Electronic Communications Act, 2005 (Act No. 36 of 2005) Regulations Radio Frequency Spectrum Licence Fee Regulations, 2010 Reasons Document: Radio Frequency Spectrum Fees Regulations 6. Comments on Formula Parameters and Factors

 

 

The submissions that addressed the Minimum Price factor concerned themselves with the rationale guiding the minimum price and the perception that the minimum price is too high.

The proposed Minimum Price is a very important component of the proposal as it alleviates the administrative burden on the Authority. The minimum price is intended to cover the Authority's administrative costs whenever the formula-derived fee is not enough for cost recovery.

 

 

Most submissions supported the linear approach in general. Neotel however recommended a discount for the use of large bandwidths.

 

The Authority's view is that discounting for large bandwidths does not encourage higher consumption but can defeat the objective of encouraging efficiency. A volume discount for volume of bandwidth used will make the formula more complex. In any case the frequency factor (FREQ) already caters for the increased availability of bandwidth at higher frequencies.

 

 

There were no fundamental objections to the principles of the frequency factor as given. Telkom, however, proposed an alternative frequency factor based on the commercial value of the so called sweet spot (700 i'JIHz-3.5GHz). As already indicated in section 4 above, this approach is subjective, penalises the efficiency of cellular operators and is not technology neutral.

 

 

The Congestion factor attracted considerable comment concerning how it would be implemented and the potential problems that could result. Concerns were raised regarding the challenges of measuring congestion. There were concerns that the waiting list could be manipulated by applicants who have no interest in controlling the frequency.

 

In the absence of testing for congestion, the Authority believes that a waiting list could be an appropriate proxy to determine whether a particular frequency is congested or not.

 

 

The comments on the GEO factor include the proposal to reduce the rural GEO factor that, if incorporated, will give a greater rural incentive and reduce the price for bulk users. Further, there is a need for clarity on the definition of the high density areas. ISPA recommends that the Authority should use the Universal Service and Access Agency (USASA) definitions. MTN recommended the deletion of medium density from the GEO factor. ISPA posits that poor urban areas will be negatively impacted by the definition of the GEO factor. There was also a proposal for a stronger incentive for rollout in rural areas, by lowering the GEO factor to 0.1 for rural areas.

 

Having taken into account the comments raised, the Authority has decided to redefine the GEO factor by removing the medium density because its usefulness does not compensate for the complications that it may impose. The Authority has also redefined High Density as the entire Gauteng province and the municipal areas of Cape Town and Durban and low density as the rest of South Africa. The Authority also believes that a stronger incentive for rural roll-out, in line with the Department of Communications' Radio Frequency Spectrum Policy, is essential, hence an increase in the discount from 0.5 to 0.1.

 

 

Comments on sharing mainly touched on the desirability of increasing the discount for sharing. There were views that the sharing factor should encourage up to 5 users or even more.

 

The Authority believes that the sharing factor allows two or more licensees to use spectrum simultaneously in the same area. The concept of primary and secondary users does not affect the application of the formula.

 

 

The main industry concern was on how the ASTER factor will be applied. Other submissions recommended that the maximum area should be the whole of South Africa. Neotel states that it is not clear to some operators how the point-to-area formula is supposed to be applied.

 

The area sterilized is the area denied to others as a consequence of the assignment, and not the area the user uses or intends to use. It is also clear that a national assignment will be charged at the maximum factor of 600. If a user has several assignments in different areas at sub-national level, then the ASTER factor will be assessed on the basis of the individual areas sterilized. The ASTER factor gives an incentive to take a national assignment (to which national objectives can be added). The ASTER in Point to Area (PtA) formula applies to overall covered area as opposed to on a station by station basis. As a result there should be no change to the ASTER factor because it incentivizes efficient assignments and does not penalise service provision to rural areas.

 

 

There were no fundamental comments on the HopMini factor. Telkom proposed that the HopMini should apply not only as a penalty for inefficient use but also as an incentive to efficient users.

 

The HopMini applies only when the user requests a point-to-point link for a distance for which higher frequencies could have been used. When the user is extra efficient (use of a given band for even longer links than the baseline), no additional incentive is provided because no operator would undermine its business by deploying longer links than necessary. Moreover, efficient users get a natural incentive by using less bandwidth or higher frequencies.

 

 

Submissions that commented on this issue requested a UniBi factor of 0.5 for specific cases. Vodacom recommended that where 2 licences are issued for a pair of co-frequency cross-polar links on same hop, both links should have a UNIBI of 1.

 

The principle of Unibi is that the value is 0.5 when the frequency applied is not paired.