Telecoms stakeholders have welcomed the competition and possible lowering of broadband prices the introduction of the government telecommunications infrastructure company Infraco could bring to the local telecoms arena. However, they have also questioned government`s integrity in liberalising the market.
Yesterday in Parliament, public enterprises minister Alec Erwin confirmed his department`s intention to build an infrastructure company based on the telecoms facilities owned by Eskom and Transnet.
He pointed to research that shows long-distance and international communications costs are the key reasons for high broadband costs in SA. Infraco`s assets would be deployed to provide direct intervention and reduce key costs of broadband from early 2007, he said.
However, some stakeholders have questioned the desirability of having another government-controlled company in the telecoms space.
True liberalisation of the telecoms market is what is needed, not more state-owned and government-controlled entities, says MyADSL founder Rudolph Muller.
An analyst, who spoke on condition of anonymity, says such a move would set back liberalisation in the sector. "The potential for conflict is massive."
BMI-TechKnowledge analyst Richard Hurst has also previously said the Department of Public Enterprises` decision not to disinvest from telecoms infrastructure is indicative of government`s wish to have its cake and eat it.
"In any other market, you would be taken to the Competition Commission for this," he said.
There is also a question of what synergy there will be between the departments of public enterprises and communications with regard to Infraco. The communications department was unable to provide comment by the time of publication.
Muller adds it will nonetheless be great to have an additional player in the local backhaul bandwidth market, especially as it is unlikely we will see third and fourth network operators anytime soon.
Benefits for ISPs
Geoff Rehmet, business development manager at Internet Solutions (IS), says while there is a need for more information about what services Infraco will provide, the company will potentially benefit Internet service providers (ISPs).
At the moment, ISPs rely on Telkom`s high-cost national infrastructure, with no economies of scale benefits accrued, he says.
Infraco`s national infrastructure provision may help ISPs by reducing operating costs, he says. Nonetheless, the benefits are difficult to quantify at this stage.
Rehmet notes that Infraco has not expressed plans to play a role in the provision of last mile access, leaving a clear field for Neotel to compete there.
Additional competition may serve as an incentive to both Neotel and Telkom to venture into telecoms territories that were previously left alone, says Muller.
These new territories may include new service offerings and new geographical locations, he says. Neotel is still trying to gain a hold in the market, but it also has the freedom to easily change strategies as it has launched few products to date, he says.
The benefits may, however, be some time in coming, says Rehmet. Infraco does not exist as an organisation yet. At the moment, it`s just assets, and the entire service delivery has yet to be built, he says.
In terms of building service delivery mechanisms, Muller suggests the Department of Public Enterprises holds dialogue with ISPs, consumers and businesses to establish how they can best serve the needs of business and consumers. ISPs will be able to guide the department as to exactly what they will need to serve the public better, and this partnership will be essential if this project is to be effective, he adds.
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