Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum Auction – 22 October 2020

Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
1
Empowerment
The ITA seeks to promote brad-based
black economic empowerment in
addition to what is prescribed in
Regulation 7 of the Radio Frequency
Regulations of 2015, as amended.
We understand, regulation 7 to set
the minimum requirements to qualify
for spectrum as follows:
– Equity to be held by 30% HDI
groupings; or
– A Level 4 ownership in respect
of the B-BBBEE ICT Sector Code
We therefore seek clarity in respect of
whether the Authority requires a
licensee to
a) hold both 30% HDI equity in its
licence and at a minimum
hold a Level 4 contributor
status in accordance with the
B-BBEE ICT Sector Code or
b) either 30% HDI or be a Level 4
contributor?
c) What is the consequence of
bidder not having 30% HDI in their
licence in relation to participating in
the auction?
Consequently, is a licensee who
holds less than 30% HDI equity
disqualified from participation in the
auction?
Definition of Historically
Disadvantaged Individuals (HDIs)
The terms HDI is commonly used in
the legislation and regulations but
has not clearly been defined. The
only definition appears to reside in
the proposed Ownership and Control
Regulations HDI regulation process.
We therefore seek clarification on the
definition of HDI that will apply in the
ITAs.
Calculation of HDI The calculation of B-BBEE ownership
and compliance with the
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
2
calculations in the B-BBEE ICT Sector
Code. However, the methodology
of the calculation of HDI is unclear as
is the required proof of calculation.
We, therefore, require clarity on the
following:
– Definition of HDI
– Methodology for the
calculation of HDI equity
including assumptions
– What constitutes proof of HDI
ownership including
documents required?
14.2 requires licensees to reach and
maintain Level 1 contributor status in
terms of the ICT Sector Code for the
duration of the licence, i.e. 20 years.
The SACF in previous submissions had
indicated that the requirements of
the Codes fall outside of the purview
of ICASA and that in 2016 measured
entities were not given a period to
comply when the Codes were
amended, as a result most measured
entities dropped several levels and it
took entities several years to claw
their way back to the former levels.
This was as a result of not being given
a period to comply with the
amended Codes. Implementation
was immediate – upon promulgation.
The new Codes with amended
targets even applied to verification
processes that were already
underway, resulting in verification
being redone against the new
Codes.
Application and compliance with
the Codes was voluntary and the
drop in contributor levels had a
commercial impact on measured
entities, it did not have an impact on
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
3
licence compliance. The inclusion of
a prescribed level of compliance will
now constitute a compliance
obligation. We are aware that the
Codes are being amended at
present, and the consequence on
levels of compliance is as yet
unknown. As a result, we are
unaware of the level of the impact of
the changes on the level of
compliance with the Codes.
We therefore seek clarification from
the Authority in respect of what
measures the Authority has in place
to prevent the potential noncompliance of licensees who may
hold a Level 1 contributor status at
the point of spectrum licensing but
may change as a result of changes
to the Code?
In addition, licensees are given 12
months to attain a Level 1 status.
Changes to the Code may have an
even more grave impact on
licensees who may not already have
achieved a Level 1status at the point
of licensing. We therefore seek
clarification from the Authority in
respect of what measures the
Authority has in place in this
instance?
As we understand the ITA, a licensee
may bid for one or more bands of
spectrum available. As such, what
happens in an instance where a
licensee only secures a licence for
spectrum in the IMT700 or IMT800
bands impacted by the delays in
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
4
digital migration thus receiving a
licence first with a deferred effective
date.
We, therefore, seek clarification from
the Authority in respect of when the
empowerment obligation comes into
effect, is it from the licence date or is
it from the date that the licence
becomes effective, i.e. when the
licensee acquires the spectrum
nationally and may begin rolling out
the spectrum?
Licence Duration
Clause 8 of the ITA for the auction
sets out the licence term for 20 years
from the date of issue. It further
recognizes the delays in digital
migration.
Clarity is sought on:
– when the licence term begins?
– When the licence fees
become payable?
In the SACF’s previous submission to
the Authority on the auction, we had
proposed that the licence begins
once the licensees receive the
spectrum on a national basis. The
payment of licence fees should also
only come into effect at that point.
We therefore propose that once 75%
of the affected spectrum in the
IMT700 and IMT800 bands becomes
available nationally per licence that
should begin the clock for the
licence duration.
As a result of the deferred availability
of IMT700 and IMT800 spectrum, we
seek clarity on the consequent
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
5
deferment of associated
obligations?
As per the ITA, the spectrum licence
is valid for a period of 20 years.
Several licensees who will bid for the
spectrum are currently halfway
through their licence terms. As such
the duration on their current ECNS
licences is significantly shorter than
the duration of the spectrum licence.
This is a factor that informs the
valuation of spectrum in relation to
the bids submitted.
We therefore seek clarity on the
process and terms for the renewal of
ECNS licences.
Obligations
Uplink and throughput obligations
12.1.1 sets out the requirements for
uplink and downlink speeds focusing
on coverage of areas that fall within
batch 3 over a five year period.
9.1 of the ITA indicates that licences
are technology neutral. This in our
understanding ought to mean that
licensees are able to configure all
licensed spectrum in a manner that
achieves obligations prescribed
without a prescription of which
obligation sits on a specified band of
spectrum.
We, therefore, seek clarification on
whether a licensee may use any or a
combination of spectrum assigned to
it to achieve the uplink and downlink
speeds applicable?
Coverage Obligations
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
6
12.2 imposes coverage obligations
on licensees who acquire IMT700 and
IMT800.
We understand the intention of this
obligation to be ensuring coverage
nationally with a specific focus on
under-served communities as set out
in Batch 2 and 3 municipalities.
We seek clarity on whether the
licensee who acquires the IMT700
and IMT800 must rollout services to
these areas themselves or are they
permitted to use the services of other
licensees which may include the
WOAN this strengthening the longterm business case for the WOAN?
However, the principle on which we
seek clarification is whether a
licensee may use any other licensee
to ensure coverage in compliance
with the licence conditions. This is for
example a standard practice with
access to fibre.
We further seek clarity on whether
the rollout obligations must be
achieved using the bands being
licensed through this process or
whether licensees may use any
available combination of licensed
spectrum that promotes the efficient
use of spectrum and complies with
the regulated levels of Quality of
Service (QOS).
Clause 12.2.3 We seek clarity and certainty on
which licensee categories that these
obligations apply and do not apply
to, applicability of the exclusions of
the outside in approach confirmation
that these obligations do not apply to
Batch 3 areas and that there are no
timelines associated with these
obligations.
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
7
Open Access Obligations
Access to sites and masts
Clause 12.3.1 requires Tier 1 licensees
provide a reference offer and
policies applicable to accessing a
mast which will become a licence
condition.
In light of the growing trend of towers
being owned by third parties we seek
a clarification that the open access
obligation as contained in the ITA.
Open access to MVNOs
12.3.2 places an obligation of
successful licensees providing open
access to MVNOs.
The ITA defines an MVNO as a
communications service provider
that does not own its own network
but provides services over the
network.
In the absence of a legislative and
regulatory framework MVNOs, we
seek clarity on what the Authority
envisages is an MVNO.
We therefore seek clarification on
whether the MVNO is a reseller or is
required to have specific network
elements to be viewed as an MVNO,
if so, what are the elements?
The 3GPP standards TS 36.331 and TS
38.331 have some guidance, can the
authority share more on the
considerations of the elements and
number of MVNOs.
12.3.2 compels licensees who
acquire spectrum through the
auction to submit business plans for
MVNOs to demonstrate sustainability
for 3 years.
The ITA does not appear to provide
for a defined number of MVNOs who
are to be beneficiaries of this
obligation.
It could not have been the intention
of the Authority to impose an open-
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
8
ended obligation on successful
licensees.
Our assumption is that the Authority
had conducted a feasibility study
which would inform the number of
MVNOs required in terms of the
obligation. As the obligation includes
ensuring sustainability of the MVNOs,
we seek clarity on what happens
should one of these MVNOs wish to
exit or consolidate as a result of the
commercial imperative to do so. We
would appreciate a clarification on
how the Authority will address the
potential closure of some MVNOs as
a result of the commercial case.
It is unclear how licensees would be
able to submit business plans or
ensure the sustainability of entities
wherein they do not hold equity?
Does the Authority envisage
licensees holding 49% shareholding in
the MVNOs included in this
obligation?
Even in instances where entities have
participated in the enterprise
development programmes of
licensees, licensees have been
unable to guarantee the
sustainability of another entity. How
does the Authority envisage that this
is done?
Therefore, we seek clarification in
respect of the following:
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
9
– What constitutes sustainability
of an MVNO?
– How many MVNOs are
envisaged in this obligation?
– Ownership structure of MVNOs
as envisaged in the obligation,
in order to enable licensees to
contribute to the sustainability
of the MVNO?

Incentives to the WOAN
Clause 12.4.1 of the ITA provides for a
minimum uptake of 30% capacity
from the WOAN for a period of five
years, yet the ITA for the WOAN in
clause 4.4.1 for 7 years.
We therefore seek confirmation on
duration of the obligation for five
years.
Social Obligations
12.5.1 prescribes that licensees are to
zero rate content by PBOs including
gov.za.
During COVID, licensees were
required to zero-rate content to
educational and health facilities
which has generated a staggering
level of traffic. The DCDT developed
regulations to define the type of sites
eligible to have content zero-rated.
All PBOs are not Not-For-Profit
organisations.
We are of the view that this
obligation must be clearly defined
and include a regulatory framework
for eligibility. We are of the view that
a framework should be developed
through a consultative process.
Use it or share principle
12.6 introduces a principle of use it or
share the licensed spectrum. The
framework and application are
critical towards the spectrum
valuations and impact on investment
We understand this to be a new
concept. We, therefore, seek further
clarity in this regard.
– What constitutes unused
spectrum?
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
10
as well as terms for use on a shared
basis.
– Does the Authority envisage
that all licensed spectrum must
be fully used within five years?
How does this take into
consideration the longer term
planning by licensees in
respect of network expansion
and increases in traffic beyond
the five year period?
– In instances where a licensee
may not have fully used
spectrum in a given area
within the five year period and
is obliged to share the
spectrum, what then happens
should the licensee require the
spectrum in year 7?
– Are the other licensees
required to vacate the band
to allow the licensee to use its
licensed spectrum?
Auction
Tiers The ITA introduces a new scheme of
Tier 1 and Tier 2 licensees, which has
not been the subject of a
consultative process.
The ITA prescribes obligations for Tier
1 and Tier 2 operators based on the
formula included in the ITA.
The categorization of licenses in
each Tier is not included in the ITA.
We seek clarification from the
Authority of when the list of Tier 1 and
Tier 2 and sub-national licensees will
be provided.
Qualification
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
11
The Authority seeks to publish level of
HDI equity of successful bidders on
the Authority’s website
As we understand it, the Authority
intends to publish the HDI status of
qualifying bidders on its website, the
SACF is of the view it should also
include the B-BBBEE compliance
levels as we understand it to be a key
qualifying criteria. We do not
understand this to currently be
included.
17.2 introduces a new concept of
opt-in which has not been included
previous consultative documents.
Stakeholders have not had the
opportunity to participate in a
consultative process which included
the opt-in rounds of the auction and
did not have the benefit of having
sight of an explanatory
memorandum that provided
stakeholders insight into the new
concepts included in the auction.
As such we are of the view that
significantly more detail in respect of
the opt-in round is required.
As such we are of the view that
significantly more detail in respect of
the opt-in round is required amongst
others such as which bands are
applicable to the opt-in rounds and
to which Portfolio’s.
We further seek clarity on whether
Tier 2 licensees bid first for spectrum
which is then excluded from the
process of bidding where Tier 1
licensees are included?
We seek clarity on how the opt-in
rounds will work?
Clarification on the WOAN
Questions of Clarification for the ITAs for the licensing of the WOAN and High Demand Spectrum
Auction – 22 October 2020
12
30% Offtake
Clause 12.4.1 of the ITA provides for a
minimum uptake of 30% capacity
from the WOAN for a period of five
years, yet the ITA for the WOAN in
clause 4.4.1 for 7 years.
We therefore seek clarity on whether
the obligation is for five or seven
years.
Ownership in the WOAN
19.1 of the ITA mandates 70% equity
to be held by South Africans and 30%
of the licence is to be held by HDGs
Are current licensees entitled to
participate in the ownership
structures of the WOAN? If so, are
there parameters for this
participation?

CONTACT US

© 2022 – Designed by DocuSynthesis