Electronic Communications Act, 2005 (Act No. 36 of 2005)RegulationsRadio Frequency Spectrum Licence Fee Regulations, 2010Reasons Document: Radio Frequency Spectrum Fees Regulations4. Comments on Policy Issues |
A number of presenters raised policy issues underpinning the draft regulations. The following are some of the key policy issues raised:
| a) | Broadcasters have historically not paid for spectrum. However, most presenters felt that the exclusion of broadcasters from the payment of spectrum fees goes against the spirit of technology neutrality and convergence espoused in the Act. It was felt that the Authority had not provided enough rationale for the exclusion of broadcasters from the payment of spectrum fees. |
Broadcasting systems comprise amongst others distribution and contribution links. Getting the signal from the studio to a transmitter is 'contribution', and getting the signal out of a transmitter to the general public is 'distribution'. At present, broadcasting service licensees are paying for certain contribution links (e.g. satellite links, microwave and studio-to-transmitter links) and not for distribution links (e.g. audio 88-108MHz, VHF/UHF TV, etc). The issues raised in the written and oral submissions suggest that broadcasters should pay for distribution links as well. A decision, however, could not be made on the matter without affording broadcasters the opportunity to be heard.
The Authority therefore has decided to embark on a public consultation process in order to give other operators and the genera; public as well as broadcasters an opportunity to comment on whether broadcasters should pay for spectrum and if so, how.
| b) | It is not clear to some presenters what the purpose of levying radio frequency spectrum licence fees by the Authority is. It is also not clear whether the fees charged by the Authority for spectrum will be recovery of costs or whether the intention is to raise funds for the treasury, that is, whether the fees are a form of tax on operators. |
The discussion document accompanying the draft regulations clearly states that the spectrum charge should be calculated so as to, at a minimum, cover the costs of spectrum regulation. The proposed spectrum pricing framework therefore does not seek to maximize revenue for the state. The intention of some of the written and oral submissions is to influence the Authority to make a statement on the revenue target that the Authority intends raising. The Authority is not in a position to be tied to a specific revenue target, save to say that at a minimum the fee structure intends to cover the cost of regulating spectrum use, while at the same time ensuring efficient use of spectrum, in line with the underlying principles of Administered Incentive Pricing (AlP) adopted herein. It is therefore common cause that the fees collected may overshoot the cost of regulation. The over-recovery of fees may also result from an increase in applications for spectrum use.
| c) | Some presenters also recommended that an economic impact analysis of the proposed fee structure should be undertaken, so as to give operators and the Authority an indication of the impact of the proposed licence fees. During public hearings the Authority gave operators an opportunity to submit further information by 18 September 2009, on the impact of the proposed fees on their individual businesses and also to demonstrate to the Authority their interpretation and application of the formulae. |
The Authority received the additional information as requested. The Authority compared the information received from operators on the use of the fee calculation formulae as contained in the draft regulations with its own interpretation and application of the formulae. The Authority noted instances where there were variances between the operators' and the Authority's calculations, based on the parameters used. The Authority noted further that of the parameters contained in the regulations, the use of 'Area Sterilised' and 'HopMini' provided the most challenge to some operators. The Authority is confident, however, that by the time the regulations become operational, there will probably be convergence on how to use the parameters contained in the regulations to calculate spectrum licence fees
It was further noted that on average, the proposed fee structure impacted heavily on bulk users. In order to minimise this impact, the Authority decided to increase the discount for the usage of spectrum in low density areas in line with policy sentiment that operators be encouraged to invest in the rural areas.
The Authority is satisfied that the proposed formulae will deal with the numerous challenges of spectrum pricing and usage. Over time, the remaining challenges of interpretation should be ironed out between the Authority and operators.
| d) | It was also recommended that the 'use it' or 'lose it' principle should be incorporated into the draft regulations. The Authority is of the view that important as it is, this matter should be addressed in terms of section 33 (3) of the Act, which deals with coordination and disputes among radio frequency spectrum licensees. |