The millstone around spectrum’s neck

Ivo Vegter, a former technology journalist and a columnist for the IRR, writes in defence of free markets and individual liberty. This article was commissioned by the Free Market Foundation.

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This article was first published on on 28 February 2022 

The millstone around spectrum’s neck

Communications minister Khumbudzo Ntshavheni has proposed that new spectrum licences, to be auctioned in March, carry a range of ‘social service obligations’, from free data for everyone, to taking over government’s own responsibilities.
Speaking at the debate on the State of the Nation Address on 15 February 2022, communications and digital technologies minister Khumbudzo Ntshavheni said that spectrum licences would be made conditional upon the fulfilment of
a range of social service obligations.
The government believes that data has become a new utility, like water and electricity, and that therefore, every household, ‘whether rich or poor, whether employed or unemployed,’ should have access to a minimum of 10GB of data per month.
This would be made part of the preconditions for spectrum licences, and instead of being able to pay penalties, private-sector telecommunications companies would have their spectrum licences yanked for non-compliance.
In addition, licences will come with the obligation to connect, within three years, all 18 520 outstanding public schools, all 5 731 public health facilities such as clinics and hospitals, as well as the 8 241 offices of traditional leaders or traditional authorities.
Ntshaveni did not explain why these organisations cannot contract with one of the mobile operators and buy their data connection just like everyone else. For a few hundred rand a month – which these facilities could surely scrounge from their taxpayer-funded budgets – they could get a decent fixed-wireless line with much more than 10GB of data.
She also did not explain why schools, health facilities and other government offices should benefit from freebies funded by the private sector, when the state owns several enterprises, including the State Information Technology Agency and the soon-to-be-merged Broadband Infraco and Sentech, which exist for the exact purpose of servicing government-owned facilities or poor, under-developed and under-serviced areas.
Mere days ago, Cabinet approved
phase two of the SA Connect project, the national broadband project started in 2013 to designed to achieve the National Development Plan goals of creating an inclusive information society.
With an annual budget of about R1 billion, the project – which has been plagued by
all the delays and confusion one might expect from a government project – aims to connect tens of thousands of government sites, including schools, health facilities, libraries, Thusong Service Centres, traditional authority offices, more than 33 000 community WiFi hotspots, as well as get broadband to 100% of all households by 2030.
Now, as if on a whim, the minister hopes to shift these obligations to the private sector, as conditions for receiving spectrum licences; this is sheer extortion. It is also a gross abdication of government’s own responsibilities, and undermines the claimed raison d’être of, at least, Broadband Infraco.
Imposing such requirements upon companies also has a way of backfiring. Telkom was once required to roll out fixed lines in return for a five-year government-protected monopoly. The fixed lines it did roll out were soon disconnected for non-payment, the five-year monopoly dragged on for years, and in the end, the country had fewer fixed lines than it started with, and grossly over-priced voice and data services.
Providing a minimum of 10GB of data to every South African household is a much greater burden than it might appear.
The country has over 17 million households and rising. Offering each household 10GB would cost billions. Moreover, this would turn tens of millions of customers who routinely use less than 10GB into free riders. The cost of servicing them would need to be recovered from the minority of people who use more than 10GB per month in mobile data.
This would cause data prices to rise, penalising those – including many precarious small- and medium-sized enterprises – who need more than the 10GB allowance.
The minister gave no indication whether telcos would be responsible for rolling out infrastructure to the (very limited number of) South Africans who currently do not enjoy decent (that is, 4G/LTE) data coverage, but if they are, that would add many billions to the cost.
It is also a tremendous bureaucratic burden. There is no reliable way for mobile operators to identify households and their members. Households are counted in statistical surveys, but there is no master list of households somewhere against which telcos could check whether any given person qualifies for their household’s data allocation. How exactly the minister wants spectrum licencees to give effect to this obligation is a mystery.
The Free Market Foundation has long advocated making spectrum tradeable, either as private property, or as tradeable long-term leases, in order to bring market forces to bear on the efficient allocation and use of this scarce resources.
Encumbering spectrum licences with all manner of cost and obligations makes this prospect seem very distant. Dealing with spectrum sales attached to partially-fulfilled social service obligations would make trading it very cumbersome.
Attaching arbitrary social service obligations to government-issued licences also contradicts president Cyril Ramaphosa’s claimed objective to cut red tape for business. It sets a perilous precedent, and substantially raises the costs of doing business when licences are required.
What may be next? Forcing licenced food retailers to provide a minimum of free food for everyone? Prescribing that liquor stores or pubs must maintain roads? Make taxi licence holders convey poor passengers for free? Force plumbers to maintain municipal water and sewerage reticulation? Make spa baths, massage parlours and escort services free to stressed government officials, as a condition of licensing these businesses?
The financial burden of public services – if they should be offered at all – should fall equally on all taxpayers, and not preferentially upon holders of certain types of business licences.
If government has ambitions such as providing internet access to all government facilities, or providing free broadband to everyone, that’s what levies, taxes and state-owned entities are for. It is unjust to extort these services from a handful of private sector companies, on pain of losing their licences to operate.
Spectrum licences should be auctioned without encumbrance, to maximise their efficient use and minimise the cost of data services to the general population.

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