MTN challenges ICASA’s auction structure for spectrum at Gauteng High Court

MTN is challenging ICASA’s decision to implement an auction structure that creates two categories of mobile operators, namely Tier 1 and Tier 2, and the use of an opt-in auction round in which Tier 1 operators will not be allowed to participate.

MTN welcomes the fact that spectrum is finally being made available for auction and does not want to see the process delayed, however, the company has exhausted every procedural channel open to it to seek clarity on the tiering classifications and the opt-in round structure and is now left with no other option, but to seek relief from the courts. 

The spectrum auction is arguably the most important industry development in the past 15 years, and it does not serve the country to derail this critically required spectrum auction. For this reason, MTN is seeking relief with a very narrow focus, limited only to reviewing (with the objective of) removing the Tier 1 and 2 categorisation and the opt-in round, from the auction process.

On 2 October 2020 ICASA published an International Mobile Telecommunication (IMT) Invitation to Apply (ITA) and Wireless Open Access Network (WOAN) ITA. The IMT ITA had many ambiguities and ICASA gave an opportunity for prospective bidders to ask clarification questions by 22 October 2020. 

ICASA gave its answers on 11 November 2020 on the clarification questions and ICASA published a reasons document on Friday 4 December 2020. However, there remain a significant number of ambiguities and many questions from MTN and others remain unanswered.

MTN’s primary concerns:

One of biggest ambiguities was the Tier 1 and Tier 2 classification which ultimately leads to the exclusion of Tier 1 operators from participating in the opt-in round for portfolios 1 and 2. MTN and Vodacom are the only operators classified as Tier 1 operators. MTN is challenging the definitions that have been used to differentiate a Tier 1 operator from a Tier 2 operator, in that the definitions used to do so are, amongst others, impermissibly vague, arbitrary and unreasonable. 

The second significant concern relates to the spectrum that has been allocated to the opt-in round. The minimum spectrum portfolios 1 and 2 Frequency Spectrum band consist of 1800 MHz, 2100 MHz, 2600 MHz which were identified in the ITA of 2 October 2020. After the clarification questions, ICASA included the highly sought-after 3500 MHz band (that is optimal for 5G usage) in the portfolio 1 and 2 that is available during the opt-in round.

The effect of the tiering approach and the opt-in round:

There is no doubt that 5G is a critical requirement for the Information Technology services of the future and that to remain relevant in the 5G environment, an essential ingredient is the use of spectrum in the 3500MHz band. The categorisation and opt-in structure of the auction have created a very real outcome where MTN would be unable to bid of any of the “anchor band” 3500MHz, due to the bulk of the spectrum having been taken up by the Tier 2 operators in the initial opt-in round.

The opt-in scheme will result in operators that currently hold the least amount of spectrum, namely MTN and Vodacom, being denied access to the 3500MHz anchor band, while operators that already do have spectrum in the anchor band, will have the first option to purchase even more capacity in that much-needed band.

It’s common cause the country’s lack of spectrum has been a significant impediment in the lowering of the cost to communicate in South Africa. The Tier 1 operators (MTN and Vodacom) have faced the lion’s share of criticism and pressure from the public, government and regulators, to lower prices. If MTN is unable to access additional spectrum in the anchor band, its ability to continue to consistently reduce the cost to communicate, is significantly undermined.

South African consumers have waited for more than a decade for the release of additional spectrum and MTN commends the authorities for having made this progress. However, the current auction structure is likely to leave MTN unable to access anchor band spectrum, which is not going bring the kind of economic relief consumers are looking for, along with the economic regeneration the country so urgently requires.

MTN emphasises that it does not want to see the process delayed, however, the company has pursued every procedural avenue available it to resolve the tiering and opt-in round structure and is now left with no other option, than to seek relief from the courts. MTN is addressing this matter to the court on an urgent basis, as it is critical this matter is addressed ahead of the planned spectrum auction, which is currently scheduled for 24 March 2021.

While the spectrum auction is a highly complicated matter, the impact of this auction on ordinary South Africans, cannot be understated. MTN does not want to see the auction delayed but it does believe auction should proceed in a fair, reasonable and rationale manner. To achieve this, MTN holds that the tiering categorisation and opt-in rounds should be removed from the process.

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