

PTS.

► UK 800MHz and 2.6GHz auction

In 2013, Ofcom, the UK regulator, carried out an auction of 250MHz of spectrum in the 800MHz

and 2.6GHz bands. A total of GBP2.4 billion was raised from this auction. Ofcom estimates that

this auction would create up to GBP20 billion value for customers resulting from the deployment

of 4G networks. It is worth noting that prior to the auction Ofcom made all existing and to-be-

awarded mobile spectrum tradable, in case the auction did not result in efficient allocation.

In this case, Ofcom imposed a 98% population coverage obligation with a minimum speed

requirement of 2Mbit/s on one package of 800MHz spectrum to be achieved by 2017. The package

with the coverage obligation was awarded to O2 in the auction. Both O2 and Vodafone, which

have been cooperating on 3G network build for some years and now share the majority of passive

network infrastructure through a joint venture company established between the two operators,

have announced that this coverage obligation will be met by 2015. This obligation has spurred the

other major operators, EE and Three, which also share networks through an entity called MBNL,

to aim to meet similar coverage targets. Both EE and Three were awarded 2×5MHz of 800MHz

spectrum in the auction (contrary to the usual outcome in European auctions where operators are

awarded a 2×10MHz block of 800MHz spectrum). It remains to be seen whether the two operators

will seek to pool their separate assignments to create a shared 2×10MHz block (which will require


Ref: 2001462-405c

UK regulatory approval, since although spectrum trading is permitted, spectrum pooling is subject

to competition checks).

The UK government has also supported operators in providing coverage through the Mobile

Infrastructure Programme (MIP). MIP involves GBP150 million of government funding allocated

towards building new masts in the least economically feasible areas in the UK. This project is

aimed to provide coverage to 60 000 premises that were not previously covered or otherwise

poorly covered. The government ran a procurement exercise to appoint the company that would

build and manage the required infrastructure on behalf of all service providers. Arqiva, which is

the transmission provider for digital terrestrial television (DTT) services in the UK, as well as

owner and operator of a large portfolio of mobile masts, was subsequently awarded the contract.

► France 4G auction

In 2011, the French regulator, ARCEP, auctioned 4G spectrum in two phases: first the 2.6GHz

spectrum was auctioned raising EUR936 million, followed by the 800MHz spectrum raising

EUR2.639 billion. The total funding raised surpassed the EUR2.5 billion targeted by ARCEP.

While all four operators that bid were awarded spectrum in the 2.6GHz band, only three of the four

operators were awarded spectrum in the 800MHz band. There were four spectrum lots available:

two 2×10MHz and two 2×5MHz. Bouygues Telecom and Orange France each won 2×10MHz lots,

while SFR won both the 2×5MHz lots.

The operators that were awarded 800MHz licences agreed to meet a number of obligations

assigned to the spectrum allocation:

The winning operators all agreed to host MVNOs, under the full MVNO model, on a

nationwide basis on their 800MHz networks. The MVNO terms are not stipulated under the

licence conditions.

SFR, despite paying the most for its spectrum, was obliged to offer MVNO access to its

network in priority rural areas. Free Mobile, the entrant that was not awarded spectrum in the

800MHz band, was guaranteed access to SFR’s network in rural areas provided its own

2.6GHz network had achieved 25% population coverage.

Using 800MHz spectrum, licensed operators must provide high speed (theoretical speeds of up

to 60Mbit/s where the operator has 2×10MHz) coverage of 99.6% of metropolitan population

within 15 years and 90% of population in priority zones (hard-to-reach areas defined by the

regulator) within 10 years of the licence being granted.

Coverage obligations carry their own implications for policymakers and regulators. In the first

place, coverage obligations must be policed (we note that some stakeholders have expressed

scepticism about the accuracy of SA mobile operators’ coverage claims) and standard definitions

must be established for quality of coverage. Secondly, credible penalties must be attached to

failure to meet coverage targets. Thirdly, careful consideration must be given to how coverage

targets are imposed; for example, whether the obligation should be imposed on one operator or all

of them, or whether different operators’ obligations refer to overlapping or disjoint geographic


Ref: 2001462-405c

areas. In addition, policymakers should be aware of the opportunity cost of the obligation (the

spectrum revenue foregone as a result of attaching a burden to the spectrum) and weigh that

against other options for achieving the desired coverage.

Finally, it is noted that although the coverage obligation might be attached to one specific band

(such as the 800MHz band), if MNOs have multiple bands available for 4G use, regulators will

typically allow them to meet the coverage obligation using any available band, providing it meets

the targeted population/geographical reach and the specified downlink/uplink speed, if relevant.

Use it or lose it spectrum conditions

A more generic coverage obligation that can also be included in MNO licences is one that is

designed to encourage operators to roll out services within a given band within a given timescale –

often referred to as a ‘use it or lose it’ clause.

These are typically included in spectrum licences purely for spectrum efficiency reasons (i.e. to

ensure that an operator makes some investment in providing services using the licensed spectrum,

as well as to give regulators a lever to revoke any licences for bands that are not being used

efficiently).

Given that the incentive in this case is usually to ensure that a minimum amount of network

investment is made (i.e. a use it or lose it clause does not usually prescribe particular areas of

geography that the network should cover, or target speeds for services), this sort of licence

condition is unlikely to address issues of coverage, or affordability, from wireless broadband

services. Hence, a specific coverage objective such as the types used in Europe as indicated in the

previous section would be needed if particular coverage (or affordability) issues are to be

addressed. In a liberalised spectrum management regime, however, this condition could be used to

encourage leasing or sharing of spectrum in rural areas. In the case of South Africa, operators

awarded 2.6GHz who target urban users could be encouraged to share the spectrum with wireless

ISPs in rural areas who today rely on licence exempt Wi-Fi spectrum.

Market entry/spectrum set-asides

Noting that the government has identified affordability, as well as coverage of services, as being a

concern, the government and ICASA could consider specific measures within the planned 4G/IMT

spectrum licensing to encourage market entry, as means of increasing competition in the mobile

market. It is assumed that measures aimed at increasing competition within the mobile market

would have a beneficial impact on retail prices of mobile broadband services assuming that the

market is functioning correctly. However, this assumes that it would be commercially viable for a

new player to enter the South African market (which is by no means certain, given the poor

performance of Telkom Mobile – and even targeted rural deployments in South Africa, by the

Underserviced Area Licensees, have failed in the past)..

In particular, the entry of a new national infrastructure-based mobile operator in South Africa

carries with it a range of costs which are quite clear and certain, and benefits which are uncertain


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and potentially relatively far into the future. There would also be substantial spectrum implications

not just in terms of the current planned award of 700/800MHz and 2.6GHz spectrum, but also on

possible needs to re-distribute existing 2G/3G spectrum due to the requirement of a new entrant to

have a cross-section of suitable mobile spectrum and possibly wireless broadband spectrum.

However, access to spectrum such as in existing 2G and 3G bands would only be available when

current spectrum rights expire.

Particular interventions that the government and ICASA may need to consider to ensure a new

entrant were to emerge from the IMT/4G licensing process might include:

Enabling access to low-frequency spectrum (below 1GHz): this could be done through the

imposition of wholesale access obligations on one or more existing MNO licensees of

900MHz and/or 700/800MHz spectrum.

Ensuring a new entrant can get access to scarce radio sites: this could be done in conjunction

with a broader review to ensure that no barriers exist to limit scope for existing MNOs to enter

into network sharing arrangements (see next section).

Reviewing the costs of wholesale backbone transmission links to ensure that these are cost-

based or subsidised where necessary for policy reasons.

Offering national roaming to new entrants: this can be implemented through obligations on

established operators as part of the spectrum rights renewal process, in order to enable the new

entrant to get national roaming for a limited period of time in less dense areas.

However, given the uncertainty regarding the costs and benefits of a new market entrant, as noted

above, it would appear risky for the government to seek to influence ICASA to award a licence to

a new operator, or to set aside specific spectrum for this purpose. Notwithstanding this, it may be

beneficial for ICASA to actively engage in a process that may, if demand exists, enable entry of a

new operator, but without specifying that this must be an outcome. Where competition is identified

as a particular concern, regulators can also opt to design spectrum award processes in various

novel ways in order to ensure that a minimum number of competing networks exist. In the UK for

example, Ofcom specified that the award of 800MHz and 2.6GHz licences should result in four

national wholesale providers acquiring suitable spectrum portfolios (the same number as existed in

the market prior to the 4G award). Since 2G/3G spectrum is unevenly distributed in the UK

however, Ofcom further specified that the 4G award should ensure that each of the four operators

acquired a minimum portfolio of spectrum, which included their existing 2G/3G assignments. This

meant that the fourth MNO in the UK market (H3G) needed to acquire more spectrum in the 4G

award than the other three operators in order for Ofcom to determine that the outcome of the award

was suitable from a competition perspective.

RAN sharing

Over the past two decades, and largely since 2G/GSM networks were introduced around the world,

the mobile market has grown dramatically. In most markets, this success has been underpinned by


Ref: 2001462-405c

regulatory policy (in the form of spectrum licensing) aimed at ensuring that multiple competing

infrastructures (or radio access networks – RAN) are built out. This has been seen as a key factor

in market competition, since coverage has been a differentiator for MNOs and hence the incentive

to deploy networks – promoted by the competitive pressures of there being multiple infrastructures

being built – has delivered significant benefits for users in many markets. The notable exception to

this is for users in rural areas or in countries where affordability issues mean that multiple

infrastructures are not feasible. However, where multiple RANs are deployed, MNOs can

differentiate themselves both in terms of coverage and through network quality, by designing their

RANs with different engineering approaches to achieve specific quality objectives.

However, with 2G (and 3G) networks now being considered as mature in many markets, coverage

is less important for established MNOs as a differentiator, although there are still clear differences

between MNOs’ 3G coverage today and there will no doubt be differences in 4G coverage as well.

In general, site sharing has traditionally been viewed as a possible compromise on radio

engineering design of RANs, which is why MNOs have been reluctant to share sites in the past,

unless specifically required to in order to cover certain areas (e.g. national parks or other protected

areas).

However, now that the mobile market is at a point where total retail revenue is in decline, and

where coverage is less of a concern as a differentiator, opinions have shifted on site sharing and

this is becoming an increasingly popular form of cost reduction within MNOs’ networks, both to

reduce the capital costs of new site builds and to share the operational costs of sites already

deployed.

Globally, infrastructure- and network-sharing initiatives are therefore gaining momentum as a way

to reduce costs, in the wake of the rapid increase in mobile data demand and the investment

required to support it.

RAN sharing can take various forms. Sharing of radios on new sites is often easier to justify and to

implement for MNOs, whereas the consolidation and rationalisation of existing sites – a process

which requires decommissioning or re-locating existing sites – is complex from financial,

engineering and implementation perspectives. Furthermore, the decision on whether to proceed

with site sharing can be influenced by the fact that one MNO may benefit more than the other(s),

giving rise to complex commercial issues, as well as having regulatory and competition

implications.

Given the pressures on MNOs to reduce costs and halt the decline in revenue, it is likely that more

site sharing will be seen around the world in future. Sharing might not stop at site either in future –

there is increasing interest in sharing more deeply into the RAN, which might include, for

example, sharing of the complete RAN infrastructure and resources, including spectrum and

backhaul.

Although the most cost-effective RAN-sharing scenario might be where there is only a single

infrastructure that all operators use, most markets are far from achieving this, given the historical

developments in implementing multiple national infrastructures. Careful regulation in terms of


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wholesale access, price setting and other consumer-protection measures would also be required to

achieve this. However, although migration towards a single infrastructure is not envisaged in many

markets currently, there are an increasing number of instances where sharing and consolidation of

networks is taking place between two or more network both in urban and in rural areas. This can

be beneficial both to MNOs and to consumers, through better availability of mobile services,

including availability in areas that might otherwise have been unviable for an MNO to cover on its

own, but becomes viable if costs are shared with one or more operators. Earlier availability of new

services could be a further possible benefit. However, the realisation of benefits from

infrastructure sharing depends heavily on the type of sharing and the existing market conditions.

For example, infrastructure sharing may result in MNOs being able to offer greater capacity in

congested urban areas where space for sites and towers is limited, but greater benefits in the form

of more widespread coverage are more likely to occur in less developed areas. In these areas,

sharing may expand coverage into previously unserved areas. However, infrastructure sharing may

be less likely to occur in markets where coverage still exists as a service differentiator, as MNOs

would no longer be able to compete on coverage.

Infrastructure sharing may bring about further benefits through encouraging competition, for

example by reducing barriers to entry for smaller firms, increasing incentives for service

innovation and promoting efficiency. However, these gains should be weighed against possible

negative effects on competition. The need to share sensitive information could lead to tacit price

collusion between firms. Sharing firms may also no longer be able to compete on key dimensions

such as coverage or service quality. The sharing of networks by operators may reduce incentives to

invest in further network deployment in the long term. The extent to which these negative

competition effects can occur will depend on the type of network-sharing arrangements and the

underlying market and regulatory conditions. In order to promote RAN sharing as a means of

improving the availability of mobile broadband services in unserved areas therefore, the

government and ICASA would need to have a full understanding of potential benefits and costs in

order to determine what regulatory conditions might be necessary to ensure positive benefits arise.

In the absence of mandated RAN sharing, however, it is likely to be beneficial that MNOs are able

to commercially agree to share sites if in their interests to do so – and indeed, many thousands of

sites are already shared between mobile operators in South Africa today. The South African

government and ICASA could therefore review its infrastructure-sharing policy in consultation

with industry parties to ensure that there are no bottlenecks in this regard (e.g. high cost of access

to roof-top sites, limitations on what forms of network sharing are permitted or anti-competitive

denial of sharing).

National roaming

Roaming is a familiar concept within mobile networks, in the context of international roaming i.e.

the ability for a user to roam onto networks whilst abroad and receive the same range of voice and

data services available from their home network (subject to availability of those services with the


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roamed network). This international roaming relies on a series of commercial agreements between

mobile operators in different countries upon which roamed call transfer and termination are based.

National roaming represents a similar concept to international roaming, except that the roaming

concerns networks operating in the same geographical area. Because not all mobile networks will

provide coverage to the same degree in each area of the country (unless RAN sharing is

implemented across all networks, as noted above), there may be perceived benefits associated with

implementing national roaming as a means of extending coverage across all networks and enabling

consumers to have a choice of network providers, even in rural areas. It might enable users to roam

onto other networks when in coverage ‘not-spots’, for example. However, since all mobile

networks typically provide overlapping coverage to a large degree, and because coverage not-spots

can often be very small, there is potentially a range of technical issues to be resolved in order to

avoid various problematic issues that might occur due, for instance, to unwanted roaming (e.g.

when a user is at the edge of home network coverage but roams on to another network because that

network displays better coverage). Commercial issues also arise, notably the fact that roamed

services are often in higher-cost areas, so the average cost of national roaming tends to be higher

than the average cost across all geographies covered by a single operator.

These issues require consideration of possible modifications necessary to existing mobile

infrastructure, as well as the roaming capability of devices, since certain features may be required

in order to ensure the smooth operation of national roaming. A range of other possible issues arise,

such as the need to modify MNO billing systems to manage roaming traffic, the consequences of

unintended roaming in terms of pricing and an increase in interference within networks. As a

result, national roaming between established MNOs is not widely used although it can be used as a

mechanism to help a new market entrant to establish itself in a mature mobile market (e.g. national

roaming might enable a new 3G or 4G entrant to roll out infrastructure in a phased way, whilst

offering customers the ability to roam onto an established 2G/3G network to provide nationwide

coverage until full network roll-out is achieved).

National roaming has been enforced as a licence condition in a number of auctions. Some

examples are:

Colombia – CFC, the Colombian regulator, held an auction for 4G spectrum in the 2100MHz

and 2600MHz bands. Three existing operators, Claro, Movistar and Tigo, and new entrant

Avantel, each got spectrum in these bands. As part of the conditions of the spectrum award,

each of the existing operators was mandated to provide national roaming access to Avantel on

their respective 4G networks. Initially, the three operators were reluctant to open their

networks to Avantel, but they eventually gave in to legal pressure summoned by Avantel.

Czech Republic – In November 2013, the CTU concluded an auction for 4G spectrum in the

800MHz, 1800MHz and 2600MHz bands. Some of the licence conditions included the

obligation on existing 2G network operators to offer national roaming access to their networks

to any new entrants for five years; that some spectrum in the 800MHz and 1800MHz band

would be reserved for a new entrant; and that licensee would be restricted from merging with

other participants for 15 years. Despite conditions that favour new entrants, none of the


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potential entrants that had previously expressed interest submitted bids for any spectrum. In

particular, one operator opted out because of the restriction from merging with other

participants.

We understand that in some countries (e.g. Tanzania) operators have agreed to cover disjoint

areas and offer each other reciprocal national roaming, and similar arrangements have

emerged in Brazil where spectrum is awarded regionally.

Government subsidy for network roll-out in the most under-served areas

As a final resort, if market-led approaches to achieving better coverage are not successful, some

governments have implemented specific interventions to fund mobile network roll-out in the most

under-served areas. These intervention models take a similar form to the interventions already

described in this report and in previous reports of this study in relation to government funding of

broadband services.

An interesting case is in the UK, described in Section 3.5. In the UK, the government has set aside

funding for next-generation broadband provision in remote areas, which UK local authorities are

responsible for distributing, mainly through procurement of a network to provide rural broadband

services. Separately, the UK government identified that particular parts of the UK had no mobile

coverage from existing networks, and were unlikely to gain coverage through market forces alone.

The UK government therefore set aside funds to procure a company to install mobile sites and the

associated facilities needed to operate sites (e.g. electricity, towers and backhaul) in targeted not-

spots. This infrastructure is being made available on a wholesale basis to existing MNOs to install

their own RAN equipment.

6.2 Measures aimed at improving affordability/quality of services and competition

Mandating network access for mobile virtual network operators (MVNOs)

An MVNO is a wholesale arrangement in the mobile market that involves a wireless

communications service provider serving its customers over the network infrastructure and service

platform of an MNO. A key feature of an MVNO is that it does not necessarily have a spectrum

assignment of its own. MVNOs typically compete with MNOs by offering differentiating services,

addressing specific segment needs and/or leveraging their distribution or other business

capabilities.

There are four basic commercial models, although variations exist with slightly different splits of

platform ownership between the host operator and the MVNO (see Figure 6.1 below). Notably, in

heavier models, the MVNO invests in its own service platforms and elements of the core network.


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Figure 6.1: Four basic commercial models for MVNOs [Source: Analysys Mason, 2014]

The four basic commercial models that MVNOs can adopt are:

Branded reseller – this involves a situation where the MVNO is effectively reselling the

MNO’s service under a separate brand. Branded reseller MVNOs have limited control over the

whole MVNO operations – typically only handle customer relations, and would require very

little investment in systems.

Light MVNO – in this case, the MVNO has control over the customer-facing systems. The

required investment from the MVNO is low in this case but there is limited room for

innovation on the MVNOs part.

Medium MVNO – this option involves the MVNO owning some of the network equipment.

This presents slightly more freedom for the MVNO, but also requires a higher level of

investment.

Full MVNO – in this case the MVNO invests in its own core equipment but still uses the

access network of the host MNO. This scenario allows the MVNO the greatest freedom to

innovate and differentiate its proposition.

Asset-heavy MVNOs can in principle achieve higher gross margins and therefore target more

valuable segments that require higher subscriber acquisition costs but also represent a higher share

of market revenue. Some MVNOs originally operating on a light model have adopted a heavier

model following initial success with limited offerings, allowing them to compete more broadly

with the MNOs in their market, creating a bigger impact on the wider competitive landscape.

There are also a variety of models around which the engagement between MNOs and MVNOs can

be structured. The four core models are:

Tied MVNO – in this case, the MVNO is owned by the MNO. Thus its value proposition is

greatly influenced by the MNO.

Joint venture – this involves a situation of shared equity between the host MNO and another

entity. This option offers limited flexibility as the host MNO maintains a vested interest in the

MVNO.

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Passive equity – this involves the MNO investing in the MVNO as a silent partner. The level

of influence the host MNO will have depends on the level of its investment towards capex.

Third-party contract – this is where the MVNO and host MNO enter into an arm’s length

contract. This gives the MVNO more freedom in its strategy. However, its ability to carry out

any initiatives is constrained by the provisions of the contract.

The impact of MVNOs in other markets around the world demonstrates that MVNOs stimulate

competition at a service level, both in terms of pricing as well as in terms of service innovation,

thereby offering benefits to subscribers. Many of the MVNOs that have entered mobile markets

have focused on offering lower prices, which forced MNOs to lower their prices in markets where

MVNOs have been successful, as demonstrated in Figure 6.2 below. This benefits consumers as

they pay less for the same service, but in many situations the MVNO’s particular business

capabilities (such as deeper customer insight or easier help facilities) also lead to greater use of

services by subscribers.

Figure 6.2: Evolution of

international direct dial

(IDD) rates following

the entry of low-cost

MVNOs Lyca and

Lebara in the UK

[Source: Analysys

Mason, 2014]

The host MNO also stands to gain from offering access to MVNOs. Firstly, MVNO access allows

the host to monetise any extra capacity that it may have on its network by selling wholesale

services to MVNOs. Further, MVNOs may help smaller MNOs improve their position in the

market by further fragmenting the market. MNOs can use MVNOs to improve their competitive

position in the market, especially when they adopt the tied MVNO or joint venture models. An

additional player in the market is likely to fragment the market further by drawing customers away

from existing players. Using its influence over the MVNO, the MNO may target its competitors’

customers without compromising its current value proposition.

In the South African context, MVNOs may have little impact on the objectives of SA Connect.

While they may improve service competition in areas currently receiving access, MVNOs will

have very little impact on extending coverage. Mandating MVNO access will not improve

coverage in areas that do not receive services currently but may have some impact on adoption of


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services by certain segments that currently have coverage but for various reasons do not use the

services (e.g. older people, less educated people, different language groups). .

With sufficient regulatory oversight, mandating MVNO access in areas with limited service

provision (perhaps receiving services from one operator) may increase the level of service

competition in that area thus offering users variety. Considering that such areas usually have

limited commercial appeal, however, the potential host MNOs are not likely to be open to offering

MVNO access as this may further reduce the revenue they receive in this area. Ultimately, MNOs

may be dis-incentivised from rolling out networks in areas with limited service provision if

MVNO access is mandated.

New market entry

It is noted that the entry of a new mobile operator may create more competition on quality of

service (QoS), as well as incentivising roll-out/coverage, although as discussed above the costs and

benefits of this approach are finely balanced.

Spectrum trading

Although spectrum has traditionally been assigned administratively in many markets (i.e. where

the regulator assigns specific bands for specific purposes to an individual operator for its exclusive

use, with fees based on the cost of administering the licence), regulators are increasingly adopting

market-based mechanisms for spectrum assignment. This includes spectrum pricing, where the fee

charged for spectrum access is linked to the market value of the spectrum rather than the cost to

the regulator of issuing the spectrum, and spectrum trading, which is often implemented alongside

spectrum pricing. Spectrum trading is used as a means of allowing re-distribution of spectrum

between market players to achieve an optimum balance without regulatory intervention. It could

also be viewed as a way of increasing infrastructure competition if it is commercially feasible that

a new player could emerge, or a weak player could strengthen its position, by acquiring spectrum.

Many regulators have made 4G spectrum licences tradable – within Europe for example, many 4G

licences are tradable. Spectrum trading can enable operators to sub-divide particular bands within

the market to meet each operator’s needs (for example, it would be theoretically possible for

900MHz spectrum re-alignment such as is required in South Africa to enable the 900MHz band to

be used for 4G to be achieved through spectrum trading). However, in practice, spectrum trading

needs to be carefully overseen by the national regulator to ensure that un-competitive outcomes do

not result (e.g. a dominant MNO acquiring a majority share of spectrum, which would reduce

infrastructure competition). Therefore, enabling spectrum trading on its own is unlikely to meet the

government’s broadband objectives although there could be other beneficial outcomes (such as

leasing of 2.6GHz spectrum to wireless ISPs in rural areas) of allowing MNOs to trade 4G

spectrum assuming that this is overseen by ICASA.


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Band managers

Although the majority of licence spectrum is assigned to individual operators that use the spectrum

for their own infrastructure, the concept of a band manager has emerged in some markets whereby

a company will have management rights over a block of spectrum and will sub-divide this in some

way between multiple users. This concept is therefore similar to an open-access wireless network

operator whereby multiple service providers use the wholesale infrastructure to provide retail

services to customers. This is similar in form to ICASA’s ‘Managed Spectrum Park’ proposal

except that a band manager will typically coordinate frequency assignments on behalf of users,

whereas in a Managed Spectrum Park, multiple un-coordinated users might access the same

spectrum concurrently.

The band management approach has gained recognition in some markets and is fully described

within the ITU spectrum management toolkit, for example.50

It is assumed that if functioning

correctly a band manager can increase the efficiency of spectrum use by pooling spectrum

amongst multiple users. However, possible disadvantages of a band management approach include

the cost of spectrum access for retailers (e.g. the band manager might charge a premium for access

to spectrum, which might then result in service providers charging higher prices to customers), and

delays in availability (if the band manager chooses to hoard spectrum or delays assignment to

individual service providers). Careful regulation is therefore required to avoid these problems. For

these reasons, emergence of fully commercial band managers is relatively limited around the

world to date (New Zealand is often regarded as being a market where multiple band managers

exist although in practice this is for particular types of wireless service only and not for public

mobile/wireless broadband spectrum). Band management also exists to some extent in the UK

market where a band manager acquired a nationwide licence for 28GHz spectrum in order to re-

sell capacity to individual fixed link providers.

It is noted that band management might become more relevant in future mobile markets, as

wireless technologies become more agile. The concept has emerged within some markets where

TVWS use is being authorised – in the UK and the USA for example where the regulator is

permitting multiple commercial companies to provide geo-location database services to manage

TVWS access.

50

See http://www.ictregulationtoolkit.org.


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7 Future trends and 5G

In this section we briefly consider how mobile technology and business models might evolve in

the future, in the context of 5G, and how this might influence mobile networks and the mobile

market structure, noting that this may be relevant in the context of achieving the 2030 broadband

objectives that the government has proposed.

By 2030 it is likely that the wireless market will have evolved considerably from the current 4G

technologies. In particular, there is already research underway into what the next generation of

wireless network might be, referred to as 5G, which might require new technologies to be

deployed, requiring different spectrum.

In recent months, immense interest and lobbying from a wide range of stakeholders has already

emerged in relation to the future development of fifth generation (5G) mobile, and the associated

issues including technology standardisation, future availability and award of spectrum. This is

occurring even though, in many countries around the world, 4G networks are just being rolled out,

and in some, 4G spectrum has not been awarded.

One reason for this is that many studies conducted in recent years have highlighted the economic

impact of decisions made by national governments about the award of future mobile spectrum, as a

result of the significant socio-economic impact of mobile communications. This is particularly in

regards to the role that mobile communications plays in creating economic growth and new

employment, as well as the role of mobile networks in achieving objectives such as those defined

by the government’s broadband development agenda in South Africa. Another key driver is in

terms of ensuring that 5G spectrum issues can be addressed within the fixed cycle of WRCs held

by the ITU. Noting that the WRC in 2015 will discuss spectrum matters relating to 4G (including

the 700MHz band), it is expected that the following WRC (in 2018/2019) will discuss 5G

spectrum.

Early planning for 5G is important to ensure that countries move forward in a harmonised way,

thereby maximising the economic impact of 5G networks when these are launched. It is expected

that this planning for 5G will continue alongside further standardisation and deployment of 4G,

with the likelihood that 5G networks will emerge sometime after 2020, as indicated below.51

51

Although 2020 and beyond is the mainstream target for 5G, some countries are likely to deploy 5G sooner than this

– for example, it is expected that some form of 5G network will be created as a showcase at the 2018 Winter Olympics in South Korea.


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Figure 7.1: 5G timeline [Source: Analysys Mason, 2014]

Much of the early debate on what 5G will be is focused upon the technology aspects. Requirements

for 5G are targets at present – for example, that systems should provide:52

higher capacity (compared to existing IMT systems): e.g.1000×capacity/km2

higher data rates (e.g. 100×typical data rate of LTE)

reduced latency (less than 1ms for the radio access network)

support for massive device connectivity (e.g. 10×connected devices)

energy saving and cost reduction.

In due course, the current global research on 5G technology options will move into a broader

debate on business models and monetisation of 5G, and how current 4G business models will

evolve into 5G, taking account of shifts that are already becoming apparent in the mobile market in

relation to business models, revenue and capital spending models.

In terms of the business models, it is noted that changes are already emerging to the structure of

the mobile market in many countries around the world, with a greater focus on radio access

network (RAN) sharing and business consolidation, potentially involving the sharing of many

MNO assets, including radio spectrum. New pricing models are emerging and mobile operators are

increasingly looking at innovative ways of re-dressing the revenue squeeze that has occurred as a

result of market, and regulatory, shifts in recent years.

The significant increase in mobile data traffic in recent years, which is forecast to continue well

into the next decade, is one of the key drivers for current changes within the structure of the

mobile market. This is partly as a result of networks evolving to use the IP-based architecture that

4G standards are based on, which provides the potential for cost savings, better flexibility and greater

scalability in network infrastructure compared to use of circuit-switched networks. This provides

potential for MNOs to provide mobile data and other mobile broadband services at lower prices that

were possible from 3G networks and/or to improve profitability from the carriage of such services.

However, market shifts are also due to changes in consumer behaviour and preferences and moves

52

Based upon requirements being discussed within the ITU-R and 3GPP.

LTE introduction

((3GPP Release 8)

2008 20102009 2011 2012 20142013 2015-2020 Beyond 2020

First LTE-A standard

(3GPP Release 10)

3GPP

Release 12

Global projects

Underway for 5G vision

ITU Report on

future technology

trends

ITU WRC-15

ITU

Report on

IMT Vision

3GPP study for 5G

(Release 14 onwards)

Spectrum

harmonization

Technology

consensus

WRC-18

Spectrum

licensing

Network

implementations


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towards ‘always connected’ societies placing increasing pressure on mobile networks to be

ubiquitously available. The cost of providing ubiquitous mobile coverage still presents challenges

within the 4G business model, however, and this is driving structural changes at present. Network

consolidation, for example, has taken place in various European markets recently with cases in

Germany and Ireland in particular raising serious market implications in terms of competition and

concentration of spectrum.

These structural changes are expected to continue within the mobile market as the industry moves

forward to 5G.

In the context of the South African broadband objectives, it is noted that one of the motivations for

5G is to provide the ubiquitous broadband. This recognises that, even with 4G technology advances

and the assignment of further spectrum, it seems unlikely that 4G networks will offer a serious

challenge to fixed broadband networks (e.g. fibre), either in terms of data speeds, or capacity,

although they will complement fixed services in areas unserved by fibre broadband. Hence, the

emergence of 5G is expected to be the central element in achieving this ubiquitous coverage.

What this means in terms of market structure is yet to emerge, although a number of issues are

relevant:

Different possible 5G architectures are emerging, which are affecting the value chain for

mobile services – for example, the use of very small cells connected via a virtualised core

network presents structural, interworking and operational challenges for MNOs based on the

present mobile value chain. In particular, it seems unlikely that multiple operators will invest

in overlapping small cells and so the mobile market might naturally evolve towards a

wholesale-based approach to delivering small cells where fewer infrastructure providers offer

capacity to all service providers in a market

The spectrum needed for 5G might encompass a range of existing and new bands, which could

potentially span a wide section of radio spectrum. Different bands will serve different purposes

and a key aspect of 5G will be to integrate the various approaches and bands. Early indications

are that spectrum sharing is likely to be used in a far greater way in future than at present,

which may signal an end to further spectrum being reserved for ‘exclusive’ mobile broadband

use in future, as 5G is introduced. This is particularly in view of the wide bandwidths that

might be needed for 5G data carriage (e.g. 100MHz or more per network), suggesting that

current models of spectrum packaging where spectrum is assigned in 2×5MHz or 2×10MHz

blocks, will become unworkable. This would suggest further moves towards wholesale

wireless networks (with MNOs as service providers on those networks), although this is yet to

be confirmed.

One of the key use cases for 5G that might affect mobile industry structure in particular is the

shift towards business models that are ‘Internet of Things’ (IoT) rather than mobile subscriber-

oriented. This could create structural changes in view of the difference in network loading that

IoT creates compared to current mobile data use cases (for example, in the sense that the IoT

will create high volumes of low bandwidth data links). This potentially requires a different


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approach from network operators in terms of network design and service definition in order to

monetise on IoT opportunities. This could also point towards a wholesale network with

multiple operators providing services on that network since it is unlikely that there will be the

market appetite, or demand, for multiple competing network infrastructures providing IoT

connections, given the number of interconnections that would be required.