ERWIN COMES TO THE RESCUE ON THE BROADBAND WAGON IN SOUTH AFRICA

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Details are still sketchy about what government intends to do with Infraco, a new company it unveiled last week to lower the cost of broadband.

Which assets are in the company, who will be allowed to buy its bandwidth, what plans there are to extend its reach, and when it will start operating are among the great unknowns.

The hard facts are few: its core asset is a national telecoms backbone built by Eskom, and R627m has been budgeted to develop the new state-owned entity.

Anyone craving further details must wait until the end of the month, when Public Enterprises Minister Alec Erwin will clarify his plans. What Erwin has said is that Infraco is essential to make SA's hi-tech sector globally competitive by rapidly increasing the availability of broadband and decreasing its cost to introduce "a genuinely competitive" supply of bandwidth.

It is not surprising Erwin deems it necessary to step into the telecoms arena, given the failure of his colleague, Communications Minister Ivy Matsepe-Casaburri, to usher in better and cheaper services. Despite her years in office, telecoms remain extraordinarily expensive, and President Thabo Mbeki's repeated calls for cost reductions have washed over her.

In May, Matsepe-Casaburri surprised everyone, including Sentech, by saying the state-owned signal carrier would become the core of a national wireless broadband network to provide voice and data services, especially to rural areas. Little has happened since then.

Matsepe-Casaburri also decreed that bandwidth on the crucial Sat-3 undersea cable linking Africa to Europe should be sold to all operators at a cost-based price. The industry is still waiting.

Cue Erwin, with plans of his own. His department's direct intervention should significantly lower the cost of broadband by supplying long-distance and international networks, he said. What the communication department's policy of "managed liberalisation" may achieve in a few years, Infraco would achieve by early next year, he claimed.

The creation of Infraco should bring much-needed competition to a market still shackled by Telkom's dominance, although industry players are concerned that it is yet another government-owned entity.

The lack of detail makes it difficult for the current players to comment. Telkom issued its usual bland statement that it welcomed competition and the expansion of broadband access to a broader section of society.

Telkom's new rival, Neotel, was also taciturn, saying the news "does not affect Neotel's business and strategy model". Neotel would continue to provide connectivity to internet service providers and other suppliers of voice and data services. If providing connectivity to its customers required Neotel to lean on the high-capacity network of Infraco, it would do so as it had full access to it, its statement said.

Democratic Alliance spokeswoman Dene Smuts believes the plans for Infraco must be debated at public hearings.

"I do not blame minister Erwin for setting up as telephone minister number two, given communication minister number one's shortcomings," she said. But the sector needed certainty, and it was unclear how Infraco related to government's earlier move to budget R1bn for Sentech to roll out a broadband network.

"Is Erwin taking us back to a giant state telco or does he just want to offer cheap wholesale capacity to all players?" Smuts asked.

Clearly, one of Erwin's aims is to help Neotel become a successful rival to Telkom. But that will demand careful regulations, otherwise Infraco could destroy Neotel's business by stealing its customers. If SA's hundred-or-so internet service providers can buy bandwidth from Infraco, Neotel's plan to serve those customers itself will be scuttled.

Erwin said Infraco would make the necessary investments to serve the needs of Neotel and speed up the introduction of Neotel's services. That would have a positive effect on the availability and cost of broadband, he said.

Infraco will house the national fibre-optic networks built by Eskom and Transnet. It is not clear if that means reversing a deal that saw Neotel buy Transnet's inner-city fibre-optic network for R256m. However, the inner-city networks may remain within Neotel, with only the national networks folded into Infraco.

Neotel uses the network it bought from Sentech as the basis for its connectivity services, and also leases capacity on Eskom's network. Government initially planned to sell Eskom's R748m network to Neotel but changed its mind, apparently to save Neotel from having to inflate its fees to recoup an initial heavy outlay. Now Neotel will access Eskom's backbone through the new network wholesaler.

Business Day