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Nod expected for R1.2bn COJ network buyout

Martin Czernowalow
By Martin Czernowalow, Contributor.
Johannesburg, 14 Jan 2015
Johannesburg mayor Parks Tau is in favour of establishing a municipal-owned entity to take over the city's broadband network.
Johannesburg mayor Parks Tau is in favour of establishing a municipal-owned entity to take over the city's broadband network.

The City of Johannesburg (COJ) is expected to get the green light at the end of this month to buy itself out of a multibillion-rand fibre broadband project, when the city council reconvenes on the last day of January.

It is understood the contract - between the COJ and CitiConnect Communications - is in dispute and a proposed motion to terminate the deal has been placed on the agenda for the upcoming council meeting.

CitiConnect manages an entity called BWired, which was established by the city in partnership with Ericsson South Africa, when the broadband project was initiated. Ericsson won the tender for the R3.4 billion project in 2011, for a period of 15 years. After this time, the project would be 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.

Johannesburg mayor Parks Tau is believed to be the driving force behind the move for the city to buy itself out of the contract, at a cost of R1.2 billion. In August last year, the mayoral committee initially proposed the motion to terminate the deal to the council, on the basis of "breaches of the build, operate and transfer agreement with Ericsson SA by CitiConnect".

According to documents in ITWeb's possession, the mayoral committee is in favour of establishing a municipal-owned entity (MOE) to take over the running of the fibre broadband network project. It is envisaged the MOE will provide the COJ with various services, including the provision of spare capacity on the Joburg Broadband Network to ICASA-licensed operators at cost-related pricing to drive down telecoms costs; manage and deliver the city's smart city objectives; manage the city's ICT operations; and maintain a city-wide database of telecoms assets.

Move opposed

Yet, not everyone is in favour of the move, which is purportedly being opposed not only by opposition parties, but also by a number of ANC councillors. Ashor Sarupen, Democratic Alliance Gauteng finance committee member, says it "has once again highlighted the ANC's inability to manage large-scale ICT projects".

Sarupen says Tau wants to terminate the contract in favour of setting up another MOE, along the lines of the Johannesburg Roads Agency or Pikitup, to manage and maintain the broadband network and its operations.

"This would entail the city buying the network infrastructure for R1.2 billion and cancelling the existing contract worth R3.4 billion over 12 years.

"However, the city does not have the skills, expertise or employees to operate such a network, and the longer term costs of operating and maintaining this network would far exceed the cost of utilising a credible service provider."

Despite the divisions that have been created between the mayoral committee and some ANC councillors, Sarupen expects the motion will be passed by the council at the end of January. "In a normal democracy, councillors would be free to vote as they wish. Unfortunately, no ANC councillor will vote down a motion supported by the mayor. So, we expect it to get pushed through."

Sarupen claims that, should the project be bought out by the city, it is likely to stall for the next two to three years, as the metro would first have to find the right skills and create capacity to take over the network. This means long delays can be expected before the project goes live, he adds.

The right reasons

ICT veteran Adrian Schofield says there must have been a breakdown of the relationship between CitiConnect and the COJ, which means Tau is planning to establish the MOE "hopefully for the best reasons".

He points out the majority of the R1.2 billion the city would spend to take over the project would go towards buying the network infrastructure, which would at least be a sensible investment.

"I don't want to say too much about municipal entities, but in terms of capacity, since Parks Tau took over as mayor there has been an improvement in the city's operations. Of course, there is room for more."

Schofield says there is a lot to be said about modern metros investing in infrastructure, as they need to have broadband networks to provide connectivity to residents.

Numerous attempts to obtain comment from the COJ and the mayor's office proved unsuccessful.

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