South Africa - Minister's vision of broadband services is potentially very expensive, especially in rural areas

[the new age] The desire by the Minister of Communications, Roy Padayachee, to grow home broadband services is feasible but significant infrastructure investments amounting to billions of rands have to be made, according a senior telecoms analyst.

Dobek Pater from Africa Analysis, an ICT and telecoms research firm in the developing economies said that the government’s intentions are noble but this will come at a price.

“The Government needs to go into underserviced areas; this will require substantial investments in excess of billions. If you look at what mobile operators have deployed for their mobile broadband the government will have to do more,” explained Pater.

The outspoken Pater said they are, however, other options for government to deliver on its targets which include partnering with existing operators and other role players in the sector.

Presenting his budget vote in parliament on Tuesday, Minister Padayachee lamented the lack of broadband penetration in the country saying home internet connectivity remains worrisome in South Africa. Padayachee said penetration is currently 5% and is expected to decline further due to high costs.

“Research indicates that under conditions characterised by the high cost of services, saturation in urban markets and limited access in rural areas, the rate of expansion of the Internet in South Africa will decline from above 15% to 10% per annum by 2015. This projection envisages 11.3 million Internet users by 2015, which is approximately 22% of the population,” said Padayachee.

Pater agreed with the minister saying, “the deployment of infrastructure will be the determinant factor. It’s also a question of how retail pricing will be in the next four years”.

According to the minister, ICT infrastructure remains a basic foundation for economic competitiveness and the government has increased investment in infrastructure to create jobs and stimulate the economy. He pledged that the government will accelerate broadband infrastructure spending.

“In this regard, an initial R450 million, over the MTEF period, has been allocated for the provision of Broadband services. An integrated broadband implementation plan, which will harmonise various broadband related initiatives, will be finalised in this financial year,” said Padayachee.

Pater also said that the government will also have to re-examine the business model of Broadband Infraco, the government owned telecoms infrastructure provider which was set up in 2007 and intended to improve market efficiency in the long distance connectivity segment by increasing available long distance network infrastructure.

“Infraco is a bit of an enigma, we know where it’s at but don’t know where it’s heading. It has been ascertained that the current business model isn’t working,” he said

The South African ICT market has been touted as the biggest and the fastest growing in Africa which provides the country with vast opportunities.

The private sector has been investing heavily on infrastructure with the most recent high profile project being the WACS submarine cable linking Southern Africa and Europe, spanning the west coast of Africa and terminating in London, United Kingdom. This $650 million cable system is the biggest to ever land on the Africa continent.

The consortium to this project is mainly composed of South African operators, including the pan-African telecoms giant, MTN.