Getting Jo’burg connected
Can the City of Gold marry the motives of profit and universal service?
ALTHOUGH JOHANNESBURG’S R500modd broadband network project has all the major operators scrambling to get in on the action, there are some reservations about whether or not it will be possible to marry the motives of profitability and universal service.
Some potential bidders – who preferred not to be named in case their concerns counted against them in the bidding process – say it remains to be seen whether a company could build a business case on the project. One described Jo’burg’s expectations as “unrealistic”.
However, the city remains optimistic and hopes the private sector will come to the party and provide solutions.
Douglas Cohen, of the City of Johannesburg’s economic development division, says the project had to be a “win-win” solution for both parties. Cohen says the whole point of the request for information (RFI) process was to find a way to make it work in partnership with the private sector. “Making broadband affordable and accessible to all is one of our objectives and we believe that there are service providers that recognise that – given the size and scale of Jo’burg – there’s a business opportunity here.”
Another potential bidder says it wasn’t a question of technology: the technology solutions required were available. Most importantly, the success of the project would depend on how it was structured and financed.
The RFI process closes on 30 March, and Cohen hopes to announce, by May, a shortlist of parties to build a demonstration network. Cohen says he’d had requests to extend that deadline but unfortunately couldn’t do so. Though he refused to be drawn on deadlines further on in the process, the RFI document does mention 2009 as an envisaged completion date.
Another of the project’s principles is the creation of a “smart, digital world-class city” prepared for the information and communications technology needs of 2010.
Neotel and Internet Solutions have confirmed that they’d participate in the process, while others expected the bid to include Telkom, Sentech, Business Connexion, MTN, Vodacom and (possibly) Altech and Gateway Communications.
Few small companies are expected to participate, except as part of other consortiums’ bids, given the significant costs involved. However, the interested consortiums must include black empowerment participants (10% of the evaluation score). And there would be scope strong private sector partners if they wanted the provision of broadband to their constituents to be a for-profit business. IS director Hillel Shrock says such a project must at the very least be self-sustaining.
Shrock says Jo’burg’s intentions were “laudable” and IS/Dimension Data (its parent company) is viewing the project as a very exciting one, provided detail issues could be ironed out.
But most potential participants are keeping their cards close to their chests. Asked if it planned to participate, Vodacom chief communications officer Dot Field replied: “Vodacom is always investigating opportunities to grow and expand its business. This process is ongoing and a variety of opportunities are being explored.”
Meanwhile, an Altech spokesman said no executives were available to comment, given that it’s in a closed period. However, given that Altech recently signed a partnership agreement with Samsung Electronics in a deal to trial a WiMax broadband network in SA, this is undoubtedly a market in which it has aspirations.
The Jo’burg network would be the country’s biggest city-wide broadband project, given that it’s SA’s economic capital and houses 3,2m people. The project would require a private sector player or consortium to invest around R400m or more into building a network. In turn, Jo’burg would provide around R100m (some in cash, some in the form of the use of assets, whose values have yet to be determined) using a combination of technologies, including fibre optic, wireless and power line technologies.
Meanwhile, news that Telkom had tied up the City of Cape Town’s broadband network project in litigation didn’t seem to bode well for the success of other metropolitan broadband initiatives – at least until the regulatory environment can catch up with the new legislation. for small ISPs to buy capacity from the operator once the network is up and running (though Jo’burg itself would be the broadband’s principle user to facilitate the roll-out of services.
Says Cohen: “Jo’burg is looking for a partner – or group of partners – to invest, build and operate a network. That’s no small undertaking and does require significant investment, resources and capacity.”
Internet Solutions (IS) CEO Angus MacRobert says each of SA’s cities needed to find
Cities need strong private sector partners. Angus MacRobert and Hillel Shrock