According to a memorandum attached to the Broadband Infraco Bill – up for debate on Wednesday afternoon – the high broadband costs in SA compared to international counterparts have been investigated.<\/p>\n
It revealed that connectivity providers other than Telkom have a cost structure where up to 80 percent of costs comprise those attributable to Tier 1 national backbone connectivity and Tier 3 international connectivity, both of which are supplied by Telkom.<\/p>\n
The logical conclusion is to intervene to address the national backbone and international connectivity cost structures.<\/p>\n
This is based on the assumption that if these costs are addressed, Tier 2 (the local metropolitan area network and last mile) connectivity providers will quickly pass this on to the market as a result of competitive pressure.<\/p>\n
Government intends expanding the availability of broadband access to underdeveloped areas, thereby ensuring that the bandwidth requirements for specific projects of national interest are met.<\/p>\n
To achieve this, the minister for public enterprises will acquire shareholding in Broadband Infraco (Proprietary) Limited from Eskom Holdings Limited.<\/p>\n
The Bill also seeks to create flexibility for funding and private sector involvement by providing for the possibility that Infraco may be converted into a public company.<\/p>\n
Public companies are generally recognised as the optimal corporate form to access capital markets and enable future private sector investment, where necessary.<\/p>\n
Thus, the bill provides for transferring Infraco shares and Infraco interests from Eskom to the state, licensing Infraco under the Electronic Communications Act, and converting Infraco into a public company with share capital.<\/p>\n
In terms of the bill, the state will provide capitalisation for Infraco to the amount of R975-million.<\/p>\n