Government shelves the Woan

The cabinet has scrapped plans to launch a wholesale open-access network (Woan), terminating a controversial scheme government first introduced years ago that it was hoped would increase competition in South Africa’s mobile market.

The decision, which was endorsed at a cabinet meeting on Wednesday, serves to knock out one of the key pillars of Telkom’s lawsuit against communications regulator Icasa over the licensing of broadband spectrum – that case is set to be heard in the high court next month.

A statement from the cabinet, issued on Thursday morning, said that it “approved the amendment of the policy on high-demand spectrum and the policy direction on the licensing of a Woan to be published for public comment”.

“The proposed amendments remove the requirements to license the Woan,” the statement said.

That means the Woan, long a key policy plank of the ANC’s for South Africa’s telecommunications industry, is dead. The decision to scrap it comes after the only high-profile example of a Woan elsewhere in the world, Mexico’s Red Compartida, went bust last year.

Altán Redes, the company developing Red Compartida, filed for bankruptcy in July 2021. The network was created to curb the dominance of América Móvil, controlled by billionaire mogul Carlos Slim.

South Africa’s planned Woan — a much-derided concept among local operators and telecoms experts — was partly modelled on Mexico’s experience. It was lauded by former communications minister Siyabonga Cwele, who even reportedly travelled, with a South African delegation, a few years ago to meet with Mexican officials to learn about that country’s experiences.

No support

The Mexican plan had often been held up by the South African government as an example of a successful Woan, the type of network it was keen to roll out in an effort to make the local telecoms market more competitive – government has long bemoaned Vodacom and MTN’s market “dominance”.

The Woan was set to enjoy special offtake agreements mandated by government, as well as cheap access to spectrum. The rules meant that Vodacom and MTN would have been required to buy 30% of the new entity’s available capacity. Cwele had previously wanted to gift the Woan a monopoly over new spectrum, threatening investment in South Africa’s telecoms industry. The minister was removed from the portfolio in 2018 by President Cyril Ramaphosa. It’s understood the idea of a Woan has not garnered the support of the current minister, Khumbudzo Ntshavheni.

Few commercial entities have publicly expressed interest in investing in the Woan. A notable exception was Remgro’s telecoms infrastructure business, CIVH. Telkom also previously showed an interest in the Woan, though made no firm commitment.

The cabinet’s decision to support the scrapping of the Woan comes in the same week that Icasa auctions spectrum to mobile operators to provide broadband services. The long-awaited auction is expected to conclude by the end of the week, with the cabinet also saying in its statement on Thursday that the “licensing of high-demand spectrum remains critical to the country’s economic recovery drive”.

However, the partially state-owned Telkom is challenging the regulator on several grounds, one of which is (or was) uncertainty surrounding the licensing of the Woan.

Telkom said in court papers filed earlier this week that the licensing of spectrum for the Woan and the auction of spectrum to commercial operators was “interlinked” and therefore could not be dealt with separately.

“Given the linkages, the rational and competent thing to do, even now, would be to complete the Woan-related studies with an open mind and maximal flexibility to change the parameters of both the IMT (mobile broadband spectrum) and Woan processes to maximise the chances of a value-maximising Woan and value-maximising IMT auction,” Telkom said in a responding affidavit to parties to the litigation. “A delay to accommodate this study would not cause any fatal damage to the South African mobile market. Nor would it confer any lasting advantage to Telkom.”  — © 2022 NewsCentral Media