The City of Joburg (COJ) will establish a municipal-owned entity (MOE) to take over the running of its R1.2 billion broadband network project, after it terminated the services of CitiConnect Communications (CCC).
CCC managed an entity called BWired, which was established by the city in partnership with Ericsson South Africa, when the broadband project was initiated.
According to documentation in possession of ITWeb, the Joburg City Council's mayoral committee on Thursday approved a motion to accept the transfer of BWired and incorporate it into an MOE.
Upon establishment, the entity will provide the COJ with various services, including:
- The provision of spare capacity on Joburg Broadband Network to ICASA- licensed operators at cost-related pricing to drive down telecoms costs;
- Manage and delivery of the city's smart city objectives;
- Manage the city's ICT operations; and
- Maintain a city-wide database of telecoms assets.
In the motion tabled before the mayoral committee, the COJ states that, "subject to some relatively minor finishing work, in the form of connecting a number of COJ properties to the network, the build of the network was completed in the first half of 2013". The network was expected to go live on 1 July last year.
"Subsequent to the completion of the network, the COJ discovered that CCC had committed numerous acts of repudiation of its obligations under the BOT [build, operate and transfer agreement]."
Unsuccessful negotiations
The motion further notes that negotiations with Ericsson, to enter into a transaction in settlement of the BOT, proved unsuccessful.
It is understood that none of the parties had been paid by the COJ. "The effect of a termination is that Ericsson must procure the transfer of the network asset and the existing contracts held by the operator company, BWired, against payment for the cost of the network build," the motion states.
Ericsson could not be reached for comment on Friday.
Ericsson won the tender for the project in 2011, for a period of 15 years. After this period, the project would have been taken over by the city. The company was to construct the network over a period of three years and then operate it for a further 12 years.
The completed fibre optic network will offer full WAN accessibility, VPN services and bring Internet connectivity to all COJ buildings in the region.
At the time, it was announced that the network project would be "self-funding" and would result in "no additional cost to ratepayers" - which means the operational costs for the project would have come entirely from Ericsson.
The COJ says the end of the stalemate and subsequent establishment of the MOE will further allow the city to deliver its smart city objectives. An assessment undertaken by the COJ shows that the most viable mechanism to expand the Joburg broadband network would be a fibre to the home rollout. It is envisaged that the COJ would implement 1 000 WiFi hotspots throughout the city, to advance the objectives of universal access to the Internet. "It is anticipated that the rollout of the hotspots will now be accelerated and the target is to deliver 500 hotspots by the end of the financial year."
In terms of the financial implications of these developments, the city says it will be released from its annual obligations in terms of the BOT, over a 12-year period. "Budget provision has been made for the estimated capital amount in 2014/15 financial year. The possible financial benefit is the 100% revenue accruing to the city instead of the revenue-sharing mechanism, as it was envisaged by the BOT over 12 years."
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