Competition worries created Infraco

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 10 Jul 2007

Government's concern that Neotel would be too involved in competing with Telkom prompted it to create state-owned enterprise Infraco to lower broadband costs, says Universal Services Access Agency of SA (USAASA) CEO James Theledi.

He was speaking ahead of the public hearings on the Infraco Bill, to be held before Parliament early next month.

Theledi was a Department of Public Enterprises deputy director-general until his appointment as USAASA CEO on 1 June. He says the thinking was that Neotel would not be able to leverage the infrastructure, which it should have received as part of the deal to create the second national operator, to lower costs as it would compete with Telkom to attract customers.

"There was a genuine worry that Neotel would not be able to pass on the lower prices," he says.

Minister of public enterprises Alec Erwin has been government's champion in the creation of Infraco as a broadband supplier out of the full service network assets of Transtel and Eskom.

Erwin has stated Infraco will be responsible for the implementation of long-distance backbone capacities between metropolitan centres, while Neotel will be responsible for the implementation of distribution networks within metropolitan areas.

Theledi says the establishment of Infraco would be essential to increase the access of broadband within the rural areas and the lowering of access costs.

"Infraco, from our point of view, would go a long way to having an impact on the e-rate [the discounted access rate for schools], lowering the cost for libraries and also especially for universal access licensees," he says.

USAASA, along with a number of other telecommunications players, including Vodacom, Telkom, MTN, Cell C, Verizon, Neotel, the Internet Service Providers Association and the Communications Users Association of SA, are to submit their public comments on the Infraco Bill to the Parliamentary Portfolio Committee on Public Enterprises by 25 July.

The public hearings are due to be held on 1 and 2 August.