Cabinet approves Infraco

By Damaria Senne, ITWeb senior journalist

Johannesburg, 20 Apr 2007

Cabinet has approved the establishment of the Broadband Infrastructure Company (Infraco) as a state-owned enterprise that will provide electronic communications network services.

The approval follows a Cabinet briefing by the Department of Public Enterprises this week.

A Parliamentary statement says the Broadband Infrastructure Company Bill, which is expected to provide the framework for the existence and operation of Infraco, will be tabled in Parliament during the 2007 session. Minister of public enterprises Alec Erwin will be the shareholder representative.

The statement adds the non-core fixed-services network assets of Eskom and Transnet will be transferred to Infraco.

The Department of Public Enterprises first proposed Infraco last year as a way to lower telecommunications prices. Erwin said Infraco, which would be formed using state-owned telecoms assets, would provide national backhaul infrastructure, providing nationwide connectivity for telecoms providers at low costs.

The announcement came as a surprise to the ICT industry, as it was previously expected government would sell its telecoms assets, owned through Eskom and Transnet, to Neotel.

The process to provide clarity to Cabinet and ICT stakeholders was fraught with delays, with the Department of Public Enterprises postponing dates it would brief Parliament on Infraco's structure and operations at least three times.

Exclusivity contract

Neotel recently entered into a four-year exclusivity deal with Infraco, which will allow it to source bandwidth from the state-owned company, as well as act as its marketing arm.

Neotel MD Ajay Pandey says the second national operator's exclusivity contract with Infraco also provides the company with the option to manage the network. However, there is no obligation for Neotel to do so and Infraco is also looking at outsourcing the management of the infrastructure.

Pandey says Neotel will establish whether it needs to build its own network, or enter into a contract with Infraco after the four-year period. He does not rule out considering using Telkom's other network providers' infrastructure. The decision will be based purely on which option presents a better business case, he says.

Neotel has also announced plans for its enterprise services to be introduced next month. The company recently acquired Transtel's remaining assets for R230 million. The assets include fibre, a national footprint, customer database and staff.

Neotel has also announced plans to undertake a pilot for residential services, using CDMA2000 technology, around the middle of the year. The pilot is expected to last a few weeks. The company says if the test goes smoothly, it will be followed by a commercial launch.