18 October 2007 at 06h34
 

The cost of broadband Internet access is set to drop significantly with the adoption in the National Assembly on Wednesday of the Broadband Infraco Bill. The bill provides mainly for transferring Broadband Infraco (Pty) Limited to the state from Eskom Holdings Limited.

It further licences Infraco under the Electronic Communications Act, and converts it into a public company with share capital. Broadband costs in SA are considerably higher than the country's international counterparts.

Research shows that connectivity providers in SA - other than Telkom - have a cost structure where up to 80 percent of costs comprise those attributable to Tier 1 national backbone connectivity and Tier 3 international connectivity. These are both supplied by Telkom.

By intervening to address these cost structures, government is expecting that Tier 2 (the local metropolitan area network and last mile) connectivity providers will quickly pass the savings on to the market as a result of competitive pressure.

The bill also creates flexibility for funding and private sector involvement by allowing for the conversion of Infraco into a public company. Public companies are generally recognised as the optimal corporate form to access capital markets and enable future private sector investment, where necessary.

In terms of the bill, the state will provide capitalisation for Infraco to the amount of R975-million. Infraco's main objects are to expand the availability and affordability of access to electronic communications, including, but not limited to, under-developed and under-serviced areas, commensurate with international best practice and pricing.

Public Enterprises Minister Alec Erwin dismissed suggestions the state was getting too involved in "cabling". "The specific proposals are the following: that we would take responsibility to lead the process for a west coast [communications] cable.

"This would be a very large capacity cable - we're quite certain bigger than the private sector itself would be prepared to invest in," he said. The reasons for this included that SA needed very large capacity for the proposed Square Kilometre Array (SKA) radio telescope project, to be centred mainly in the Northern Cape.

The country was also increasing capacity for science and research. "So this is the kind of investment that was very unlikely to be made by the private sector," Erwin said.

If government's objectives were fully met in the foreseeable future, there was no particular need for Infraco to "automatically always stay in public hands". "But the objectives of getting affordable, price-competitive broadband... must be met and retained at all costs," Erwin said.

The bill received the support of all parties in the House and now goes to the National Council of Provinces for concurrence.

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