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Final report #5 for DTPS and GTAC Open-access wireless networks and spectrum assignment 9 December 2014 Robert Schumann, Janette Stewart, Russell Matambo Ref: 2001462-405c .
Open-access wireless networks and spectrum assignment
Contents
1 Executive summary 1
2 Introduction 9
3 International models for open-access wireless networks 11
3.1 Australia 11
3.2 Kenya 15
3.3 Tanzania 18
3.4 Rwanda 19
3.5 UK 22
3.6 USA 24
3.7 Summary 26
4 IMT and ICASA’s draft IMT roadmap 28
5 Spectrum requirements for an open-access wireless network 35
5.1 Type of spectrum assignment (licence, licence exempt, lightly licensed, white space) 35
5.2 Choice of frequency band 38
5.3 Spectrum packaging 41
5.4 Decisions in deploying a new open-access wireless network 49
6 Other options in spectrum licensing to facilitate a broadband development agenda 56
6.1 Measures aimed at facilitating further network roll-out 56
6.2 Measures aimed at improving affordability/quality of services and competition 65
7 Future trends and 5G 70
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment
Copyright © 2014. Analysys Mason Limited has produced the information contained herein for
the Department of Telecoms and Postal Services (DTPS) and the government Technical
Advisory Centre (GTAC). The ownership, use and disclosure of this information are subject to
the Commercial Terms contained in the contract between Analysys Mason Limited and GTAC.
Analysys Mason (Pty) Ltd
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Registered in South Africa, No. 2012/170472/07
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment
Abbreviations used
Note that abbreviations for companies’ names are not included.
ACCC Australian Competition Consumer Commission
CA Communication Authority (of Kenya)
DSO Digital Switchover (of terrestrial TV broadcasting)
EU European Union
FCC Federal Commission of Communications (USA)
FDD Frequency Division Duplexing
FTTC Fibre To The Cabinet
FTTP Fibre To The Premises
FWA Fixed Wireless Access
GPON Gigabit Passive Optical Network
GPS Geographical Positioning System
GSM Global System for Mobile Communications, also called 2G
ICASA Independent Communications Authority of South Africa
IMT International Mobile Telecommunications
ITU International Telecommunication Union
LTE Long-Term Evolution (also called 4G)
LTE-A Long-Term Evolution Advanced
MIMO Multiple In, Multiple Out (antenna technology)
MNO Mobile Network Operator
MVNO Mobile Virtual Network Operator
NBN National Broadband Network
NGA Next-Generation Access
ORN Olleh Rwanda Networks (Rwanda)
PPP Public–Private Partnership
PTS Post & Telestyrelsen (Sweden)
RAN Radio Access Network
TDD Time Division Duplex
TD-LTE Time Division Long Term Evolution
TVWS TV white space (spectrum)
UMTS Universal Mobile Telecommunications System (a 3G technology)
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 1
1 Executive summary
This document is the fifth deliverable from the study of market structure of the
telecommunications sector in South Africa and the implementation of South Africa Connect1 that
Analysys Mason is undertaking for the Department of Telecommunications and Postal Services
(DTPS) and the Government Technical Advisory Centre (GTAC).
It considers international experience in operating open-access wireless networks, appropriate
models for allocating or awarding spectrum, including packaging of spectrum, options for
leveraging urban-appropriate spectrum for rural fixed-wireless access, and the possible
involvement of the government in operating an open-access wireless network. Aside from
considering the launch of a new open-access wireless network, we also consider other options for
improving the coverage and competitiveness of wireless markets. All of this analysis is set in the
context of ICASA’s plans for internationally harmonised IMT spectrum and future evolution of
wireless standards towards 5G.
Summary of findings on the feasibility of an open access wireless network for South Africa
Connect
The key findings from our analysis as presented in this report on the feasibility and scope for open
access wireless networks are as follows:
The technical distinction between public cellular mobile and wireless broadband spectrum is
becoming less relevant in the marketplace, although it is still strategically relevant in terms of
the services being delivered and related competition issues. However, technology neutrality is
being recognised in many markets internationally where spectrum licence conditions are being
liberalised to allow MNOs to select the appropriate technology and generation of technology
(i.e. 2G/3G/4G), based on market demand and to meet business needs. Accordingly, in terms
of the spectrum allocation requirements for an open-access network, international market
developments suggest that a spectrum band harmonised for IMT use will be suitable for
delivery of wholesale wireless broadband services, irrespective of whether the open-access
network is fixed-wireless access (FWA) or a mobile broadband offering.
International experience in designing successful wholesale open-access wireless networks is
light, and networks of this sort that are being established are still in their infancy. There are
risks attached for government and for private investors. In countries where a specific company
has been created to operate a national broadband network (including a wireless network, as in
Australia for example), significant funding is required to achieve its stated goals.
1
Department of Communications, South Africa Connect: creating opportunities, ensuring inclusion. South Africa’s
broadband policy, 6 December 2013. Referred to in this report as “SA Connect”.
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Alternative forms of intervention might be funding of wireless infrastructure only in the most
remote areas (with tighter coverage obligations in one or more IMT licences to incentivise
MNOs to provide coverage), or encouragement of network/RAN sharing. Other measures such
as MVNO and national roaming can improve the choice of service providers in the market, but
are unlikely to address coverage issues.
In terms of the choice of spectrum for an open access wireless network to use, consideration is
needed as to whether the service is an FWA one, or a mobile one. In general, for services to
mobile devices, lower-frequency spectrum planned in accordance with internationally
harmonised band plans is generally favoured over higher bands, to provide a more cost-
effective coverage to wider geographies. 800MHz spectrum has been highly valued by mobile
operators in Europe (and internationally, sub-1GHz digital dividend bands in either the
700MHz or 800MHz range tend to attract significant interest and bids, if the frequency
arrangement aligns with international recommendations). Operators are often prepared to pay
large premiums regardless of whether conditions to meet coverage objectives are placed on
800MHz spectrum licences. Accordingly, an appropriately designed coverage obligation –
or obligation of wholesale access on one or more 700/800MHz spectrum package – could
be considered as an alternative to setting aside spectrum for an open-access wireless
network if the intention is for the network to deliver mobile broadband services. This is
further described below.
If the open-access wireless network is to provide an FWA service, then the disadvantages of
using non-harmonised spectrum are less relevant and bands with lower economies of scale,
such as the 450MHz band, might be suitable. However, this should ideally be confirmed
through further cost–benefit analysis, taking account of the type of delivery (i.e. FWA or
mobile broadband) that is envisaged. The choice of band also depends on the bandwidth
available, however, and we note that there is insufficient 450MHz spectrum available for
this, on its own, to meet the SA Connect requirements in terms of network throughput
and speed.
More generally, if policymakers believed that a new wholesale open-access network (not
based on one of the existing networks) were desirable, at least three major decisions
would need to be taken that would have a significant impact on the likely impact and
viability of the proposed network:
— Will the service be designed to attract FWA, or mobile customers?
— Will the service be restricted to rural areas or rolled out nationally (including metros)?
— Will the network receive government support or not?
This leads to eight possible operating models for the proposed network, shown in Figure 1.1.
Our qualitative assessment against the criteria of avoiding market distortion, minimising
government cost, maximising take-up and impact, and viability, suggests that rural-only
models are likely to be most appropriate, and that there are potentially viable templates for
both FWA and mobile systems in Australia, South Africa, Tanzania, and in existing shared
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 3
network joint ventures in numerous countries. However, all of these models involve
considerable risk, and without government investment they are likely to provide only partial
coverage to currently unserved areas.
Figure 1.1: Flow chart showing the various options for an open-access wireless network in South Africa
[Source: Analysys Mason, 2014]
FWA Mobile
FWA or mobile?
450MHz or 700/800MHz
2.6/3.5GHz
Rural Rural
only Rural only or National only Rural only or National
national? national?
Government Government Government Government
support or not? support or not? support or not? support or not?
Government Government Government Government
Not Not Not Not
support support support support
1 2 3 4 5 6 Rural-only 7 8
Government-
Wireless ISP Shared Network mobile network Olleh Rwanda Smile model
NBN Co model sponsored Clearwire model
model Tanzania model without Networks model (TZ, UG, NG,
(Australia) national FWA (USA)
(South Africa) (Tanzania) government (Rwanda) DRC)
network model
support model
Note: This figure is reproduced in larger format in Figure 5.4.
Summary of alternative options
As noted in this report, an alternative way of achieving the government’s targets for broadband
availability might be to promote various industry-led approaches within the mobile broadband
market. These are likely to be favoured by MNOs. Possible alternatives to an open access wireless
network in South Africa have also been reported in work carried out by consultants on behalf of
the GSM Association2.
A summary of our findings in in terms of alternative options to the creation of an open-access
wireless network is as follows:
One of the key industry-led approaches to extend the reach of mobile networks beyond
the area commercially feasible for a single operator is radio access network (RAN)
sharing between two or more operators. This is becoming more widespread in many
countries, although consolidation into a single national wholesale wireless provider is not yet
occurring. The existence of network-sharing arrangements makes it easier to meet coverage
obligations (in markets where these are being included in 4G licences). However, although
RAN sharing might extend coverage into some areas where it would have otherwise been
unfeasible, it is unlikely to result in coverage/availability issues being fully addressed (i.e.
universal coverage is not guaranteed), unless specific incentives or obligations exist to cover
rural areas. Nevertheless, government funding in truly under-served areas could be
implemented to complement industry-led roll-out to the remaining areas.
2
For example, the study on assessing the case for single wholesale networks in mobile markets, available at
http://www.gsma.com/.
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 4
Coverage obligations within 4G licences can be designed to require one or more MNOs to
extend network reach into harder to serve areas, and/or to provide coverage in specific
locations (depending on how the coverage obligation is formulated). Where regulators in other
countries have imposed a 4G coverage obligation on one MNO, this can incentivise other
operators to follow suit by providing similar coverage. This is not always the case, however, as
the Swedish case study in our accompanying report on International experience in broadband
market structure demonstrates. This is potentially because in the Swedish case the not-spots
were identified by the regulator (as being particularly hard-to-reach areas), whereas in other
markets (e.g. the UK) the coverage obligation extends to the majority of the population but
excludes the most remote areas, which are addressed separately (in the UK case, via a
procurement to install masts in rural areas for joint use by all MNOs). In the German case
study, although not-spots were identified by the regulator, the obligation to reach these was
shared among MNOs (whereas in Sweden one operator had to cover all hard-to-reach areas).
This is the most likely reason why the German approach has been more successful than the
Swedish one.
Imposing an obligation to host MVNOs on operators with coverage objectives may allow
competition objectives to be achieved despite the limited availability of spectrum.
It is noted that in most cases, the minimum throughput that regulators have defined for 4G services
as part of a coverage obligation is somewhat lower than the speeds that would be expected from
next-generation fixed network access (e.g. fibre or well-designed FWA). We also note that the
minimum speeds in the coverage obligations ICASA indicates in the draft IMT roadmap fall short
of the SA Connect requirements. Therefore, although 4G services are expected to improve the
availability of mobile broadband in countries where 700MHz and 800MHz licences are awarded,
mobile broadband networks are not expected to offer a serious competitive challenge to fibre
broadband; nor are they likely to achieve the speeds, coverage, reliability and performance
expected of fixed wireless broadband networks. This is partly due to the economics of 4G network
build, as well as for technological reasons.
Also, and although not explicitly discussed in this report (see the report in this series on
“Implications for policy, licensing and regulation” for more on spectrum charging), it is worth
mentioning the government revenue impacts of any of the measures described here in relation to
conditions attached to MNO licences. The revenue generated from a spectrum award is an
important contributor to the national fiscus and possibly also to specific broadband initiatives. It
should be recognised, however, that mobile operators are willing to pay for spectrum in proportion
to the supernormal profits that can be extracted due to the scarcity of that spectrum. In a
hypothetical world in which spectrum supply was infinite, spectrum would have no value, because
the threat of market entry would force prices down to the efficient cost of delivering mobile
broadband services. As a consequence, a more competitive mobile broadband market results (all
other things being equal) in lower spectrum valuations by operators. This is the reason why
policymakers should strive to place as much spectrum in the hands of as many operators as
possible, but it also points to the inevitable reduction in government revenue resulting from such
policy.
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Imposing obligations on spectrum also tends to reduce government revenue from spectrum awards,
in a relatively predictable way that is related to the cost of complying with the obligation (e.g. the
cost of building network in deep rural areas). Prudent policymaking suggests that this revenue loss
should be estimated by the regulator prior to awarding the spectrum, and the cost compared with
that of other options for achieving the same outcome (such as direct grant funding).
However, spectrum award mechanisms that reduce the price paid by operators for spectrum below
what they would have paid in a competitive process do not necessarily guarantee that operators
will set aside the resulting cash savings for roll-out. Operator incentives are not altered simply by
varying the amount of sunk cost incurred in purchasing spectrum. As a result, the competitive
dynamics resulting after spectrum award are more important for achieving coverage and pricing
targets than the mechanism of the award. Put another way: offering operators spectrum at low
prices does not lead to low broadband prices.
Conclusions from this report
From this summary, our conclusions from the analysis presented in this report are as follows:
There is insufficient experience around the world to suggest what may constitute best
practice in wholesale open-access wireless networks. Emerging projects (such as those in
Australia and Rwanda) may yet develop best practice, but such networks face significant
organisational and strategic challenges, and it should be noted that the Australian example is
limited to FWA-style access rather than full mobile access.
Competition issues between an open-access wireless network and existing MNOs 4G
plans need to be considered, particularly in the context of use of sub-1GHz spectrum
(where market demand might outstrip supply) and if the open-access network will
deliver services to mobile devices. This is because existing mobile operators will have
legitimate concerns if the government funds a network that will compete on the same terms as
the MNOs’ networks, since the government-funded network might be in a position to roll out
services more quickly, or to a wider population, causing market distortions. There will also be
concerns if sub-1GHz spectrum in harmonised bands is set aside for a Government-led
network, particularly if only needed for rural areas, due to the high value of 700/800MHz
spectrum for commercial 4G use, and the potential loss of economic benefits (such as
government revenue, and consumer and producer surplus).
More widely available urban-appropriate spectrum (notably 2.3GHz, 2.6GHz and
3.4GHz) could be leveraged to provide broadband in rural areas only if the aim were to
provide FWA-style service rather than full mobile broadband (as is the case in Australia,
for example). These bands have the benefit of offering more bandwidth, and so the
throughput/speed that can be achieved from networks using these bands may be higher.
If spectrum is being assigned to an open-access wireless network, it will require an
exclusive assignment or a wholesale obligation on another licensee with an exclusive
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assignment (i.e. licence-exempt, light-licensed or TVWS spectrum is not suitable). Although
further analysis would be required to confirm the precise amount of spectrum that would be
required for SA Connect, our view (based on the capabilities of LTE-A technology and the
speed targets set for SA Connect) is that 2×10MHz is only a minimum requirement (for a
lightly loaded network delivering data-only services in rural areas) and that further spectrum
will be required in order to meet SA Connect speed targets up to 2020 and beyond.
Accordingly, use of the 450MHz band on its own is not sufficient to meet the SA Connect
requirements (as suggested by ICASA), although it could be used in combination with other
bands.
As a means to mitigate spectrum scarcity and related competition issues, ICASA could
investigate reserving a specific lot in the 700/800MHz spectrum award for a commercial
network that would have an obligation to provide wholesale access on regulated terms
(including prices) to other operators. For example, wholesale access obligations could be
attached to one or more licences in the planned IMT award process, along with a specific
coverage obligation. This would enable participants in the award to value the spectrum
accordingly, if parts of the band(s) being offered carried a coverage obligation.
We assume (although it is not clear in the roadmap) that ICASA intends to award all available
IMT spectrum in a single process. This type of award process is complex, but provides greater
flexibility for ICASA to design award rules which allow for (but do not guarantee) an overall
efficient outcome, taking account of the needs of SA Connect and other demands such as
emergency services use. Awards spread over time – for example, if bands are awarded within
successive individual processes – enable more flexibility to changing circumstances, but the
outcome of later awards is highly dependent on what happened in earlier ones (e.g. new entry
is more difficult, and operators may not achieve the optimal spectrum packages that they
require for 4G). From the SA Connect perspective, it would seem appropriate to follow a
single IMT spectrum award process, with any specific measures the Government
subsequently decides are necessary to support an open-access wireless network (e.g. set aside
of spectrum) incorporated into this award.
Ultimately, the preferred approach for improving coverage and market conditions will
depend on the capabilities of ICASA and DTPS. In order of increasing requirement for
decisive and rational involvement from them, the options are:
— Imposing coverage obligations on at least one of the spectrum lots awarded
— Imposing coverage and wholesale obligations on at least one of the spectrum lots
— Reserving spectrum for a new open-access wireless operator with coverage obligations
(based on one of the models shown in Figure 1.1).
Links to other reports produced within this study
Finally, it is worth observing to what degree the issues discussed in this report are dependent or
independent of various other topics considered in this and the accompanying reports. This has
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 7
implications for whether questions around spectrum policy need to be addressed concurrently with
resolutions for these other issues, or whether (as industry is clamouring for) spectrum can be
awarded before other issues are resolved. In the bullet points below, we consider the extent to
which we believe considerations around spectrum are dependent on other issues:
The role of SOCs and government agencies. The major SOCs operating in the telecoms
sector are Telkom, Broadband Infraco and Sentech. Our analysis in this report suggests that
the activities of an open-access wireless network should be circumscribed, focusing on rural
areas and possibly based on FWA rather than a full mobile service. Neither Sentech nor
Broadband Infraco has demonstrated sufficiently strong performance to warrant its
appointment as the operator of an open-access wireless broadband network, and indeed
Sentech recently returned funds to National Treasury after failing to agree a plan to roll out a
wholesale FWA network. Telkom already operates several wireless networks, with limited
success, and there is little reason to favour it through spectrum policy. Restructuring of any of
these entities will take time and may have an uncertain outcome, and it would be risky to make
spectrum policy and spectrum award decisions that depend on a successful and speedy
outcome.
ICASA’s capabilities. Improving ICASA’s monitoring of networks, dispute resolution,
coverage studies and wholesale market oversight will help to ensure the effectiveness of
spectrum policy, and operators should be expecting more rigorous oversight from ICASA in
the near future when they acquire new spectrum. Spectrum policy and spectrum awards should
be made on the assumption that ICASA’s capabilities and resourcing will improve, but that its
focus may be confined to a small number of key areas in the medium term. The process of
awarding spectrum should therefore be used to identify which capabilities are important in
achieving policy goals, but this should not delay the award.
Open access definition and implementation. A policy decision on whether to introduce
some form of open access – whether from a new entrant or from obligations on existing
operators – will need to be made prior to spectrum award. Furthermore, the cost of complying
with any coverage obligations is likely to vary widely depending on what action is taken to
ensure open access to aggregation and backbone fixed networks. The issue of open access to
fixed backhaul networks is unlikely to be resolved before spectrum is awarded, so bidders are
likely to make pessimistic assumptions about the costs of complying and therefore pay less for
spectrum. While achieving a lower revenue from the spectrum award is unfortunate, it should
not cause a delay in awarding the spectrum. This problem could be mitigated by moving as
quickly as possible towards implementing a solution for lowering the cost of rural backhaul.
Revised market structure. A decision on spectrum award does depend critically on whether
policymakers believe that one or more new wireless entrants are required in the market (which
could be either mobile or FWA operators). A change to fixed market structure has little
relevance to the award of spectrum.
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Aggregated demand from the public and potentially private sectors. Aggregated end-user
demand (e.g. from schools, clinics and government offices) would increase the viability of
networks in some currently under-serviced areas. Government attempts to stimulate consumer
demand would have a similar effect, if successful. Both of these would increase the proportion
of South Africa’s population reached by commercial mobile and fixed-wireless broadband,
making it correspondingly easier for operators to achieve any coverage obligations and
therefore increasing the likely revenue to government from the award of spectrum. Uncertainty
regarding the outcome of demand aggregation and stimulation should not, however, delay
spectrum award.
We therefore conclude that the only critical issues which need to be resolved prior to awarding
high-demand spectrum are the conditions (of coverage and wholesale open access) that may be
imposed on the spectrum awarded, and whether a change in wireless market structure is desirable
(notably through new entrants, whether mobile or FWA). Still important but not critical are
demand aggregation and stimulation, and the success of ensuring cost-effective open-access fixed
backhaul networks in rural areas, both of which may lower the cost of reaching rural areas with
wireless broadband and thus increase government revenue from a spectrum award. The spectrum
award process, and decisions regarding spectrum obligations, should in turn be used to determine
ICASA’s regulatory priorities. In our view these are the only significant interactions between the
high-demand spectrum award and other policy issues.
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2 Introduction
This is the fifth deliverable from the study of market structure of the telecommunications sector in
South Africa and the implementation of South Africa Connect3 that Analysys Mason is
undertaking for the Department of Telecommunications and Postal Services (DTPS) and the
government Technical Advisory Centre (GTAC).
The objective of the study is to advise on the most appropriate market structure arrangements and
reform options that will support attainment of the broadband targets identified in SA Connect
specifically, and the efficient functioning of the telecoms sector in South Africa more generally.
This project primarily focuses on the “Digital Future” pillar of the SA Connect policy, which aims
to consider the viability and competitive impact of open-access fibre and wireless broadband
networks.
This document addresses element 3.1.7 of the terms of reference for the study (which is to advise
on open-access wireless networks, including implications for spectrum allocation), and considers:
International experience and best practice in transitioning to, and then operating, an open-
access wireless network, including the investment required by the public sector and structure
of the network.
The most appropriate model for spectrum allocation, taking account of South Africa’s
development agenda (and specifically the need for balancing revenue objectives and
affordability of infrastructure investment).
Options to leverage urban-appropriate spectrum for broadband in rural areas.
Optimum configuration of spectrum packages.
Alternative options within spectrum licences that might deliver similar coverage/availability
benefits to those of a wholesale wireless network.
This report should be read in conjunction with the third deliverable from the study, titled “Models
for open-access national broadband networks”, which deals more broadly with structural models
for open-access networks, considerations of wired and wireless coverage, regulation and
governance. In this report, we specifically address issues relating to creation of open-access
wireless networks, including international experience and the implications on radio spectrum –
both in terms of the assignment of suitable spectrum and the impact of this assignment on other
players within the market which may have interests in acquiring the same or similar spectrum
(most likely to be the South African mobile network operators).
3
Department of Communications, South Africa Connect: creating opportunities, ensuring inclusion. South Africa’s
broadband policy, 6 December 2013. Referred to in this report as “SA Connect”.
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The remainder of this document is laid out as follows:
Section 3 describes international experience in defining and operating open-access wholesale
wireless networks
Section 4 reviews ICASA’s draft IMT roadmap and explains the context of IMT technology
developments
Section 5 considers what type and quantity of spectrum may be necessary to create an open-
access wireless network in South Africa
Section 6 reviews other options that may be used to achieve broadband development agendas
such as increasing network coverage and improving quality and affordability of services
Section 7 considers, in the context of SA Connect’s targets over the next 15 years, how the
next generation of mobile technology (5G) may change wireless broadband markets.
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3 International models for open-access wireless networks
This section of the report describes international experience in setting up and operating open-
access wireless networks, including the structural models needed to create them and the different
roles that government can take to support private sector entities.
In particular, we are aware of a number of international examples where mobile or wireless
broadband networks are being established or are being proposed by policymakers with some
degree of wholesale provision included. However, although this approach has been proposed in a
number of markets, it has been implemented in relatively few to date.
In the following section we describe proposals, and plans, to implement open-access wireless
networks in Australia, Kenya, Tanzania, Rwanda, the UK and the USA.
3.1 Australia
Market overview Telstra is Australia’s incumbent fixed operator, with a 46.2% market share
of total fixed broadband subscribers as of March 2014 (equating to
~2.8 million subscribers).4
As of June 2014, Australia has an estimated fixed broadband penetration of
69.8% of households. Due to Telstra’s reluctance to open up its network at
reasonable cost, other operators have countered by rolling out their own
networks. Optus, iiNet (and its subsidiaries Internode and Adam Internet),
TPG Telecom and M2 Communications are among the most prominent
alternative fixed broadband service providers with their own infrastructure.
However, even after multiple consolidation activities in the Australian
market, Telstra remains the largest player
Australia’s mobile broadband market has similarities to the fixed broadband
market, with Telstra commanding 52.5% of subscribers as of March 2014,
followed by Optus Mobile (30.8%) and Vodafone Hutchison Australia
(16.7%)4 – the latter a merger of two previous independent operators.
To provide a next-generation broadband network, the Australian government
originally attempted to select a company to build a nationwide fibre/wireless
network via a procurement process. The process was subsequently cancelled
after a network provider failed to emerge (since ACCC could not reach
agreement with Telstra regarding the roll-out requirements). The government
then changed its approach and decided to form a public–private partnership
company to install the National Broadband Network (NBN). The NBN will
4
Country Report: Australia, TeleGeography (2014).
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be delivered using a range of technologies including fibre (to the premises)
where feasible, wireless broadband and satellite.
Why an open- The NBN is an Australia-wide project to update the existing fixed line
access wireless phone and Internet network infrastructure for next-generation broadband.
network is being The aim is to make available to the market fast broadband services from a
proposed/created range of providers, and to close the digital divide by ensuring a minimum
level of broadband services is available to homes and businesses across
Australia. A mix of technologies is being used to serve different segments of
the market, including Gigabit passive optical networks (GPON)/fibre to the
premises (FTTP), fixed wireless and satellite. The fibre infrastructure is
being designed to provide downlink speeds of up to 100Mbit/s to 93% of
premises in Australia. The remaining premises will be served by either
wireless or satellite technologies, at speeds of up to 12Mbit/s. The overall
network is being designed, built and operated as a wholesale-only, super-
fast broadband network, with the wireless segment operating only in areas
outside of fibre coverage.
The wireless segment of NBN Co’s network consists of TD-LTE
technology, currently designed to use 2.3GHz spectrum. The satellite
portion of the network involves the leasing of capacity from two interim
satellites i.e. IPSTAR and Optus Satellite. In the meanwhile, NBN Co is
developing two long term satellites that will deliver services over the Ka
frequency band. These satellites are scheduled to launch in 2015, although
the NBN Co fixed wireless and satellite review suggests that they may only
be launched in 2016 considering the inherent risk of satellite launches.
Structural model After the initial procurement exercise to select a company to build an open-
access network failed, a wholly owned independent company called
NBN Co was established by the government in 2009 to build and administer
the network. This was established using a model described as a government
Business Enterprise. NBN Co is a government-owned and funded
corporation, reporting to two government ministers: the Minister for
Finance and Deregulation, and the Minister for Broadband,
Communications and the Digital Economy. The corporate structure of NBN
Co includes a Chief Executive who reports to a number of executive and
non-executive board members. The company is independent of Telstra or
any of the other established fixed network providers across the country, and
so wholesale network access agreements are necessary between NBN Co.
and existing providers to exchange services.
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Target The non-fixed line footprint of the NBN CO is estimated to be cover about
geographical reach 1 020 000 premises by 2021.5 The objective of the network is to provide
and users coverage across the entire country, although fibre will form the majority of
the network in built-up areas, it is anticipated that wireless technology will be
used in rural areas where it is too costly or impractical to roll out FTTP. It is
noted that the most remote areas may not be reached by wireless either and so
a further fall-back in the form of a satellite connection exists for the most
remote premises (about 4% of premises).
Estimated capital The most recent corporate plan for 2012–15, released in August 2012,
costs identified the total project capital cost to be AUD37.4 billion (USD33.49
billion). The non-fixed-line capital cost is estimated to be AUD3.5 billion in
the 2012–2015 Corporate Plan. This relates to capital expenditure over the
2011–2021 period for two “long-term” satellites, approximately 1400 fixed
wireless towers, and the Interim Satellite Service (ISS). An undisclosed sum
is allocated to additional base stations and the associated spectrum in areas
where NBN Co does not have coverage. NBN Co is to be funded entirely by
government equity until its cashflows are sufficient to secure supplementary
private debt.
Spectrum The Australian wireless market is fully liberalised, with spectrum auctions
assignment model being used for the primary assignment of spectrum, and secondary trading
between spectrum owners permitted. Spectrum is administered by the
Australian Communications and Media Authority (ACMA). The spectrum
that NBN Co is using to implement the fixed wireless portion of the
wholesale broadband network is in the 2.3GHz (2302–2400MHz) band. In
2011, ACMA auctioned licences for remaining packages within this band to
be used by wireless broadband providers (this followed awards of spectrum
in this band in previous years for multipoint distribution services in urban
areas. The remaining packages offered in the 2011 auction covered rural and
remote areas of Australia not covered by the original multipoint distribution
award. Forty different regional lots were auctioned. NBN Co won 24 lots in
the auction, with Telstra (incumbent mobile operator) and BKAL being the
other auction winners. NBN Co had also previously purchased rights to use
2.3GHz and 3.4GHz spectrum from an existing licensee (Austar, a
subscription TV provider). Using a combination of the spectrum purchased
from Austar and the spectrum acquired in the ACMA auction, NBN Co was
able to acquire sufficient spectrum within the regions where it was required
for the wholesale wireless network. It is noted that ACMA has also
auctioned licences to use the 700MHz band in recent years; however, NBN
5
NBN Co (2014), Fixed wireless and satellite review, available at
http://www.nbnco.com.au/content/dam/nbnco/documents/NBNCo_Fixed_Wireless_and_Satellite_Review_07052014
.pdf.
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 14
Co did not participate in this process, since the government had indicated
that although it expected NBN Co to obtain suitable spectrum for its fixed
wireless access (FWA) service on commercial terms, it should not compete
in the 700MHz auction. The ACMA 700MHz award led to the 700MHz
band being awarded to the existing mobile network operators (MNOs) in
Australia.
Benefits/ NBN Co will provide an FWA service by deploying Time Division Long
advantages of the Term Evolution (TD-LTE) technology delivered to fixed antennas at
proposed network customer premises. The TD-LTE network will be deployed using the
spectrum NBN Co has acquired in the 2.3GHz and 3.4GHz bands. This
offers the benefit of using a globally harmonised equipment standard that
has the backing of major 4G equipment vendors. These bands might also be
particularly suitable for provision of the NBN Co network since both the
2.3GHz and 3.4GHz bands are typically packaged in unpaired spectrum lots
suitable for Time Division Duplex (TDD) technology, which is better able
to support asymmetric traffic loads. For example, the network could be
configured to provide more capacity on the downlink than the uplink in
order to achieve the target download speeds of the wholesale network. With
the intention that customers will be connected to the network using a fixed
antenna, rather than via a mobile device, there is the potential for network
coverage to be improved, and the cost of roll-out to be reduced, since the
fixed antenna offers an antenna gain that will improve the propagation path
to the premises from the base station. The downside of this is that it requires
antennas to be installed at each of the premises to be connected, and
oriented in the right direction to receive services from the base station.
Risks/drawbacks The government faces some significant implementation risk as the timelines
and funding requirements are constantly changing. Originally, the 2011–13
corporate plan had pegged the forecast equity funding requirement at
AUD27.5 billion (USD24.59 billion). This was revised upwards by 10.5%
to AUD30.4 billion (USD27.18) in the 2012–15 corporate plan.6 Further, a
strategic review7 of NBN Co released in December 2013 highlighted that
the original plan was running three years behind schedule and the peak
funding requirement over the project was estimated to be AUD28.5 billion
(USD25.56 billion) higher than expected. This highlights the need for
accurate projections in the planning stage.
The government also faces some investment risk by taking an equity funding
approach to the NBN. There is some uncertainty as to how the government
6
NBN Co (2012), Corporate Plan 2012–2015, available at http://nbnco.com.au/content/dam/nbnco/documents/nbn-
co-corporate-plan-6-aug-2012.pdf.
7
NBN Co (2013), Strategic Review, available at http://www.afr.com/rw/2009-2014/AFR/2013/12/12/Photos/cf89acce-
62d4-11e3-810f-3adddacaf5d6_NBN-Co-Strategic-Review-Report.pdf.
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 15
can exit its investment in the NBN. The high cost of the network may make it
difficult to find buyers for the privatisation of the NBN.
3.2 Kenya
Market overview Kenya has an extremely low fixed broadband penetration of about 1% of
households.8 Being the only mass-market retail fixed access operator in
Kenya, Wananchi (Zuku) dominates the market with a 49% share of
subscribers. Other major fixed broadband operators include Liquid Telecom
Kenya, Orange/Telkom Kenya, AccessKenya and Safaricom with market
shares of 18%, 11%, 11% and 7% respectively, mostly addressing the
enterprise market. The leading fixed broadband service is cable (41.1%),
followed by fibre (26.7%), fixed wireless access (18.9%) and DSL (13.3%).
Mobile broadband in Kenya has a penetration of 29.7% of population.8
Safaricom is the dominant player with a market share of 73% followed by
Airtel and Telkom Kenya (Orange Kenya) with market shares of 18% and
9% respectively.8 Though it launched 3G services in 2008, Safaricom (the
operator with the widest coverage) only provides 3G coverage to 61% of the
population as at Q1 2014. Operators have been slow in deploying 3G
networks, focusing their deployments on major cities, as demand for mobile
broadband has not been high in Kenya. The low demand is mostly a
function of low ICT literacy in the country, an issue the government is
seeking to address through numerous initiatives.
A large portion of the Kenyan market is therefore un-connected by any form
of broadband service.
Why an open- The government of Kenya is proposing the roll-out of a 4G network on an
access wireless open-access basis in order to improve the availability of broadband services.
network is being It intends to have the existing operators participate in this roll-out by
proposed/created forming a consortium. The 4G network is planned to be rolled out as part of
wide objectives and efforts to increase Internet’s contribution to economic
growth through increased availability and use of broadband services.
As well as promoting universal access, the network may also go some way
to address the scarcity of spectrum for existing mobile operators. Currently,
3G network coverage is low despite operators having been awarded licences
in 2007. Safaricom, the operator with the most extensive 3G coverage, only
provides coverage to 61% of the population as of March 2014. Through a
single coordinated roll-out of 4G, the government can make sure that it has
8
Analysys Mason estimate, 2014.
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 16
control over the coverage roll-out of the network in order to tailor this to its
universal service objectives.
Structural model The government has chosen to pursue a single, wholesale open-access LTE
network roll-out. By reserving 700MHz and 2.6GHz spectrum for the
wholesale network, the government is aiming to secure the participation of
the private sector in a coordinated mobile broadband roll-out. Originally the
wholesale network was aimed to be a public–private partnership (PPP) with
the government, Safaricom, Orange/Telkom Kenya, Airtel, yu mobile,
Kenya Data Networks (now Liquid Telecom Kenya), MTN Business,
Alcatel-Lucent and Epesi Technologies.
Delays in deployment have resulted in Safaricom exiting the consortium and
lobbying for a spectrum auction to allow it to roll out its own 4G network.
On its departure, Safaricom cited concerns about the state taking too long in
preparing a shareholder agreement. This delay is likely to be partly a result
of the complexity involved with agreeing a shareholder structure and
operational and funding details between a large number of parties.
Another reason for delay is understood to be the issues that are being faced
in Kenya in relation to releasing digital dividend spectrum (i.e. the 700MHz
band), as a result of delays to the digital switchover (DSO) from analogue to
digital terrestrial television. Although digital switchover planning in Kenya
started well ahead of many other African countries, the process was
subsequently delayed by legal action between government and three media
groups which feel the licensing process for digital broadcast signal
distribution illegally excluded them.
The media groups’ challenge has proceeded to the Supreme Court and
caused repeated delay of the switch-off of analogue TV. Digital Kenya is
now publicly advising digital switchover will re-start in September 2014.9
Since the uncertainty caused by the legal auction has halted the ASO
process, the corresponding digital dividend release has also been delayed.
Target Although no implementation plan has been developed yet, the network is
geographical reach anticipated to provide coverage to the entire country.
and users
Estimated capital Initial estimates suggest that the wholesale network will cost up to
costs USD500 million.10 The government envisioned that this cost would be split
across the various consortium members.
9
See http://digitalkenya.go.ke/news-updates/58-digital.
10
See http://www.rethink-wireless.com/2013/11/08/safaricom-quits-shared-lte-project-kenya.htm.
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 17
Spectrum The Communications Authority of Kenya (CA) has the legal mandate to
assignment model regulate spectrum, issue licences and determine spectrum fees. The CA
typically assigns spectrum on a first-come first-served basis, with fees set
administratively based upon expected demand. No auctions or beauty
contests are carried out.
Currently, it is not evident how CA plans to assign 4G spectrum. It is
envisioned that this network will have the highest priority in any assignment
of 4G spectrum, and the government has explicitly indicated that its
contribution to the consortium will be in the form of spectrum. A
government task force was assigned to study spectrum sharing at the end of
2013, indicating that the government may be considering alternative 4G
measures.
Benefits/ A key benefit of the network to operators and end users is expected to be a
advantages of the reduction in the cost of network roll-out since it will avoid the need for
proposed network multiple mobile operators to install their own masts and base station
equipment. A single network means that duplication of infrastructure is
eliminated, resulting in less money being spent on network roll-out at a
macro level. Further, since the network is being rolled out by a consortium,
each operator potentially needs to invest a fraction of the cost it typically
requires for nationwide coverage. With sufficient regulation and assuming
the network is run efficiently, these cost savings can be transferred to the
end user through lower prices.
Further, the network, if designed and regulated appropriately, may improve
the level of competition in the market. An open-access network means that
entrants require less capex to provide 4G services. An open-access network
provides operators with the same level of coverage limiting the sources of
differentiation to services and pricing.
An advantage to the government is that the wholesale network is likely to
reduce the digital divide if it is designed to cover a wide section of the
population and if network costs can be managed such that the network
achieves its stated roll-out objectives. This wholesale network is planned to
provide nationwide population coverage implying that all inhabitants of
Kenya will have access to broadband. The only outstanding issue that the
government would have to address is stimulating demand in the rural parts
of Kenya.
Risks/drawbacks Difficulty in coordinating the consortium has resulted in significant delays
to network roll-out. It was originally planned that the roll-out would be
complete by 2015, yet no work has been commenced. These delays have
resulted in Safaricom exiting the consortium and requesting that the
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 18
spectrum be auctioned.
With only one nationwide 4G network, there is also a risk that competition
on mobile broadband pricing will be ineffective, if operators do not have
sufficient incentives both to enter into agreements to use the network and to
provide competitive services. Service differentiation might also be affected,
and problems that typically arise with monopoly service provision (quality,
responsiveness, pricing) would have to be guarded against, potentially by
the regulator.
3.3 Tanzania
Market overview Fixed broadband penetration in Tanzania was 0.58% of households as at
June 2014. The larger operators include: Tanzania Telecommunications
Company Ltd (TTCL), Benson Informatics, iWay Africa and Smile
Communications Tanzania, with market shares of 58.6%, 5.2%, 2.4% and
1.4% respectively. The rest of the market is fragmented across a number of
small players. The market is dominated by DSL (69.4%) and fixed wireless
access (25%), while cable and other technologies play a small part (5.5%).
Wireless broadband penetration was 7.0% of population by June 2014. The
major providers in the wireless broadband market include Airtel Tanzania,
Millicom Tanzania (Tigo), Vodacom Tanzania and Zanzibar
Telecommunications (Zantel) with respective market shares of 22.1%, 3.9%,
58.0% and 16.1%. All these operators currently offer 3G services. Vodacom
provides the broadest 3G coverage with an estimated 70% of the population.
4G services are in their infancy with Tigo currently offering a mobile 4G
service, Vodacom conducting trials and Smile offering a fixed wireless LTE
solution.
Why an open- Shared Networks Tanzania (SNT, previously known as Rural Netco) is an
access wireless open-access wireless network deployed by Ericsson (which has since
network is being divested its share). It has the objective of helping mobile operators expand
proposed/created their services to rural areas where they previously had limited coverage.
Structural model It not clear what the structural model for the SNT is. However, Ericsson, the
network vendor, played a significant role in the network. Other participants
include the United Nations Development Programme (UNDP), the World
Bank, Swedfund and the Swedish International Development Cooperation
Agency (SIDA). Ericsson exited the investment once it considered the
deployment model to have been proven.
At the time of writing, only two operators (Vodacom and Tigo) were using
SNT services. Vodacom has suggested that other mechanisms for sharing
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 19
roll-out costs – notably assigning regions to each operator to cover, with
national roaming available reciprocally – may be preferred.
Target SNT is reported to be aiming to cover 52 000km2 of rural Tanzania. When
geographical reach SNT was launched in July 2013, it had a coverage of 35 000km2.
and users
Estimated capital No information.
costs
Spectrum The Electronic and Postal Communications (Radio Communications and
assignment model Frequency Spectrum) Regulations, 2011, govern spectrum assignment in the
Tanzanian telecoms market. Spectrum is allocated using a ‘beauty contest’
process through a competitive tender process. The regulator, TCRA, has the
authority to re-farm spectrum to accommodate changes in technologies and
use of spectrum.
SNT is currently using its 900MHz spectrum for 3G services. 4G services
are currently being offered on 800/1800/2600MHz assignments held by the
respective mobile operators.
Benefits/ SNT is designed to help bridge the digital divide in Tanzania. It is reported
advantages of the that SNT’s network is being designed to provide up to 7.2Mbit/s download
proposed network speeds using 3G and 3.5G technology over 800MHz spectrum. Offering this
network on a wholesale basis ensures that the rural communities are not
excluded.
Risks/drawbacks While SNT offers broadband coverage in rural areas, it does not influence
the level of use by members of the rural communities. It is likely that some
further demand stimulation activities may be required. This leaves the
wholesale operator vulnerable to low demand and also to competing
operator-driven initiatives, such as shared reciprocal access.
3.4 Rwanda
Market overview With most of its population living in rural areas, Rwanda has very low
broadband penetration rates. The fixed broadband penetration as at June
2014 was at 0.5% of households.11 The key players in the fixed broadband
market are MTN Rwanda, Broadband Systems Corporation and Liquid
Telecom with estimated market shares of 89.2%, 5.3% and 3.8%
respectively.12 Rwanda’s fixed broadband services are offered primarily
11
Analysys Mason estimates, 2014.
12
TeleGeography Country Report, 2014.
Ref: 2001462-405c .Open-access wireless networks and spectrum assignment | 20
through WiMAX, with limited use of fibre and DSL. Liquid Telecom has
recently announced investment in Rwanda of RWF24 billion (USD35
million) to fund further installation of fibre optic cables.13
The mobile broadband penetration rate was 7.7% as at June 2014. The key
players in this market are MTN Rwanda, Millicom Rwanda and Airtel
Rwanda with respective market shares of 50.2%, 34.5% and 15.3%.
Currently, at least 71% of the population have access to 3G services. The
low mobile broadband penetration rate is reflective of the relatively high
cost of access and low broadband-capable device penetration.14
Government is the major shareholder in Broadband Systems Corporation
(which holds 5.3% broadband market share) through the Rwanda
Development Board. It does not have any further ownership in the
telecommunications sector, having sold Rwandatel to Liquid Telecom in
2013.
Why an open- The government of Rwanda has teamed up with KT Corp of Kenya to build
access wireless a an open-access wireless 4G network through a joint venture called Olleh
network is being Rwanda Networks (ORN). The national broadband policy15 cites the need to
proposed/created expand coverage and access to broadband and offer higher speeds as the
core reasons for the creation of the network. Realising that the private sector
has achieved limited coverage and take-up, the government believes that a
state-owned 4G operator would do a better job than licensing private
operators. ORN’s objectives are in line with the Vision 2020 of Rwanda that
aims to convert Rwanda’s economy from an agrarian economy to an
information-rich, service-oriented and knowledge-based economy by 2020.
Structural model ORN is a joint venture between the Rwandan government and KT Corp of
South Korea. It is the only 4G infrastructure company in Rwanda. There is
no indication of how the equity is split between the two parties.
ORN is a pure wholesale operator, independent of any other operator. Airtel
Rwanda is reportedly16 offering services on ORN, with SIM cards selling
for USD28.40 and data from USD4.25 per GB.
Target ORN aims to achieve 95% population coverage on its LTE network by
13
See http://www.newtimes.co.rw/section/article/2014-09-24/181213/.
14
Research ICT Africa reports that only 19% of adults had Internet-capable mobile devices in 2012. See
http://www.researchictafrica.net/presentations/Presentations/2012%20Calandro%20Stork%20Gillwald%20-
%20Internet%20Going%20Mobile-
%20Internet%20access%20and%20usage%20in%20eleven%20African%20countries%20.pdf.
15
See
http://www.myict.gov.rw/fileadmin/Documents/Policies_and_Rugulations/ICT_Polices/National_Broadband_Policy.p
df.
16
TeleGeography, “KT Corp-backed ORN to unveil open-access LTE network on 1 September”, 26 August 2014.
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