Infraco should inject competition

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 02 Aug 2007

Infraco should inject competition into the country's broadband supply and it is immaterial that it is a state-owned enterprise, the Competition Commission told Parliament today.

Speaking on the first day of the hearings into the draft Broadband Infraco Bill, before a joint sitting of the parliamentary committees on communications and public enterprises, the Competition Commission said it is investigating a range of complaints against Telkom, relating to broadband.

The commission's two representatives, Simon Roberts, its chief economist, and Tembinkosi Bonakele, its manager of compliance, stressed there is strong market concern with the power Telkom has.

"The BCX/Telkom merger was opposed just on those concerns," Roberts said.

The commission recommended prohibition of that merger due to the horizontal overlap in the market for managed network services.

Trade-offs

As far as the four-year exclusive relationship between Neotel (the licensed second national operator) and Infraco, Roberts said the trade-off is between allowing Neotel to become an effective competitor, versus a "duopolist" with limited incentive to compete.

"Effective competition in the market would be furthered by Infraco supplying other customers," he said.

Roberts said Transtel and Esitel (the Transnet and Eskom subsidiaries that have handed their network infrastructure to Infraco) should be allowed to explore the external sale of excess bandwidth and be allowed to roll out additional network assets, given their low cost of doing this.

Bonakele said Infraco should be allowed to borrow money in order to finance its investments and operations and it should be deemed to have an individual electronic communications network license.

Open access

Cassandra Gabriel, chairperson of the Universal Services Access Agency of SA, in her presentation, stated that Infraco should meet two objectives, namely, that it is based on open access principles and that it be given targets of rolling out infrastructure into under-serviced areas.

Department of Public Enterprises director-general Portia Molefe said Infraco's funding would be based on the equity being provided by government and the debt, the money to fund the laying of two undersea cables, would be raised through financial instruments on the international capital markets.

"That is why it is important that Infraco be given the necessary flexibility to raise money," she said.

The parliamentary hearings are scheduled to continue for the whole day today, with the regulator, ICASA, presenting first, followed by Telkom.