Broadband Infraco will stick to its legislated mandate of seeking only a minimum rate of return for government's investment in the new fixed-line operator, says Department of Public Enterprises (DPE) director-general Portia Molefe.
She made this assurance during yesterday's media briefing, ahead of public enterprises minister Barbara Hogan's budget vote speech.
Molefe also noted the state-owned enterprise has a 12% stake in the $640 million (about R6.1 billion) West African Cable System. However, she refused to divulge exactly how much was actually paid for the stake, saying it was commercially sensitive information.
The DPE's briefing notes state communications regulator Independent Communications Authority of SA (ICASA) has already given a tentative indication that Broadband Infraco would receive its licence by August.
High expectations
Broadband Infraco is one of government's new enterprises, born out of the Esitel and Transtel assets that were originally earmarked for second national operator Neotel.
Its mandate states Broadband Infraco is to: “...rapidly normalise telecoms market efficiency by improving access to, and lowering the cost of, those components of national and international connectivity infrastructure that impede private sector development and innovation in electronic communications services and content offerings”.
Originally, Broadband Infraco was conceived by the DPE under former public enterprises minister Alec Erwin's tenure, as a means to break Telkom's stranglehold on international and local long distance networks. It would do this by laying a West Coast submarine cable to Europe and by operating fibre-optic networks between the major metropolitan areas.
Erwin initially stated Broadband Infraco was only expected to make a “utility rate of return” on government's investment, meaning the bare minimum plus a small profit to recoup government's initial investments.
Molefe said yesterday that Broadband Infraco would have at least two points of presence (POPs) in major urban areas, with at least one POP in second tier cities. However, no details of Broadband Infraco's rural roll-out were given.
Licensed to upset
ICASA has issued Broadband Infraco an invitation to apply for its individual-electronic communications network services and electronic communications services licences. Public hearings should begin on 29 June.
The advent of Broadband Infraco has industry excited and worried at the same time.
The Internet Service Providers' Association of SA (ISPA) said, in its submission to ICASA last week, the natural role for Broadband Infraco would be in the long-distance network arena.
“In identifying the manner in which the fibre assets of Esitel and Transtel are to be utilised for the benefit of all South Africans, it remains, however, crucial to ensure the proposed intervention is suitably focused. There is an abundance of recent history relating to state-owned enterprises (SOEs), which should serve as a clear warning of the distortions and persistent high pricing that can occur when an SOE enters a market,” the submission says.
Future imperfect
ISPA's primary concern is with Broadband Infraco's future conduct, as the association believes there is a significant risk that it will seek to use its individual-electronic communications service licence to compete directly with those it seeks to enable.
The submission says this sense of unease is heightened by the provisions in the Broadband Infraco Act that cater for its future privatisation.
ISPA also points out that Broadband Infraco is not just another licensee, as it has received R950 million of taxpayers' money in start-up capital and assets that have already been so funded.
“It is also the recipient of rights of way - a scarce resource - and rights of expropriation under the Broadband Infraco Act,” the ISPA submission says.
ISPA asks ICASA in its submission to place specific terms and conditions on Broadband Infraco, to ensure it does not become a state-sponsored competitor that distorts the already-competitive service provider market segment.
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