Why Minister Siyabonga Cwele is suing Icasa

Johannesburg - Telecommunications and Postal Services Minister Siyabonga Cwele in court papers has lashed out at a local regulator over its plan to sell spectrum.

Cwele’s office, in a founding affidavit, has asked the North Gauteng High Court to interdict and set aside the Independent Communications Authority of South Africa’s (Icasa’s) spectrum auction.

Icasa last month invited applicants to apply for 700MHz, 800MHz and 2.6GHz spectrum licences, which will boost the rollout of faster LTE broadband.

The auction for the licences is expected to occur in January 2017 and the reserve price to bid on lots of spectrum will be R3bn.

But Cwele is fighting the auction and his office has outlined reasons why he thinks Icasa’s spectrum auction move is “irrational”, according to the affidavit seen by Fin24.

“The decision of Icasa, the publication of the ITA (Invitation to Apply) and the licensing process initiated by it are irrational because they have been made prematurely and precipitously without the existence of the requisite regulatory steps that must precede them,” said director-general for the telecoms and postal services department, Sipho Mjwara, in the founding affidavit.

Mjwara went on to explain that government’s policy matters regarding spectrum have not yet been finalised, which is a necessary requirement for the auction.

“It [Icasa] is bound to have regard to that policy direction before it could lawfully commence with the requisite licensing process,” said Mjwara.

“It has failed to do so without any rational basis,” he added.

Cwele’s office in the affidavit has also asked why Icasa has moved to auction off spectrum, even though South Africa’s digital migration process is not yet complete.

This migration process involves moving the SABC’s analogue broadcasts to digital signals and it will open up frequencies to mobile networks for faster LTE broadband services.

Currently, networks such as Vodacom refarm spectrum because of a lack of available frequencies.

Set-top box distribution

But South Africa’s digital migration process is facing delays with government having only started distributing set-top boxes late last year. These boxes convert digital broadcast signals for analogue television sets.

“The digital migration of the broadcasting services from the 700 MHz and 800 MHz frequency bands in order to make them available for mobile broadband wireless services has not yet been authorised and determined by the Minister,” notes the affidavit.

“Icasa has therefore sought to award licences in respect of these frequency bands when they are not yet available for allocation to the mobile broadband wireless services,” Icasa said.

Cwele’s office has further questioned the costs of the spectrum auction as applicants have to provide bank guarantees of R100m while the reserve price for respective frequency lots is R3bn.

“The above financial requirements are extremely onerous,” reads the affidavit.

“Few licensees would have financial resources or access thereto in order to comply with them within the prescribed time periods.  

“They have the effect of favouring a few rich and powerful to the prejudice of the rest of the role players who are entitled to utilise spectrum.  

“They also have the effect of negating the balanced approach to spectrum access and open access prescribed as national policy objectives,” reads the affidavit.

Cwele’s office subsequently wants the court to treat the application as a “matter of urgency”.

Late last month, Icasa said in a statement that it had “followed the law as it currently applies in publishing the ITA (Invitation to Apply)”.

Criticism of Cwele

Cwele’s move to sue Icasa has sparked criticism from the likes of analysts and politicians.

Arthur Goldstuck, managing director of local technology research firm World Wide Worx, told Fin24 last month that both the government and Icasa are at fault.

“In this case, both parties appear to be in the wrong. Icasa is required to await policy direction from the Minister,” Goldstuck told Fin24.

“If procedures haven't been followed, then they have to go back to the drawing board. While this could reflect poorly on Icasa, it is time we recognised the fact that the entire structure of telecoms policy in South Africa is dysfunctional.

“However, when no such direction is forthcoming, in an area that has been neglected for many years, it is not surprising to see the regulator wanting to do something,” Goldstuck said.

Meanwhile, the DA’s Marian Shinn, Shadow Minister of Telecommunications and Postal Services, last month wrote to Cwele to ask him to halt his legal action.

“The matter of how to allocate wireless broadband spectrum that is critical to the expansion of South Africa’s knowledge-based service delivery and economic growth, has been subjected to a decade of politically inspired delays within the governing ANC as it dithered on how it could control the potentially lucrative spectrum,” said Shinn.

“Icasa’s bold step to issue the invitation to prospective bidders came after ten years of dithering on the spectrum policy by successive ANC communications ministers over how it was best to allocate the high-demand spectrum to ‘new’ entrants to the telecommunications sector,” Shinn added.

Before Cwele launched his legal action, Vodacom in a statement welcomed Icasa’s spectrum auction.

But Cell C last month questioned Icasa’s auction as the company asked whether the regulator had government support.

Cell C also questioned the R3bn reserve price for the frequency lots.

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