Government is to issue draft guidelines that require majority local ownership of all telecom cable systems landing on SA shores. It’s a move critics say could drive away much-needed foreign investment and undermine efforts to reduce the high cost of broadband Internet access.<\/p>\n
In an interview with the FM last week, communications department director-general Lyndall Shope-Mafole confirmed the contents of the draft guidelines and indicated the move was necessary to underpin and promote the growth of SA’s information and communications technology sector.<\/p>\n
If the guidelines, which will be issued for public comment by the end of September, are approved, it could put two proposed cable system projects, the East Africa Submarine System (Eassy) and Seacom’s Sea cable, in jeopardy. Both projects had been expected to come on stream by the first quarter of 2009.<\/p>\n
Dene Smuts, the DA’s spokesman on communications, has slammed the draft guidelines, accusing Shope-Mafole of “sabotaging SA’s interests”. Smuts, who describes the development as “really alarming”, says government has already endangered the Eassy project through political interference. The guidelines, if approved in their proposed form, would threaten the Seacom project, too. “Lyndall’s interference in cables has been a disaster,” Smuts says.<\/p>\n
Seacom president Brian Herlihy, who was in SA this week, declined to comment on the developments. But spokesman Suveer Ramdhani told the FM that Seacom was in discussions with “stakeholders” to resolve the issue. Despite an agreement with second network operator Neotel to land the cable in SA, Seacom is mostly foreign-owned. Twenty-five percent of its equity is in SA hands. (The precise make-up of the consortium will be made known only in a fortnight.)<\/p>\n
Ramdhani says it is not yet clear whether government intends trying to regulate the ownership of entire cable systems or simply the segments that land in SA. He says government has no jurisdiction over international cable systems and can create policy only for cables that lie within its borders – that is, up to 12 nautical miles (22,2 km) of the coastline. Neotel will build the backhaul fibre-optic cables that will connect Seacom’s landing station at Mtunzini on the KwaZulu Natal north coast to Gauteng; Seacom will construct the cable system to Mtunzini. It has already sold 12 nautical miles of it to Neotel to comply with legislation<\/p>\n
International cable systems typically cost anything from a few hundred million dollars to several billion dollars to build. They are constructed by a handful of international telecom operators, companies that have the deep pockets necessary to invest large amounts of money in the hope of realising a return on investment years later.<\/p>\n
One senior telecom industry executive, who asks not to be named for fear of losing his job, says that legally the communications department cannot insist that cable systems are owned by local companies.<\/p>\n
Shope-Mafole says government is mandated to draw up the guidelines in terms of section 21 of the Electronic Communications Act, which deals with the rapid deploying of telecom infrastructure.<\/p>\n
She insists that section 21 of the act applies equally to terrestrial networks and undersea cables. “It is highly unlikely – in fact, I would say impossible – for a totally foreign-owned cable to land here,” she says of the draft guidelines. “You can’t do that in the US either, for security reasons.”<\/p>\n
She denies that the rule will discourage foreign investment and adds that SA companies have the money to participate in undersea infrastructure projects and are willing to do so. A number of value-added network service licensees (these are traditionally Internet service providers) will soon be given full telecom licences that will allow them to participate in these projects, she says. “If the cable is foreign-owned, it will take money out of the continent. As government, we want to support our companies. Foreigners can invest but they must co-invest with us.”<\/p>\n
Shope-Mafole admits the guidelines could bar some cable systems, such as Eassy, from landing in SA. “Right now there is no way that Eassy can land here, given its composition.”<\/p>\n
Government initially backed Eassy, through the New Partnership for Africa’s Development (Nepad), but the parties fell out over an attempt by Nepad to wrest control of the cable system from the telecom operators that first conceived of the idea of building a cable system along Africa’s east coast. The project, the first that promised to end the reliance of countries in East Africa on expensive satellite communications, still enjoys the backing of local telecom operators, including Telkom, but if the system is barred from landing in SA, then its viability is in doubt.<\/p>\n
A number of African governments, under the Nepad umbrella, have since said they will build their own submarine system in competition with Eassy. There are two other projects on the cards that will connect SA with global infrastructure. They are:<\/p>\n
An expansion of the Fibre-optic Link Around the Globe (Flag), the world’s largest private undersea cable system, along Africa’s east coast.<\/p>\n
A new system to be built across the Atlantic Ocean by state-owned telecom company Broadband InfraCo. This proposed cable, to be built at a cost of R5bn, will be divided into two, with one leg connecting to Brazil, where it will join other high-capacity cables that connect South America and North America.<\/p>\n
The other leg will provide high-speed connectivity into Europe. The InfraCo project has, however, run into controversy, with government proposing an amendment to the Electronic Communications Act to facilitate its licensing<\/p>\n