Broadband Infraco on track

Duncan McLeod

Duncan McLeod is the editor of Techcentral and a columnist for Financial Mail. Dun won various award over the last decade, including the Telkom...

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Broadband Infraco, the new, state-owned communications infrastructure company, is making significant headway in plans to build a high-capacity submarine cable along the west coast of Africa. The cable, which will be the world’s longest such system, will cost US$510m and is expected to be switched on in time for the 2010 World Cup.

Known as the Africa West Coast Cable (AWCC), the 13 000km system will follow roughly the same route as the Telkom-controlled Sat-3 cable and also provide competition to the cable that is being built along Africa’s east coast by the Seacom consortium.

AWCC will terminate at Telehouse in London, a vast data centre facility where telecom operators co-locate their switching equipment.

Infraco holds 26% of AWCC’s equity. Telecom operators hold the rest and there is no controlling shareholder. Infraco acting CEO Dave Smith insists government is not trying to crowd out the private sector but is rather trying to ensure an efficient market is created.

With a design capacity of 3,8Tbit/s, the system will provide 32 times the bandwidth of Sat-3 and three times that of the Seacom cable. At first, 320Gbit/s of the cable’s fibre will be lit up; the remainder will come on stream later.

Smith says funding for the system is being provided by a range of local telecom players and will be operated “on open access principles”, meaning no one operator can control access to it.

Infraco has invited telecom infrastructure and value-added network service licensees — typically Internet service providers — to participate in the project. Thirteen companies, most of them South African, have signed the AWCC’s memorandum of understanding.

All SA infrastructure licensees are on board, with the exception of MTN, which is seeking further clarity on a rival project, the controversial Uhurunet system.

Uhurunet, which is backed by the New Partnership for Africa’s Development and SA’s department of communications, wants to build a cable encircling the continent. But some industry executives privately express doubt that Uhurunet will be green-lighted.

AWCC looks set to undermine Uhurunet’s business case. Also, it will be first in the water, as the project’s backers are moving quickly to get going. The investors will be announced within a fortnight, Smith says, and construction should start by September. Manufacturing slots have been reserved, as have cable-laying ships, and the contract to construct the cable will be awarded next month. Two (unnamed) suppliers have been shortlisted.

The cable will have 10 “branching units” alongside the larger countries so that these can join the system at a later date, if they choose to. “We want to ensure the trunk project is not delayed,” Smith says.

Namibia, which does not have direct access to Sat-3, will be one of the first countries to build a landing station for the cable. The cable, which has a design life of 25-30 years, will also come ashore in the fast-growing West African markets of Nigeria and Ghana.

Initial plans to extend a branch of the cable to Brazil have been shelved, says Infraco director Cornelis Groesbeek.

Infraco will invest $130m in AWCC (proportional to its shareholding) using a mixture of equity and debt funding. “Infraco is a commercial state-owned enterprise with strategic intent,” Groesbeek says. “That means it has to pay its own way and has to borrow money from the commercial market like any other operator. Unlike other operators, though, it doesn’t have a licence to rip people off.”

Unlike in Sat-3, AWCC consortium members will not collectively set prices for bandwidth. Rather, each participant will be able to take its product to market with its own tariffs. This, Groesbeek says, will help ensure a competitive market in international bandwidth and drive down prices.

Broadband Infraco Discussion