[kictanet] Sharing the airwaves: can Kenya’s 4G partnership work?

Tue Dec 21 09:39:07 EAT 2010

Alice,

Interesting Policy decision - I didnt know the govt/regulator had opted to place the 4G airwaves (the 2.6Ghz Band?) under a "managed-infrastructure" arrangement. As Russell rightly puts it in his analysis -  its quite a risky proposition.  I can expect the big players not being too comfy having to "hire" bandwidth/network resources from a 3rd party in order to deploy their 4g services, but at the same time the small players would be extremely happy to run 4g services on a "hired" basis. (By the way, I thought Safcom already had 4g license a while back..)

And yes, more problems for the Regulator - how do you "manage" the "managing agent" who is licensed to hire out the bandwidth? How can you ensure that the managing agent is not provisioning the infrastructure in a way to hurt or favour one of the Operators i.e is not biased? An even before that, what criteria is used to identify the managing agent (auction, beauty contest, political contest?)

mmhh..I guess more qtns than answers.

walu.
--- On Mon, 12/20/10, Alice Munyua <alice at apc.org> wrote:

From: Alice Munyua <alice at apc.org>
Subject: [kictanet] Sharing the airwaves: can Kenya’s 4G partnership work?
To: jwalu at yahoo.com
Cc: "KICTAnet ICT Policy Discussions" <kictanet at lists.kictanet.or.ke>
Date: Monday, December 20, 2010, 10:27 PM

  http://www.analysysmason.com/About-Us/News/Insight/Kenya_4G_partnership_Dec2010/?journey=117,55,

      Sharing the airwaves: can Kenya’s 4G partnership work?

        20 December 2010

           “Making this 4G plan work will be a challenge for
            the selected network manager ... and for those charged with
            monitoring its performance.” 

          The Kenyan government has recently put forward a plan to
            simultaneously promote cost-effective use of the 2.6GHz band
            and save operators from having to spend money in an auction.
            The plan is to offer the management of the band (up to
            190MHz of spectrum, which is suitable for high-speed mobile
            data services) to an independent company in order to create
            an open access wholesale network. Operators would purchase
            capacity from the company, and bundle it into packages and
            products that they would sell in a competitive market to
            retail customers. The end result would be a single, highly
            utilised network with low unit costs.
          The plan sounds good, but the country’s government could be
            ‘jumping from the frying pan into the fire’.
          The frying pan may not have been that bad, after all
          Why does the Kenyan government feel wary of assigning
            spectrum to individual operators? The reasons suggested by
            Bitange Ndemo, Permanent Secretary of the Ministry of
            Information and Communications, include:

            high prices paid in an auction lead to high prices
              charged to consumers
            operators failing to honour roll-out commitments
            an auction would have 19 potential buyers and room for
              only three winners, so would discriminate against those
              that could not afford it.

          Do high auction prices lead to high prices for consumers?
            Actually, it is the other way around: if operators can
            charge high prices, they will be willing to place high bids
            at auction. Service providers can charge high prices if
            there is limited supply of their product or of reasonable
            substitutes – and low auction prices do not guarantee low
            service prices. Furthermore, it is possible to design award
            processes to achieve ends other than extracting maximum
            revenue.
          The 2.6GHz spectrum is unlikely to attract 19 serious
            bidders, given that it is relatively poor for providing
            coverage outside urban areas. A new entrant operator that
            aims to launch services based on this spectrum may be aiming
            to target a niche, such as medium-sized and large
            enterprises in urban areas. Giving them a chance to do this
            may be useful, but not as useful in expanding access to
            broadband as, for example, raising money in an auction to
            fund rural access.
          Think carefully before jumping into the fire
          Kenyan policymakers have correctly identified that greater
            supply (and more competition) is the key to reducing mobile
            broadband prices. They have also commendably declined to
            squeeze auction revenue out of operators. However, their
            solution turns away from infrastructure-based competition,
            which has revolutionised the telecoms industry during the
            past few decades. Will their alternative approach, which
            focuses on retail competition, work?
          The bad news is that pure wholesale business models for
            mobile data have not done well in the past. Reasons include
            difficulty in developing ‘one-size-fits-all’ wholesale
            tariffs, absence of profitable voice services, and
            dependence on the strategy and performance of other
            operators.
          The better news is that network-sharing deals can work.
            Operators around the world are signing deals to share radio
            access networks.1 In all likelihood the critical
            feature is that the retail operators have a strong interest
            in the entity that runs the network: financial interest to
            ensure that it makes a success of the services, and
            management interest to allow flexibility and tailored
            ‘tariff plans’.
          Tantalisingly, the arrival of Indian-style telecoms in
            Africa (led by Airtel, among others) may naturally lead to
            greater sharing (and price cuts), without the need for
            government intervention.
          It is clear that making this 4G plan work in Kenya will be
            a challenge for the selected network manager (a “group from
            the USA” has been mentioned as a candidate). It will be even
            more of a challenge for those charged with negotiating an
            agreement and monitoring its performance.

          This Insight article is based on an interview conducted
              by Russell Southwood for Balancing Act Africa. Please click here to view the
              full article.
          Analysys Mason has experience in developing concrete,
              coherent national
                broadband plans and in spectrum
                policy and auctions.

          1 For further details, see
            Analysys Mason's Insight article Wireless
                infrastructure sharing saves operators 30% in capex and
                15% in opex.

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