Government chooses Telkom to roll out broadband in rural areas

During the State of the Nation Address in Parliament last month, President Jacob Zuma announced government’s decision to award Telkom as the “lead agency” to roll out broadband in South Africa’s rural areas. The JSE-listed telecommunications utility, Telkom welcomed the announcement, after both the utility and state-owned Broadband Infraco had been lobbying to run the project.
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2015-03-18
During the State of the Nation Address in Parliament last month, President Jacob Zuma announced government’s decision to award Telkom as the “lead agency” to roll out broadband in South Africa’s rural areas. The JSE-listed telecommunications utility, Telkom welcomed the announcement, after both the utility and state-owned Broadband Infraco had been lobbying to run the project. According to reports, Broadband Infraco appears to have vanished off government’s books, as no mention of the company was made in the 2015 budget vote allocation. This has fuelled rumours that perhaps the fibre cable network company is up for sale. broadband banner The appointment of Telkom has evoked much controversy, as it is a known fact that the telecommunications utility is not the only company that lays broadband. Democratic Alliance leader, Helen Zille said that Telkom had effectively been awarded the contract illegally. Zille threatened to take the government to court over the decision, as Telkom did not win the lucrative deal through an open tender process as is required by the constitution. Trade unions Solidarity and the Communication Workers Union (CWU) expressed scepticism of the broadband project. Solidarity’s Marius Croucamp said that while they did not expect it to yield profits for Telkom, they feel that it will strengthen the telecommunications utility’s monopoly. Telecommunications and Postal Services Minister Siyabonga Cwele was quick to explain that Telkom will not be the only agency involved in the broadband project, but that it would rather lead the process of rolling out broadband. “Telkom was chosen because it has the most extensive infrastructure in the country compared to other public and private sectors”, said Cwele. The government feels that the market has failed to deliver broadband to all South Africans and have therefore taken the decision to intervene in the rollout of broadband “to bring services to the poor and to close the digital divide”. The government noted that the current infrastructure rollout by both public and private sectors is fragmented and is not expanding connectivity to uneconomic and underserved rural areas and townships. According to Cwele, it is, therefore, necessary for the government to facilitate the extension of fibre infrastructure for the benefit of all South Africans, as well as other industry players,  through the establishment of an integrated national broadband network. Cwele added that “if we fail to extend broadband services to the poor, the effect would be worse than apartheid. Scars caused by this exclusion would be permanent and very deep”. The broadband project, named SA Connect, is reported to cost R98 billion to roll out. Finance Minister Nhlanhla Nene has confirmed that government will invest R1.1 billion into the project over the next three years. While Minister Cwele had initially said Telkom has its own balance sheet which can meet some of this demand, his spokesperson Siya Qoza contradicted him by saying that Telkom may be “spared from contributing financially”. This sparked great confusion with Telkom shareholders and other industry role players alike. Qoza quelled the tension by saying that a final contracting agreement was being formalised between the government and Telkom and added that there would be numerous sources of funding. Telkom CEO Sipho Maseko dismissed reports that Telkom would have to dig into its own coffers, saying that government will fund the national broadband project. Addressing the inaugural conference of the WiFi Forum of South Africa in Johannesburg earlier this month, Minister Cwele said that the first phase of implementation for SA Connect would begin in April this year. “We will connect 580 clinics, 4 444 schools, 182 police stations and 572 other government offices to the internet by June this year”, Cwele said. The broadband policy indicates that government wishes to provide a 10-megabits-per-second connection, which it intends to scale up to one-gigabyte-per-second by 2030. This would improve services and provide a much-needed broadband boost to facilitate e-education, e-governance and e-health services. The government hopes that by 2020, South Africa should achieve a 100% penetration rate for broadband, with all citizens of the country connected. According to Cwele, currently, the internet is at 49% penetration, while high-speed broadband only has a penetration rate of 17%. “In pursuit of this goal, the government has developed SA Connect, our national broadband policy to guide how best we can roll out broadband and ICT services to all South Africans”, Cwele said. While the debate on whether Telkom is the best choice for the rollout of SA Connect continues, it cannot be ignored that the telecommunications utility’s extensive infrastructure boasts a 147 000km fibre-optic network, which is reportedly greater than any other telecoms company in South Africa. Get the latest Broadband deals here!