Do Open Access wireless networks threaten competition and investment?

Alison Gillwald · Broc Rademan · Steve Esselaar

Policy Brief 5, 2016

Despite its policy currency globally there is little evidence that mandatory open access networks have contributed to public policy objectives of increased competition in services, decreased pricing and higher levels of demand stimulation. In fact, a growing body of evidence from mature markets indicates that the adoption of mandatory open access network strategies may come at the expense of other public interest objectives such as investment and innovation. Further, where such measures have been implemented in mature markets of the European Union, for example, countries have the institutional capacity and competencies to implement and enforce mandatory open access, which is not the case in many jurisdictions in Africa.
The lacuna in South Africa’s national broadband policy on how to implement open access in order to contribute to national policy objectives prompted Research ICT Africa (RIA) to investigate whether open access strategies could be the policy and regulatory panacea to poor network extension and high costs of broadband . It finds that while mandatory open access interventions have failed, voluntary commercial open access models have contributed more effectively and efficiently to national objectives of network extension and wholesale cost reductions. Both commercial open access international undersea cable companies and terrestrial fibre companies challenged closed, incumbent networks by making investments on an open access basis and strongly contributing to the extension of broadband networks.
With the leading wholesale open access wireless network trials and early implementation in Mexico, Kenya and Rwanda having not taken off, South Africa should exercise caution in enforcing such an open access model. Rather than creating mandatory open access fixed and wireless networks or regimes that may take time to institute and may not be effectively enforced, and which may inhibit network investment and innovation at a time that it is most needed, high demand LTE spectrum should rather be urgently released to operators. Conditional auctioning of the spectrum should require underserved areas without broadband coverage, or uncompetitive coverage, to be serviced before the winning bidders can deploy the LTE spectrum in more lucrative urban markets.

Highlights:

1. With multiple competing demands on the fiscus, the state does not have the resources to build, implement or manage broadband networks–open access or other. In financially constrained conditions, wh e re neither the public nor private sector can independently meet South Africa’s broadband needs, the state can leverage public and private sector investments to create an enabling environment for competition and meet national broadband policy objectives as proposed in the national broadband plan. In fact, the policy proposes the rationalisation of all state-owned networks in the sector.

2. There is little rationale for a mandatory open access wireless network in South Africa. Though prices are high and probably require more effective wholesale regulation, competitive investment is responsible for the pervasiveness of mobile networks in Africa. Enabling greater participation by historically disadvantaged individuals and SMMEsis better achieved in other parts of the sector, potentially through requiring operators to provide access to services and app developers. The challenges of reaching ‘uneconomic’ areas are better achieved through a qualified auctioning of high-demand spectrum that requires operators first provide services to underserviced areas before they are able to dep l oy 4G and 5G spectrum in the more lucrative urban areas.

3. Private fibre companies have voluntarily adopted commercially-driven open access principles in order to maximise their returns on investment by getting as much traffic through their networks as possible. As indicated in SA Connectthrough incentives such as aggregating public sector demand to provide long-term anchor tenancies broadband services competitively to uneconomic areas.

Suggested citation

Gillwald, A., Rademan, B., & Esselaar, S. (2016). Do Open Access wireless networks threaten  competition  and investment? (Policy Brief No. 5). Research ICT Africa. https://researchictafrica.net/polbrf/Research_ICT_Africa_Policy_Briefs/2016_Policy_Brief_5_Open_Access_wireless_networks_in_South_Africa.pdf