Get­ting Jo’burg con­nected

Can the City of Gold marry the mo­tives of profit and uni­ver­sal ser­vice?

Finweek English Edition - - Communication & technology - BELINDA AN­DER­SON

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

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