Spectrum Auction. What is that and how does it work?

Telecommunication companies cannot operate as they please. These companies, like RocketNet, need to receive a license from ICASA (Independent Communications Authority of South Africa) to operate and use designated frequencies. These frequencies, sold on a spectrum auction, are what enable Vodacom users for example, to connect their registered devices to the Vodacom network. Each network operator will have a designated frequency supplied to them so they can provide services like internet connectivity to their customers.

First, what is spectrum

what is spectrum

Spectrum is radio frequencies utilized by telecommunication, television and radio stations as well as a host of other industries to provide digital services to customers. These frequencies need to be specifically allocated, as each frequency can handle only so much traffic. If too much traffic travels on the same frequency complications will occur.

As there is only a limited amount of traffic bandwidth available for each frequency, ICASA hosts spectrum auctions where frequencies are sold off to the highest bidder. ICASA will provide the highest bidder of a specific frequency with a license to operate with that frequency.

947 and spectrum love you

As an example, the radio station 94.7FM, who loves you, has received a license from ICASA to use and broadcast over the 94.7FM frequency. No other company may broadcast or utilize this frequency other than 94.7FM. It is a criminal offense to use a frequency without the necessary license from ICASA. Even the frequencies used by SAPS are managed by ICASA.

947 loves you
94.7 is a frequency

Not all frequencies require a license from ICASA to be used. ICASA has set aside frequencies that are authorized to be used for free by the general public. For example, when you buy a set of walkie talkies, those walkie talkies utilize a certain frequency, but you do not need to go and bid for that frequency at a spectrum auction because the frequencies they use will not interfere with licensed frequencies.

ICASA manage all spectrum

At the time of writing this blog ICASA is set to hold an auction allowing telecommunication companies to bid for their share of the 700MHz, 800MHz, 2.6GHz and 3.5GHz spectrum bands. The purchase of these spectrum bands will allow these companies to continue to roll out services including the 5G network. 5G is the fifth generation of mobile communication standards. 5G, according to experts, will allow for internet speeds of up to ten times that of 4G.

icasa
ICASA manage all spectrum

There was some controversy over this recent spectrum auction. E-TV argued that it would be impossible for television broadcasters as well as telecommunication providers to share the same spectrum on 700MHz and 800MHz bands. The Pretoria High Court halted the process of the spectrum auction after hearing the argument. ICASA argued that the spectrum auction is necessary because it will enable network providers to lower data costs, expand the 4G network and roll out the new 5G technology. It will be interesting to see how this one plays out.

Spectrum auctions are not only held in South Africa

Much like South Africa, the United States of America hold similar spectrum auctions for their network providers. In the USA the industry is regulated by the Federal Communication Commission (FCC). The spectrum auction held this year (2021) by the FCC included over 97 rounds of bidding in what has been the most important auction for telecommunication companies in terms of market dominance and competition.

Spectrum auctions in the USA
Spectrum auctions in the USA

The FCC stated that the spectrum auction generated a massive $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. The latest spectrum auction was held to give bidders access to mid-band spectrum which would be more beneficial to consumers using 5G.

The $81b spent on the FCC spectrum auction more than doubles the amount of money spent on the previous auction.

Spectrum is in high demand

Due to its lightning fast download and upload speeds, 5G has become the next big thing in terms of smart device connectivity, communication and entertainment. With promises that a 4K movie can be downloaded within seconds, customers are eager to receive the next generation network capabilities and the network companies are biting at the bit to get the limited amount of spectrum available.

in high demand
Spectrum is in high demand

Due to the limits on supply of the spectrum, and the limited amount of traffic each spectrum band can handle, these companies are throwing down eye watering amounts of money at spectrum auctions to get what they can. Becuae the more spectrum you have for 5G capability, the more consumers are going to use your network and the more money companies will make on their investment.

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