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Apr 25, 2007

Infraco already mulling West Coast submarine cable prospect

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Although a new State-owned broadband provider, currently dubbed Infraco, is yet to be formally established, it is understood that the Department of Public Enterprises (DPE) has mandated the current interim management team to study the possibility of investing in a new fibreoptic cable linking South Africa to the Europe via the West Coast.

DPE director-general Portia Molefe tells Engineering News that recent Cabinet approval for the Broadband Infrastructure Company Bill, has opened the way for the Parliamentary processes that should see the formal creation of Infraco, which comprises assets currently owned by Eskom and Transnet, during the first half of the year. But she also insists that a lot of work is already under way both for the domestic long-distance network and potentially an intercontinental link.

Infraco’s operations are currently being run through an Eskom subsidiary, which has its own CEO designate and board. It is finalising the construction of the infrastructure to the specifications required by the second-network operator, Neotel, which will effectively contract its services – at one stage, it was anticipated that the long-distance assets would actually form part of the second network operator, but that decision was reviewed.

For this reason, the Eskom subsidiary is currently rolling-out the infrastructure, as well as creating network redundancy and smaller rings, in line with the Neotel spec. It is also testing and lighting the dark fibre.  But with the recent Cabinet approval, Infraco’s separation from Eskom and Transnet will now proceed, probably along similar lines to the separation of SAA from Transnet.

Four-year exclusivity with Neotel, but . . .
Initially, Infraco will have a four-year exclusivity with Neotel, which will sell or retail this wholesale bandwidth on a cost-plus model to the market. However, it is likely that within that four-year window, Infraco will seek a licence, which could see its capacity, which is said to be more extensive than that offered by Telkom, open to all comers.

In addition, if it is found that Neotel is not passing on infrastructure pricing that is reflective of Infraco’s costs, the licencing process could be accelerated. Given that Neotel would be the retailer of Infraco’s bulk service, it would also have to be open to providing that capacity to all potential customers in South Africa, including the incumbent, Telkom. Should it fail to do so, it would be in breach of contract, which could act as another potential trigger for accelerating the licencing process.

The licence would also feasibly open the way for Infraco, probably in consortium with others, to pursue a submarine cable project. However, it is moving ahead with studies regardless.

Political pressure
Infraco’s submarine cable deliberations come against the backdrop of political pressure for improved African connectivity, going all the way up to South African President, Thabo Mbeki.

In a recent interview with Britain’s Financial Times, Mbeki described bandwidth prices as “phenomenal”, adding that to use the undersea-cable network linking Africa to the world was “many hundred percent more per unit of time than is being charged elsewhere in the world”. Days later, Telkom CEO Papi Molotsane quit, with some speculating that his inability to align Telkom’s business strategy with government’s demand for lower telecoms prices and better African connectivity, particularly through the politically-vexed Eastern Africa Submarine System, or EASSy cable, as key to his decision.

At present, the continent is connected to the rest of the world via the SAT3/WASC/SAFE submarine system, which involves 36 nations. The West Coast link is a 15 000-km optic cable linking Europe with South Africa and a number of countries on the West African coastline, while the SAFE, or South Africa-Far East, continues the connection another 13 800 km to Malaysia via Reunion. The systems ultimate capacity will be 120Gigabits a second.

Capacity and pricing
But Molefe reveals that the DPE is supporting Infraco in its efforts to study a new West Coast submarine cable for various reasons. She did not, however, place a monetary value to the possible project, saying only that various configurations were being studied.

Molefe argues, for instance, the current capacity would not be sufficient to support South Africa’s bid for the so-called square-kilometre-array (SKA) international science project, which would require capacity of 1 terabit-a-second by 2014.

In September last year, South Africa was short-listed along with Australia as the possible host country for the $1-billion SKA – a project that envisages a radio telescope with an effective collecting area more than 30 times greater than the largest telescope ever built. Part of South Africa’s bid includes a guarantee that it will have the necessary broadband capacity to transport the large amounts of information arising from the SKA.

In addition, it could also be desirable to have additional capacity to provide a certain degree of redundancy for the soccer World Cup. But given the timeframes that ambition might not be practical to implement.

“Infraco is busy setting out the business case with capacity options,” Molefe reports, adding that DPE is of the view that South Africa and Africa is in desperate need of an “open-access cable” rather than the current model of telco-operated cables.

But main rationale for DPE’s support arguably lies in a desire to reduce the price of bandwidth as well as to create the capacity for an explosion of bandwidth related business opportunities in South Africa and Africa.

Molefe argues that a cable, which could be operated on a cost-plus model, would gel with the terrestrial model currently under development by Infraco. “Solving the terrestrial bandwidth constraints is but half the problem. We still need to get from here, to, at the very least, Europe.”
 
Terrestrial first
But Molefe stresses that, for now, Infraco should be viewed as a national long-distance provider of high-quality terrestrial bandwidth and that the decision to establish the company was driven by a desire to place downward pressure on prices.

Indeed, in a press statement released this week, the DPE stressed that the new long-distance network has sufficient capacity to provide high-speed national connectivity for at least the next 20 years, and is capable of supporting commercial, government, scientific and special-event requirements such as the 2010 World Cup.

Infraco, the release states, will initially be funded from the National Revenue Fund and the private sector, and is projected to be self-funding within four years of launch.  The immediate capital investment is being undertaken to provide infrastructure support to Neotel.



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