#DataMustFall report suggests telcos could be forced to spin off wholesale arms

The South African telecoms regulator, Icasa, should “urgently convene a technical colloquium” whose purpose is to determine how to split up mobile operators retail and wholesale arms in order to facilitate competition and reduce the cost of data.

That’s the view of the Parliamentary Portfolio Committee on Telecommunications and Postal Services, as outlined in its “Cost to Communicate” report.

The report, which was tabled on November 15 and will be considered by parliament when it reconvenes next year, is the result of the two-day hearing on mobile and data costs held in September.

The hearing was convened in part as a response to #DataMustFall protests. The committee heard from diverse industry players including the major networks, CSIR, the Department for Telecommunications and Postal Services (DTPS) and online radio station Touch Central.

READ MORE: #DataMustFall – how cellphone giants are milking you

Several of the participants, including the Internet Service Providers Association (ISPA) and the Wireless Access Providers Association (WAPA), put forward suggestions that driving down the cost of data for customers would be best achieved by facilitating greater “services competition”.

The committee’s response is a strongly worded recommendation to Icasa that it should investigate ways to split up mobile network operators into wholesale and retail arms, which would – in theory – promote greater price transparency and allow smaller virtual operators to compete on price.

Such measures are common in the world of fixed line operators, especially where a national operator has held a historical monopoly on phone lines. Last year Telkom split its infrastructure division off into a separate operating unit, OpenServe.

Over in the UK the incumbent, BT, has just been ordered to finally divest itself completely of its wholesale unit Openreach after more than 15 years of operating it as a separate company.

READ MORE: What happened to my data? Vodacom in Parliament to answer on #DataMustFall


It’s unusual for mobile operators to be forced into splitting themselves in two, however, because it’s harder to argue that they have monopoly power that needs breaking up. Mexico is one of the few countries that has launched a national wholesale mobile network, but its success is yet to be seen .

The committee’s recommendations on this won’t just upset telcos. They put the portfolio committee in an interesting position regarding DTPS’s own National Integrated ICT Policy White Paper.

In that paper, DTPS recommends open access networks and shared infrastructure as a way of reducing the cost of mobile broadband. Many are sceptical about the white paper’s main proposals, however, which seem to suggest that mobile operators should surrender existing spectrum licences to a “Wholesale Open Access Network” and work as one big consortium managing it.

On the face of it, the committee’s recommendation could be read as a more market-friendly way of achieving a similar – but subtly different – result. By promoting wholesale access and encouraging competition in retail services, the hoped-for upshot would be more focused infrastructure spending and less duplication of effort in this respect, providing cost savings that can be passed on to the customer.

This isn’t the only area where the committee may find itself at loggerheads with the DTPS. Throughout the report, repeated calls are made to speed up the process of spectrum allocation and allow Icasa to get on and start licensing more of the radio waves for operators.

“DTPS should urgently allocate high-demand spectrum so Icasa can assign it in the most advantageous way to facilitate widespread and competitive wireless broadband accessibility,” the committee recommends. In September, DTPS minister Siyabonga Cwele successfully blocked Icasa from running an R12-billion licence auction in the High Court.

The committee also rapped DTPS on the knuckles for not bringing accurate information about operator tariffs to the hearing, criticising the department for turning up with incorrect pricing models based on third-party reports and not data provided by the operators. “DTPS should ensure the rigour and validity of the data used to benchmark tariffs of the service providers,” the committee says.

Elsewhere in the report, the committee makes other recommendations which Based on the success of WiFi-only operators such as Zenzeleni Networks and WAPA members, the committee also encourages more work on formalising the process of dynamic spectrum allocation (best known as TV White Spaces). This would give smaller operators access to licensed spectrum for data in areas where the licensee isn’t using it.

Other quirky parts of the report include the suggestion by Touch Central DJs that mobile operators should be paying content producers to service their customers. Ironic, given what happened next.

The full text of the report as tabled is below (it starts on page 5). We’re still poring over some of its details – feel free to share your thoughts in the comments below.

This story originally appeared on htxt.africa and is reproduced using a Creative Commons 4.0 BY NC SA licence.

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