Plans are in the pipeline for the South African government to establish its own telecommunications network, a move that could see increased competition for SA's fixed-line utility Telkom. State IT Agency (SITA) CEO Mavuso Msimang says the agency holds a private telecommunications network licence, and is looking at a project to establish a private telecoms network for government.

While, at this stage, no definite timelines exist for the project, Msimang is adamant it will go ahead in the near future, with SITA or another telecommunications company taking on the role of service provider to government.

Despite the fact that government is a 37% shareholder in Telkom, the State is seeking to cut costs and lower telecoms prices within the South African telecoms market, he adds. Should government establish its own private network, the fixed-line utility stands to lose millions in annual revenue. “Government can save a lot of money by running its own network,” Msimang says.

Reluctant to give many details at this stage, he points out that convergence within the local telecoms market would be a key driver for the project, with government seeking an Internet Protocol-based network for data, voice and video transfer. Msimang says large government buildings, for instance, have hundreds of separate telephone lines, which is a “waste of money”.

Africa Analysis telecoms analyst Dobek Pater says that, since its inception, SITA has been expected to provide communication services to government, but was not, until now, positioned to do so. “Thus Telkom took over some of the services, until SITA was revamped. But it makes sense that government would expected SITA to provide a comprehensive VOIP service, allowing for cost reduction,” he says. Pater believes it is unlikely that government would rely on WiMAX technology for its network, but would rather continue to use Telkom's fixed-line fibre optic infrastructure.

“I imagine that Telkom's state-of-the-art MPLS technology would be used for IP data. Wireless access would probably only be practical in terms of access to remote locations. It's unlikely that SITA would set up its own infrastructure, as it is not a public operator,” Pater says. While Telkom would lose a lot of revenue if it lost the government contract, Pater says, government, as a stakeholder, would not be affected.

“Government would still benefit from the dividend from its share in Telkom. Decreased revenue for Telkom would also be offset by lower taxes that government would be paying, as well as its reduced costs,” he points out. However, he says the possibility exists that Telkom could counter offer with a VOIP service and receive the management and provision contract for the government network.