The government has combined the telecommunications businesses of Eskom and Transnet to form InfraCo. The new company would allow any business, including Telkom, to use its countrywide fibre-optic network. Government also announced that InfraCo might lay a new submarine cable along the west coast of Africa to service a portion of the country’s international bandwidth needs.

In related news, Communications Minister Ivy Matsepe-Casaburri recently said that Sentech, another state-owned company, would provide the core of South Africa’s wireless broadband network. Sentech is currently waiting for government funding to expand its wireless broadband coverage. However, the long wait for funding has made it difficult for Sentech to retain MyWireless customers over the last two years. InfraCo has received US$ 87.5 million in funding from the state.

Competition in the backbone market today consists of state-owned InfraCo preparing to compete against Telkom, another company in which the state has a majority share. In addition, there is Neotel, the second national operator in which the government holds a significant stake. It is expected that Neotel will be able to lease facilities or purchase bandwidth from the other two entities. If this market structure fails to bring down prices and extend broadband coverage, Sentech could make a contribution through its coming rollout of nationwide wireless services that would extend coverage to rural villages.

Though the number of players in South Africa’s backbone sector gives the appearance of competition, the fact they are all at least part owned by the government at the very least calls into question whether truly competitive behaviour would develop.

The government’s initial plan to deal with liberalisation in the telecoms sector was to create a protected environment for Telkom in which they would invest in infrastructure, bring services to rural communities and lower prices to create a vibrant ICT sector for South Africa. Due to non-payment, Telkom has disconnected a large portion of the fixed lines it deployed during its expansion phase. Telkom and the government’s expansion plans have not met expectations and telecoms prices have remained high because of the lack of competition. Matsepe-Casaburri remains optimistic that consumers may see lower prices before the end of 2006, mainly because of Neotel’s entrance into the market.

Broader availability of affordable services could be on the horizon through the efforts of municipalities and smaller operators. In the Eastern Cape, UniNet will roll out a wireless network to provide residents with voice and data services. The first phase of this project is expected to be complete by mid-2007. UniNet and ITel, a USAL license holder, plan to offer cost savings to customers in the Eastern Cape. UniNet is coming off a successful rollout of a WiFi network in Knysna where residents are now seeing significant savings by using the local wireless network rather than services offered by Telkom and the mobile providers. Similar projects are under way in other regions around the country.

Souce: Moneyweb from Rudolph Muller of MyADSL - WDR/Intelecon Regulatory News