With Telkom having held the country to ransom following its privatisation in 1997, government has taken a leaf out of Terminator and is building another giant to take it on.
Concerns are being raised that Broadband Infraco, like Telkom, will be set loose with good intentions but turn into a monster. The question on everyone’s lips is: what is going to stop Infraco from going rogue too?
The government is saying just trust us. But in a sector where government policy and interventions have been dismal failures, stakeholders are sceptical.
The cause for concern is that Broadband Infraco, former public enterprises minister Alec Erwin’s big solution to Telkom’s stranglehold on international and long-distance national connectivity, is applying for two licences that would allow it to compete in the infrastructure and retail markets.
What this could result in is a giant with R950-million of taxpayers’ money taking on private operators and distorting competition.
The Department of Public Enterprises’ director general, Portia Molefe, insisted last week that the parastatal would stick to its legislated mandate of seeking only a minimum rate of return for government’s investment.
Internet Solutions’s director of regulatory affairs, Siyabonga Madyibi, vehemently pointed out to Icasa during its public hearings this week on Infraco’s licence application it couldn’t just sit back and take Infraco’s word that it will not behave in an anti-competitive way.
“They are using our money as taxpayers, so why should they get a licence like other commercial operators?” asked Madyibi. “If you create another Telkom or Neotel you will have failed to protect the market. Let’s not leave it to the conscience of Infraco to do good in the market.”
He argued that Infraco should receive only an individual electronic communications network services licence, which would allow it to compete in the infrastructure space, and not an individual electronic communications services licence, which would also allow it to be a player in a retail capacity.
But many stakeholders at the hearings felt that Icasa’s award of a licences to Infraco was a fait accompli because of political will. The best they could hope for, they said, was that the licences would stipulate stringent terms and conditions that would limit the damage Infraco could do if it deviated from its mandate.
Infraco’s presentation to Icasa indicated that it plans to service large corporate customers and government entities, which means that when it receives its licences it will be competing directly with the larger operators in the sector.
Stakeholders are also fearful of what might happen with Infraco further down the line. The Internet Service Providers Association’s regulatory adviser, Dominic Cull, said that it had no problem with Infraco receiving both licences, but argued that the licences should have strict conditions.
“We have no concerns about where Broadband Infraco is now,” said Cull. “We have a lot of concerns where Broadband Infraco will be in five to 10 years. We have concerns that it will use its licence in the future to distort competition,” he said.
These concerns appear warranted.
In a recent interview in Brainstorm Magazine, public enterprises consultant and Infraco board member Cornelis Groesbeek said the reason that the Broadband Infraco Act includes a privatisation provision is to prepare for the time when the intervention was no longer required.
“This could be as soon as 10 years from now,” Groesbeek was quoted as saying.
So in 10 years the government may set another Telkom loose on the sector by privatising it and then cry foul when it doesn’t act in the best interests of South African consumers.
Broadband Infraco: the facts
Brought into existence by the Broadband Infraco Act of 2007, Infraco’s mandate is defined as “expanding the availability, capacity and affordability of access to electronic communications”.
This includes servicing “underdeveloped” areas and must be based on “international best practice and pricing”.
Infraco is in effect a wholly owned government entity — 74% is held by it and 26% by the Industrial Development Corporation.
It has a long-distance network in South Africa of 11 700km, 135 long-distance sites, 14 main points of internet access in metro areas and regional connectivity to five neighbouring countries.
On top of this, it is a major driver of and an investor in the West Africa Cable System (Wacs), which is set to dwarf Seacom with three times more capacity than the private cable that is set to go live later this month.
Department of public enterprises Director General Portia Molefe announced last week that Broadband Infraco held a 12% share in the Wacs cable, which is set to cost $640-million (R6.1-billion) to build.