Spectrum Auctions and how they work.

Spectrum Auction

Telecommunication companies cannot operate as they please, in fact each network operator needs a designated frequency, supplied to them by the government, so they can offer network services to their customers. As a result, telecommunication companies need a license from ICASA (Independent Communications Authority of South Africa) to use designated frequencies. Furthermore, these frequencies get bought at Spectrum Auctions and provide end users with network connection.

Definition of Spectrum

Spectrum is radio frequencies that empower service providers to sell digital services, utilised by sectors like telecommunication, television and radio stations. Each frequency handles a limited amount of traffic. If too much traffic travels on the same frequency, complications will occur.

Frequencies get sold at Spectrum Auctions

Frequency allocation happens at a Spectrum Auctions. Each frequency has limited bandwidth purchased from ICASA at the auction, by the highest bidder. ICASA will provide the purchaser of a frequency with a license to operate exclusively with that frequency.

Frequencies and crime

For example, the radio station 94.7FM has a license from ICASA to use and broadcast over the 94.7FM frequency. No other company may utilise this frequency, and it is a criminal offence to use a frequency without the necessary license from ICASA purchased at a Spectrum Auction. 

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Frequencies used by SAPS get managed by ICASA.

Free Frequencies

Not all frequencies require a license from ICASA purchased at a Spectrum Auction. ICASA allocates specific frequencies for use by the general public for free. For example, when you buy a set of walkie-talkies, those walkie-talkies utilise a specific frequency. 

Free frequencies

Spectrum Auction in 2022 and the benefits

In 2022 South Africa held a widely celebrated, high-demand Spectrum Auction. The auction could lead to lower communication costs, wider network coverage in rural areas, better network quality and improved competition. 

A Spectrum Auction of this nature has great benefits for the economy. The national fiscus received a much-needed boost as mobile network operators poured billions of rands into purchasing the highly sought-after spectrum. The auction took one week to conclude and raked in R14.4b.

The spectrum allocation will provide an array of economic advantages. These advantages include fifth-generation internet (5G), reducing mobile data costs and improved internet connection for all citizens.

Cyril Ramaphosa stated in an article by Engineering News that,

The conclusion of the auction of high-demand spectrum for mobile telecommunications is a significant milestone in South Africa’s reform agenda, which will drive growth and transformation in the economy and modernise and transform key network industries such as energy, telecommunications, transport and water provision”.

Spectrum Auctions around the world

The USA Spectrum Auction held in 2021 had over 97 bidding rounds. It was the most crucial auction for telecommunication companies in the US at the time. The Federal Communication Commission (FCC) is like an ICASA regulating the USA spectrum industry. 

The FCC stated that the spectrum auction amassed $81b in revenue from 21 different bidders. Amongst the top bidders were Verizon, who spent a whopping $45b and AT&T, who spent $23b. 

Even though network providers in the USA have already started rolling out 5G networks, they have done so only on low-band frequencies. In effect, this spectrum auction gave bidders access to the mid-band spectrum providing benefits to customers using 5G.