CT details broadband plans

Johannesburg, 22 Apr 2008

The City of Cape Town is sticking to its broadband guns, revealing the first phase of its infrastructure roll-out will cost R275 million and take five years to complete.

This was proposed in the city's five-year economic strategy plan, which is currently open for public comment.

The strategic document reveals its plans to install city-wide broadband infrastructure falls under its initiatives to facilitate economic growth.

"[The network will] lower the cost of telecommunications and improve local industry competitiveness," it says.

The strategy document makes no mention of the controversy that surrounded the awarding of a tender for a portion of the project. Last year, the city dismissed an objection by fixed-line operator Telkom over the awarding of the R32 million Smart Cape wireless tender to MTN Network Solutions and Cornastone Enterprise Systems.

Self-providing

The first phase of the project sees 202km of cable laid, with connections to around 100 key municipal buildings. The metro will match its 2007/8 R88 million allocation in the 2008/9 financial year. This declines to R28 million in 2009/10, R30 million in 2010/11 and R40 million in 2011/12.

"The cost of operating the network will essentially be fixed, in comparison to the current system, in which costs are driven by the amount of traffic. The capital cost will be primarily recovered from internal cost savings. Spare capacity will be offered to licensed telecommunications service providers. The revenue from this resale of spare capacity to third parties will also be used to recover costs and to expand the geographic reach of the infrastructure," the city explains.

Through cost savings alone, the city believes the project will pay for itself after seven years. It expects to save around 41% ‑ or R37 million - a year on its current expenditure on "equivalent services".

"The cumulative benefit of these cost savings over five years is R204 million."

As the South African Research Network will make a capital contribution towards the project, the city will pass some network capacity on to its universities and research institutions.

Finding returns

Despite considerable cost savings, the city says the "two most important areas" which the project will impact on are its contribution to the gross domestic product (GDP) and its creation of jobs.

It has calculated that the broadband project will make an estimated cumulative contribution of R5.7 billion to SA's GDP by 2011/12. This is when the majority of the infrastructure development will be complete.

"This cumulative total increases to over R211 billion by 2026/27. This means that by 2016/17, the project will have stimulated the city's economy to grow by 2.3% and by 2026/27, this is expected to increase to 4.6%," it comments.

In addition to the economic boost, the City of Cape Town expects to create a total of 2 412 direct and indirect jobs in 2007/8 and 4 837 in 2008/9. By 2010, this number will increase to 14 828, and by 2027 nearly 252 000 jobs, the city estimates.

"The broadband expansion in Cape Town will change three types of jobs. The first type includes the direct jobs that will be created over the duration of the project period in infrastructure development, the construction of exchange facilities and operations. The second type is the so-called indirect jobs that are created by the multiplier effects of the capital and operational costs of the public transport and from changes in transport usage and time-savings. The third type of change in jobs will arise from the structural economic changes attributable to the proposed project as a result of cost savings and, particularly, productivity gains that will make the city's businesses more competitive," it reveals.

The period for public comment will close at the end of April.