Ministerial spokesman Gaynor Kast says the mandates of the two State-owned enterprises (SOEs) were largely "complementary", as InfraCo would comprise a national fibre optic cable network while it was Sentech's intention to provide wireless broadband connectivity in SA's metro areas as well as those areas where it wasn't cost effective to lay fibre.

Finance Minister Trevor Manuel allocated R647m to InfraCo in his October medium-term budget policy statement and there's since been significant speculation concerning what the role and function of the new SOE would be. Kast said the full details with regard to InfracCo's operations would only be released early next year, though it would be operational from January 2007.

Some commentators have questioned whether Government is the most efficient body to provide cheaper broadband for SA rather than leaving it to a more competitive private sector in an increasingly liberalised market.

But Kast says all Government is doing is utilising State-owned assets to force the cost of bandwidth down to a level that would stimulate and sustain economic development. "To date, the private sector has failed to deliver on that objective - hence the intervention by Government." That intervention, she says, wasn't unique to SA, with countries such as India, South Korea and Malaysia going down the same path in the past.

For example, South Korea has long been seen as a good example of the potential to significantly increase broadband penetration and its positive effect on its economy.

Kast says Government didn't consider it a conflict of interest that it owned stakes in major telco operators, including Telkom, Neotel, Sentech and soon InfraCo.

Public Enterprises Minister Alec Erwin said at the time of Manuel's budget allocation to InfraCo that it would speed up the introduction of Neotel's services. It would also enable Government to secure the necessary broadband capacity in the ongoing preparation for bandwidth hungry projects such as the Square Kilometre Array (SKA), the world's most powerful radio telescope (which SA has been short-listed to host), and the development of the SA National Research Network.

Kast says InfraCo would be a utility-type company providing wholesale bandwidth to other operators rather than a fully-fledged telco offering voice and data services to end users. That would initially be on an exclusive basis to second national operator Neotel, as previously negotiated with the SNO.

From the outset InfraCo's only assets would be the fibre optic network backbone built by Transtel and Eskom Enterprises on the back of their existing infrastructure. The backbone was initially built for inclusion into the SNO, once licensed. However, Government decided recently that it would retain that asset and spin it off into a new SOE.

InfraCo wouldn't use Eskom's existing private telecommunications network licence, rather its licence was under consideration, Kast says. If need be it could also apply for spectrum to be able to use wireless technologies as well.

Kast says though this long-distance fibre network would comprise the original asset base of InfraCo, it would make further investments in infrastructure down the line "to complement the laid fibre and to enhance its business".

There's been some speculation that Tata/VSNL will own a stake in InfraCo, but Kast says shareholder matters would be dealt with in the announcement early next year "as they're subject to ongoing consideration".

The announcement would also give clarity on Government's intentions concerning expanding undersea cable capacity, which it's believed InfraCo will invest in. There's been some speculation that InfraCo could compete with SA's west coast SAT-3 cable, in which Telkom owns a big stake, and manages. Kast says the objective of expanding undersea cable capacity would be to provide additional international connectivity to meet SA's future needs (no doubt with projects such as SKA in mind).

Kast says that the R647m allocated by Government to InfraCo would be sufficient to fund the required equity contribution to establish the SOE.

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