Infraco: Really the answer?

ADSL South Africa (Broadband South Africa), 7 November 2006

Government recently introduced a new company to help lower for one the cost of broadband in South Africa. Is Infraco the answer to our prayers?

At this stage one can only speculate whether the unveiling of Infraco are based on good intentions or whether it's just another move to create confusion. One can't however help to second guess the government's intentions especially since government has interests in almost all the players, Neotel included. Icasa for one is clearly not executing its intended mandate to lower the exorbitant telecommunications costs in South Africa. If government is failing with so many cards in hand, why should we smile at the addition of another? Quality is what we need not quantity. At least not in this context.

According to Minister of Public Enterprises, Alec Erwin (picture above), he's aiming to increase the availability of broadband while decreasing the cost of it. Dene Smuts, Democratic Alliance spokeswoman, asked the question we're asking as well: "Is Erwin taking us back to a giant state telco or does he just want to offer cheap wholesale capacity to all players?" This is where the intentions bit mentioned above comes into play.

Now let's assume a worst case scenario. A scenario where ADSL broadband prices for one are heading south due to a 'consensus' reached between players and not because of real competition. Now what's the problem some might ask. Well, prices are heading south but stop at the first service station remaining there for a long cold winter or for what might feel like an eternity. In other words, prices are heading south but not as far south as it would have been possible under real competition. In more formal terms, we get to a situation of lower prices but with price fixing intact. Doing this while giving the public the idea that we did our best to fight high telecoms prices. We really hope government don't have this scenario in mind because then we're set for a really long winter in terms of fixed pricing. Many might deem this idea as ludicrous but history might just prove us to be correct in this regard.

Let's look for a moment at Infraco although the picture is not very clear at this stage due to a lack of facts. What we know for certain is the following: It will cost government, or you the tax payer, a hefty R627 000 000 to develop this company. In Lotto terms that's at least 627 millionaires you're sitting with. One can really hope this will be money well spent because there are so many holes one can fill with such an amount. We also know that an Eskom built national telecoms structure will form the 'heart and soul' of Infraco.

Erwin aims to reach his aims by for one helping Neotel  to become successful in competing with Telkom . Now the million dollar question: "Will the introduction of Infraco not destroy this noble idea?" It's a real possibility that Infraco could just help to destroy instead of helping to build Neotel up by stealing its customers. Why not make Infraco part of Neotel while we're at it if we're aiming to help Neotel? One idiot that messes about with regulations can make Telkom's dream come true by shooting Neotel in the foot by using Infraco. We don't want to see the situation where Infraco emerges as a third fixed network operator.

A wait and see strategy seems to be the best one to follow at this stage. Let's hope that Erwin's good intentions will lead the way to cheaper ADSL broadband for one.