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NCA’s new 4G move; a fix or more mess?

September 13, 2018
in Uncategorized
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The National Communications Authority (NCA) is finally taking steps to ensure that at least each telco gets to come into the 4G space after years of resisting attempts by broadband players and telcos to partner for the purpose.

As a first step, the NCA has just released a roadmap for the sale of the remaining spectrum slot in the 800MHz band that was left after MTN bought one for $67.5 million in December 2015.

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In a statement on its website, the NCA indicated that it has also added some digital dividend spectrum, i.e., spectrum harvested from Ghana’s yet to be realized and embattled digital migration process. That is for another day.

The statement gave potential applicants up to 5 pm on October 8, 2018, to present their applications, and indicated that the whole process is expected to finish by December 23, 2018.

This move comes slightly over a month after NCA Boss, Joe Anokye announced plans by the Authority to fix the somewhat mess created in the 4G space by the same NCA under a different Board, under the previous government.

The Mess 

Here is what the previous Board did:

1. They sold three 4G spectrum slots in the 2600MHz band to three local Broadband Wireless Access (BWA) players at the cost of US$6 million each. The idea was to bring some local content into the industry, so the existing telcos, all of which are multinationals, were denied access, and the spectra went to Ghanaian companies; Surfline Communications, Blu Communications and Goldkey Telecoms.

Till date, it is only Surfline that has managed to do something meaningful with the spectrum. Blu is pretending to exist, while Goldkey, whose CEO allegedly described the license as the most expensive piece of paper he ever bought, has now willed the license to telecoms market leader, MTN with the blessing of the current NCA, who are in the process of sealing the transfer deal, that is if the deal is not already done quietly as usual.

2. The same Board also gave what they called “authorization” to Busy Ghana at a cost of just over a million dollars to roll out 4G in Accra. So three paid US$6million each, but one paid a million plus dollars. Meanwhile, some other companies like Telesol, Zipnet (now Broadband Home) and Comsys, had also been given spectra compatible with 4G under different regimes with lesser fees than what the three BWAs paid.

3. That Board did their worst by selling another 4G spectrum to MTN at a whopping US$67.5 million in December 2015. It was the minimum asking price for the auction of two 2x10MHz slots in the 800MHz band. Only MTN could afford it, out of three bidders, so they walked away with one slot for the minimum price.

Indeed, the telcos (including MTN) and some industry analyst criticized NCA for poor judgement and lack of foresight on that occasion, because only one slot was sold and that meant NCA did not take the realities of the industry and consumer interest into consideration when fixing the price. And that was true because the driving force then, was a need to raise money to meet the June 2016 digital migration deadline, which has since not been met till date. So NCA sold the spectrum at what critics called a “political price” and yet the political deadline for digital migration was still missed. Africa.

So now here is a situation where several players in the 4G space came in under different regulatory regimes at prices that are far apart. Some have a license, others have authorization – what is the difference? Even for some, like Busy Ghana, it is still hard to figure out what their status is. In the NCA’s own books, it does not list Busy Ghana as a BWA, or even an ISP (internet service provider). NCA does not report on Busy Ghana’s 4G activities. So one wonders what the status of that company is. And speaking of reporting, NCA has for a long time now not put out their usual 90-day industry report. Another topic for another day.

Having created this messy situation, that board also left office with a huge scandal, for which the then Chair, Director-General and some two members are now in court. They allegedly pocketed some US$4 million meant to buy spying equipment. The Israeli supplier blew the alarm on them. What a legacy to leave – a messy 4G space and a scandal.

Partnerships blocked 

The situation automatically reinforced runaway market leader MTN’s competitive urge over the other telcos. It was also criticized as a stab in the back of the relatively smaller BWAs, who had not and still haven’t been able to amass the financial muscle to expand and compete. It was like NCA dropped a whale in a fish pond and left the small fish to their own fate. The local content move was completely defeated.

In the bid to survive, the idea of partnering with 4G-hungry telcos like Vodafone, Tigo and Airtel became an option for BWAs. And indeed Vodafone and Surfline presented a partnership proposal to the NCA but it was blocked. Tigo and Comsys also made enquiries about possible partnership but were also given an outright no. The then Chairman of the Board that created the mess explained privately that there was no regulatory framework for such partnerships and that was why they could not allow it.

One would have thought that innovation gives birth to regulation, so as a forward-looking regulator, you take advantage of innovation and fashion out regulation to raise revenue for the state. But it appeared progress was not a priority for that NCA Board. They had their faces to save. They had taken a whopping US$67.5 million from MTN and they had no choice than to protect the interest of MTN. They could care less about the BWAs who paid US$6million, but US$67.5 million is a big deal, and enough to buy any operator the loyalty of any regulator.

In fact, MTN insisted, and rightly so, that if any telco wants to come into space, they must cough up US$67.5 million instead of seeking a cheap backdoor entry through partnerships. Again, even though MTN agreed the spectrum was too expensive, it was also opposed to NCA selling the remaining spectrum for less, unless the regulator agrees to give MTN some refund, which everybody knew was not going to happen.

Ghanaians denied

So till date, millions of Ghanaians who are on the three other networks, Vodafone, AirtelTigo and Glo have been denied access to 4G, meanwhile, 4G spectrum is growing beard and greying in the hands of financially weak BWAs who only need to partner telcos and it will be a win-win situation for all. The state will get cash upfront, and in the form of communication service tax (CST); telcos will invest into spreading 4G to benefit more Ghanaians; BWAs will make some money and telcos will also make some money and both will pay more taxes, and employ more people; everybody is happy.

MTN misses deadline

Meanwhile, as MTN insists the other telcos must also cough up US67.5million, it has also not been able to meet the 4G licensing requirement of selling off 35 per cent of the company to Ghanaians in thirteen (13) months of acquiring the license. MTN got the license by January 2017 and it has been 32 months and they have only sold 10 per cent in a hugely successful initial public offer (IPO). Seventeen (17) months beyond the deadline and 25 per cent have still not been sold.

The licensing requirement said if the deadline is missed, the 15 years licensing period will be reduced by two years, and for every additional year it is missed, another one year will be taken off. So for 17 months missed, the MTN 4G licensing period should be down to 12 years tailing down to 11 years. But MTN cannot really be blamed for the status quo. It was clear from day one that the economy cannot support the sale of such a huge number of shares in such a gargantuan telco within such a short time. So again, was it a matter of lack of foresight on the part of the NCA, or would they be bold to apply the sanctions as stated? NCA over to you.

Fix or more mess?

One can, however, not blame the current NCA Board that much for the mess created by their predecessors. But they also need to be watchful not to create a further mess just to make an obvious, yet unnamed dominant market player happy.

The upcoming spectrum auction is for three 2x5MHz slots, which is inferior to MTN’s 2x10MHz slot in terms of capacity. I simple terms it means at any given time, the number of activities the MTN 4G network can carry is twice what the 2x5MHz holders can carry. So the latter are twice more likely to experience congestion on their 4G networks than MTN is. Simple question, where is the leveller – is it just about getting into the 4G space or actually being able to compete with a player that is already miles ahead? It appears every policy only puts other telcos on a bicycle to play catch up with MTN, which is in a Ferrari.

Secondly, while the NCA wisely excluded MTN from the current auction, it rolled back and said if the auction is not successful, other 800MHz slot holders, like MTN, will be allowed to make an offer for the spectra. NCA has not mentioned the price of the spectra yet but said it is being derived from the price of the one sold to MTN. So if that is understood to mean half of US$67.5 million (US$33.75million), then they might still be gearing up to create a bigger mess because the telcos have said that even at half the price, they can’t afford it. On the contrary, MTN, which is touted as the only real profitable telco in the country, has sworn to acquire as much spectrum as is made available.

5G here

Meanwhile, 4G is soon about to lose its superiority as 5G is already here. So while NCA may now have seen the light and the need to give Ghanaians access to a spectrum that belongs to them, soon the conversation in Ghana will change to 5G, so some local telcos are already talking about 5G and really considering waiting to acquire a 5G license and make a straight jump from 3G to 5G instead. The hard truth is MTN and the other 4G players are not showing any significant growth in activity and improved quality of service on their 4G networks, so it remains to be seen if the other telcos will bid for the relatively low capacity 2x5MHz slots.

Elsewhere in the world, 5G has been tested extensively. Ericsson has recently put out a report spelling out the huge financial gains that await operators who will invest early in 5G. The report shows while revenue growth in the industry is generally stabilizing at around 1.5 per cent per annum, a significant chunk of that is expected to come from 5G. Here in Ghana, not much improvement, in terms of customer experience and revenue for telcos has been seen from 4G, and yet NCA is now picking up the pieces from a messy 4G space and putting the country in a position to play catch again on 5G. Africa.

Tech neutrality

This whole matter has thrown some bigger-picture industry issues into focus. The issues of techneutrality and the need to name a dominant market player. Techneutrality (technology neutrality) in simple terms, suggests a regime where NCA issues a one-time license that allows industry players to deploy any suitable technology, 2G to 5G and beyond without having to always wait and pay for a fresh license before deploying technology. The NCA can then regulate the deployment to ensure sanity, but not fresh license for fresh technology. It helps telcos to even re-farm their existing redundant spectrum to deploy higher technology where possible. It is a leveller.

Dominant player

Again, in simple terms, declaring a dominant or significant market player means, based on a number specific indicators, it is obvious that one or a number of players have undue competitive advantage over others, so in order to prevent a quasi-monopoly, the regulator declares a dominant player and applies what is known as anti-trust rules to prevent that player from using its dominance to bully other players.

Such a move helps to level the playing field to a large extent, so if the NCA’s focus in this new 4G license auction is to level the playing field, as the Director-General announced, then it must put its money where its mouth is and attempt the full ten yards. Whereas industry analyst argues that the conditions currently exist for a dominant player to be named, NCA is rather dropping a hint that if the current auction fails, the market leader, MTN stands a chance of acquiring the spectrum to stretch its lead even further. How would that level the playing field, if the NCA’s focus is to sell at all cost, no matter the negative impact it might create.

As things stand now, the auction seem to have been designed just to favour the three telcos who do not have 4G. The auction is supposed to throw up three top bidders, who will then negotiate with NCA for a final sale price. If things go as being perceived then, by close of this year, Vodafone, AirtelTigo and Glo should have 4G licenses. Their slots are great for coverage but still inferior to that of MTN in terms of capacity. Again, the leveller effect partially defeated.

BWAs 

But it still remains to be seen what NCA intends to do with the woefully under-utilized licenses of the BWAs. As the telcos may get their own 4G licenses, the prospects for partnerships between BWAs and telcos have dwindled slightly. It is however important that NCA opens the window for partnerships so that those interested can go for it. After all, the NCA has blessed the MTN-Goldkey deal, so why not Vodafone-Surfline, AirtelTigo-Comsys, Vodafone-Busy Ghana and many more?

Source: AdomOnline

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