It appears the department of communications’ grand plan for Sentech to become a key player in the broadband market is not going to come to fruition any time soon.
Once again, Sentech has been overlooked in the budget, and it will not be receiving the capital investment it requires from government to institute its wireless broadband rollout.
Finance Minister Trevor Manuel did point out in his recent budget speech that adjustment budgets, in September 2007, would include allocations for Sentech’s investment requirements, but went on to add that any allocation would be dependent on business plan approval and the resolution of outstanding regulatory requirements.
This snub is another sign that the government does not view the role Sentech can play in delivering affordable broadband as particularly significant. It sees the paraÂstatal’s main priority as delivering wireless broadband to education and health services.
In addition to not receiving any of the money requested from government for wireless broadband rollout over the past few years, Sentech was prevented from borrowing R1billion from a major bank to build a national wireless broadband backbone.
Sentech’s role in broadband delivery was a plan devised by Minister of Communication Ivy Matsepe-Casaburri, but it appears to have been sidelined in favour of Public Enterprises Minister Alec Erwin’s plan for a cost-based infrastructure company.
Broadband Infraco, as the entity is now known, was mooted by Erwin as a strategy to bring down broadband costs after initial plans to sell the Eskom/Transnet full service network to the second national operator, Neotel, hit a snag when some investors were unable to raise the needed finances.
Under the new strategy, Broadband Infraco, owned by government (74%) and VSNL (26%), will purchase the network and lease capacity on it to Neotel, which is partly owned by VSNL’s parent company, Tata.
Broadband Infraco has not received additional funding for the 2007/08 financial year, following the R627million that was allocated in the medium-term budget to facilitate the purchase of the full service network.
However, in his budget speech, Manuel did point out that a contingency reserve of R3billion has been set aside for 2007/08, which will accommodate allocations to several state-owned enterprises that are not yet finalised.
Treasury Director of Public Finance, Ilse Karg, says R340million from this reserve has been provisionally allocated to Broadband Infraco.
Manuel’s adjustment budget will include further equity contributions for Infraco, depending on the approval of the business plan.
It has been suggested that poor performance in the wireless broadband sector over the past year has eroded confidence in Sentech.
Communication department Director General Lyndall Shope-Mafole told the Mail & Guardian that government had to make sure Sentech was not competing directly in an area where the private sector can play a role in bringing down prices.
Shope-Mafole suggested that Sentech’s wireless broadband rollout will be prioritised for non-retail services (those provided to schools, hospitals and other government services).
Matsepe-Casaburri reinforced this view in a statement after her recent presentation before the parliamentary portfolio committee.
Sentech spokesperson Pranill Ramchander insisted, however, that the parastatal will be competing with major broadband players, and that non-retail services will be complementary to its wireless broadband strategy.
Ramchander said Sentech CEO Sebiletso Mokane-Matabane had received confirmation that the communications department and national treasury were finalising the details of funding for its broadband rollout.