Broadband Infraco debate
The high cost of broadband and telecoms services in South Africa continues to make headlines, something which prompted SA president Jacob Zuma to promise that his government will ensure lower telecoms costs and broadband capacity expansion.
One of the building blocks of Government’s telecoms strategy is Broadband Infraco. Broadband Infraco is a state owned enterprise with the Department of Public Enterprises (74%) and the Industrial Development Corporation of South Africa Limited (26%) as shareholders. According to the parastatal it’s primary focus will be on the wholesale, large corporate and enterprise markets. The company made it clear that it will not be an access provider in the retail space.
“Infraco will provide and own the long-distance Full Service Network (FSN) deployed by Eskom and Transnet. Infraco is now a stand-alone entity reporting to the Department of Public Enterprises,” Infraco said. “Broadband Infraco will provide wholesale long distance access services to third party electronic communications services (ECS) and electronic communications network services (ECNS) providers in South Africa.”
Broadband Infraco debate
Broadband Infraco’s license applications hearings however showed that not everyone is impressed with the company’s plans and questions were raised about who the company will service.
Telkom welcomed the advent of Infraco in the local communications market, but said that the company’s license application contains contradictions. Telkom questioned Infraco’s intentions in the retail market, and said that Infraco’s apparent plan to provide services to “corporate, enterprise and government customers” seems like cherry picking and they appeared to be taking their eyes off their initial target market – the underserviced rural areas.
Telkom further questioned Infraco’s ECS (services) license application. Telkom is of the view that if Infraco is merely providing network services to other licensees it will require an ECNS license and not an ECS license. Telkom further said that it is unclear as to whether Infraco’s entry into the market will increase connectivity in rural areas and drive down prices for these end users.
Vodacom also questioned the market which Infraco will serve, adding that it would like to know what pricing regime will be pursued by the company.
The Internet Service Providers’ Association of South Africa (ISPA) has also raised concerns about Broadband Infraco’s licensing, saying that there must be certainty of the company’s future plans and that “there is an abundance of recent history relating to state-owned enterprises (SOEs), which should serve as a clear warning of the distortions and persistent high pricing that can occur when an SOE enters a market”.
Internet Solutions (IS) said in its ICASA submission that whilst broadband in the business market has made some progress, the same cannot be said about broadband in the consumer market. “The high cost of broadband is clearly a significant and prohibitive factor, and the broadband scene is still dominated by a few players”.
IS said that there is strong evidence to suggest that the biggest ills in the local telecoms market is not with service levels but due to a lack of competition at the infrastructure level. According to IS, Telkom continues to act like a monopoly despite the entrance of Neotel in the market.
IS supported an initiative to award Broadband Infraco only an I-ECNS license which will enable the company to “create a price war and compete aggressively with the current infrastructure providers”.
The Meraka Institute, which has no direct commercial concerns regarding Infraco, was in full support of the new telecoms parastatal saying that the granting of I-ECNS and I-ECS licenses to Broadband Infraco is crucial to the success of the South African National Research and Education Network (SANReN).
The submissions from the various telecoms players typically follow a trend where the companies want to make certain that their commercial interests will not be harmed while at the same time showing support for the company in order to remain politically correct.
Despite the licensing issues raised by the various stakeholders it is likely that Broadband Infraco will be licensed, something which telecoms experts Ellipsis Regulatory Solutions predicts will happen in August 2009.
Broadband Infraco – should they get I-ECNS and I-ECS licenses?
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