South Africa’s Department of Public Enterprises intends to create a broadband infrastructure company — called Broadband InfraCo — based on the long-distance fibre-optic network created by power parastatal Eskom and transport parastatal Transnet, says Minister of Public Enterprises Alec Erwin.
Replying on Monday to a question from Democratic Alliance MP Dene Smuts, the minister said for South Africa to participate effectively in the global ICT sector and its related industries such as contact centres and business-process outsourcing (BPO), it is essential to address three fundamental ICT challenges.
They are the limited access to and high cost of broadband, the uncompetitive prices of broadband internationally and the digital divide between the first and second economy.
Erwin said that research “has shown that long distance and international communications costs are the key reasons for high broadband costs in South Africa”.
“Therefore, any intervention structured to address tier one [national long-distance connectivity] and tier three [international] cost structures would have a significant impact on the affordability of broadband in South Africa,” said Erwin.
“The tier two [telecommunications access infrastructure] market is already sufficiently competitive to ensure competitive market pricing at this level.”
He said the recent promulgated Electronic Communications Act of 2006 (ECA) laid the foundation for liberalised telecommunication industry, “the impact of which will become evident over the next few years”.
The formation of Broadband InfraCo utilising the long-distance assets deployed by Eskom and Transnet is a direct intervention to rapidly reduce one of the key cost elements of broadband — national long-distance connectivity.
While liberalisation will achieve this over a few years, InfraCo would achieve this by early 2007.
“Broadband InfraCo will be registered as a schedule two public company,” he reported. “This is [a] commercial enterprise with a strategic intent, and as a result is designed to deliver a return that will be sufficient to be self-funding in terms of future expansions but with no intention to maximise profits.
“The move is expected to result in a rapid movement towards an international comparable ICT market, where operators compete for customers based on service and prices, whilst using significantly common infrastructure.
“InfraCo is not expected to negatively impact on the liberalisation process in South Africa, [and] on the contrary is expected to fast track the emergence of a globally comparable ICT market. Efficiencies are achieved in the use of common infrastructure in network industries, which is what Broadband InfraCo offers.”
Erwin reported that InfraCo would be specifically focused on long-distance infrastructure, and will not be involved in the urban or last mile infrastructure, “where the ECA will promote strong competition”. — I-Net Bridge