Why Joburg doesn't need its own broadband entity

Rabelani Dagada says the new entity is not needed, the chances of the City making a profit are zero

No business case for the establishment of Joburg Broadband Network Municipality Owned Entity

The South African government policy of telecommunications managed liberalism which was meant to protect Telkom from competition has left South Africa 10 years behind her counterparts in terms of universal access to the telecommunications services.

The universal access in South Africa was hampered by exorbitant telecommunications cost, poor access to services by the needy people and small businesses. Moreover, the South African limited accessibility to the Information and Communications Technology (ICT) increased the cost of doing business and discouraged direct foreign investment. 

Having said this, the national government should be commended for finally ditching this policy by allowing more telecommunications operators to enter the market. One of the interesting observable facts in South Africa has been the mushrooming of telecommunication ‘private networks' in the local government. This should be attributed to the high cost of broadband offered by commercial telecommunication companies. 

Several cities in South Africa have embarked on projects that enable them to offer cheap ICT services to their residents. Electronic Communications Act allows the municipalities to lease their access bandwidth and infrastructure to third party service providers and to wholesale the extra capacity. Knysna Town Council, situated in the Western Cape has been pioneering this phenomenon. In fact Knysna Town and Ekurhuleni have had their broadband networks for some time.

When the eThekwini Metropolitan Municipality launched their broadband project in 2008, named MetroConnect, the telecommunications market had less than 10 prominent operators and the cost of broadband was excessively high. It therefore made sense for eThekwini to build its own broadband infrastructure. Moreover, eThekwini Municipality was aware that they did not have skills to run a sophisticated broadband operation and thus they strategically gave a highly experienced company, Dimension Data, mandate to manage the network and to wholesale the excess capacity.

Today, eight years later, and when South Africa has more than 350 licensed telecommunication operators, the City of Joburg wants to enter the telecommunications market as an operator - this does not make sense. City's efforts to establish a Public Private Partnership to manage the Joburg Broadband Network has unfortunately failed dismally.

Four years ago the City of Joburg appointed Ericsson SA to build a 900kmoptic fibre network. Unfortunately this network has not yet gone live despite of the fact that it was expected to have started to operate in July 2013. This led to the City of Joburg cancelling the contract with Ericsson sometime last year.

On 29th January 2015, the City Council of Johannesburg approved that the City should pay R1.1-billion as part of settling the termination of the contract with Ericsson. The Johannesburg Municipality Council also approved the establishment a Municipality Owned Entity to operate and manage the Joburg Broadband Entity.

However, the aforesaid approval was preceded by some drama in the Council Chamber. The official opposition, the Democratic Alliance (DA) and minority parties left the council meeting after expressing their unhappiness for receiving the council documents dealing with this matter late. Despite of this, the African National Congress council members who remained in the Council meeting pushed through the motion.

It is well known that two of the top telecommunication operators in South Africa have not yet made profit after several years in the market. Chances that the entity responsible for the Joburg Broadband Network will successfully compete with more than 350 licensed operators and make any profit are zero. This proposed entity will not be self sustainable and thus it will consume the financial resources that the City can use elsewhere to provide infrastructure and social services to our people.

Even those telecommunication operators that are making some profit, their margins are getting reduced drastically due tight competition and the abundance of broadband. 

The truth is that South Africa is now surrounded by more than three undersea broadband cables. The private companies have already sourced this broadband inland and the bulk of it is lying underneath Joburg's streets and the private sector telecommunication operators are currently connecting this network to corporate parks, offices and residences.

Once this process is completed, the cost of telecommunications services will go down by more than 50%. In fact, your cellphone, home and office fixed-lines will pay a cheaper fixed rate - you will be able to make calls and using the data services as much as you want. Whereas the price of petrol is relatively cheaper in the coastal region, in two years' time, the cost of telecommunications services will be very cheap in Joburg due to the abundant availability of broadband everywhere and Voice over the Internet Protocol.

I will be quick to acknowledge that we have shortage of water and electricity in Joburg, but not broadband. 

This Municipality already has 15 entities and there are no compelling reasons or business case to establish an extra entity. There are murmurings in the ICT sector that even the national government is considering selling their own broadband company which is called Broadband Infraco due to intense competition. 

It is in this premise that I hereby advise the City of Joburg to cut its losses by selling the broadband infrastructure and focus on its core responsibilities that are enshrined in the Constitution of the Republic.

Another version of this opinion piece was published by The New Age.

Rabelani Dagada is the DA Spokesperson on Joburg Broadband Network Project

Click here to sign up to receive our free daily headline email newsletter