20 February 2007
South Africa will launch a new state-owned company in March that will provide long-distance connectivity to the country’s telecommunications market “on a cost basis,” Public Enterprises Minister Alec Erwin announced last week.
Briefing journalists in Cape Town, Erwin said the new company, Infraco, would not be a full-fledged telecommunications company itself, but would act as a provider of broadband capacity through fibre-optic cables to other operators in the country.
It already has an initial agreement with South Africa’s second fixed line telecommunications operator, Neotel.
The government has created Infraco by bringing together fibre-optic cable networks originally built by state companies Eskom and Transnet, both shareholders in Neotel. Erwin added that Neotel would “become more active in coming months”.
Bringing down telecoms costs
The move forms part of South Africa’s attempts to bring down the costs of telecommunications and internet connectivity in the country.
“Broadband is viewed as a key driver of economic growth and wealth generation, and therefore it is essential for South Africa to gain access to universally available, reliable and affordable broadband,” Erwin said.
Infraco, he said, would price its broadband supply not for profit maximisation, but rather to ensure affordability. This could be regulated as the costing and pricing of Infraco’s fibre-optic network was under direct government control.
“That’s obviously going to create a very important floor, or reference, price in the broadband system” which would have an important role in providing cheaper broadband to all South Africans, the minister said.
“We are very confident this will have a major impact on telephony prices.”
Erwin also cleared the confusion around the role of state-owned signals provider Sentech stating it will be providing internet connectivity through wireless systems rather than fibre-optic cables.
Sentech would also focus on delivering connectivity to the government and wider public sector, including heath and education facilities and municipalities.
“These are complementary activities – far from being in competition, they will complement each other and the private sector will continue to play a gigantic role in this area.”
In moving to provide mass broadband capacity and services, South Africa was heading in the direction of developed economies that recognised the importance of providing “ubiquitous” – not just universal – access to information and communication technology, Erwin said.