Jacquie Subban, of the eThekwini Municipality, says government is how you bring broadband to citizens.

Government wants to turn broadband into a municipal service to cut prices. Detractors aren't so sure it should or could. 

 Several big-city municipalities are forging ahead with public broadband projects, designed to provide low-cost infrastructure to anyone who wants to buy access. 

Proponents say this will help bring down bandwidth costs and make it available to previously under-served communities, among other benefits. Not everyone is convinced, however. Critics say if government wanted to reduce prices, it should permit and encourage competition, that it is taking on too much by building public infrastructure, that the grand plans are nothing more than vapourware, and that nobody has got it right except one small town.

The City of Johannesburg, City of Tshwane, eThekwini and the City of Cape Town all have broadband projects underway. There is a perceptible difference in accent, however. While ANC-dominated municipalities say they will make bandwidth pervasive, drive down pricing, provide access devices, and create content to deliver, the City of Cape Town appears to have a more pragmatic, infrastructure oriented approach.

At a cost of R300 million, Cape Town’s 171km fibre-optic network was mooted to boost the local economy and reduce the city’s telecommunications costs. Touted to be ready for 2010, the municipality says the network will be available on an “open access” basis to prevent monopolisation of infrastructure and promote competition between private companies. This will allow competition to affect lower prices and a “significant stimulus to the local economy”.

In contrast, driving down pricing and enabling mass access top the broadband agenda of the City of Johannesburg, City of Tshwane and eThekwini.

The “existential debate”

Jacquie Subban, head of geographic information and policy at eThekwini Municipality, brushes aside discussion of whether or not local municipalities are hobbling free markets or threatening civil liberties. “I don’t want to enter into an existential debate about whether this is capitalist or socialist,” says Subban, who heads up eThekwini’s connectivity project. “If this is anti competitive, then we will get taken to court, but no one has complained yet. As long as we don’t start selling ISP services, then people won’t complain about us providing the infrastructure.”

The metro has rolled out an extensive fibre network and is making its excess capacity available to local ISPs via a management contract it has in place with Dimension Data. It plans to extend connectivity to universities and schools in the region, before embarking on other planned initiatives.

Subban says the metro wants to make the service affordable to 90 percent of the population with a model that enables the municipality to access the poorest of the poor. Asked how the pricing strategy and structure was determined, Subban said she established benchmarks through an informal, self conducted poll.

“We are looking at R150 a month for data and voice. I asked a few people what they thought would be acceptable, and the domestic workers I spoke to said they were spending R70 to R100 a month on cellphones. The vision is a broad one. How do you bring broadband to the citizens of eThekwini? We have to get cheaper rates with international bandwidth becoming cheaper,” says Subban.

She details the metro’s strategy as providing access, getting involved with the provision of devices to get people onto the network, and overseeing the creation of content.

“We will help create packaged and dedicated portals that people could learn from. If you want people to learn you must package information for people to learn and give information that is crucial for people in the community.”

The duty of the state

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When questioned whether local government should be playing in this space, Subban says this is government’s role. “Who provides education and health information in this country? Government. Information in itself can be disconcerting because of information overload.

For someone who is not used to information it is overwhelming just having access to the internet. We will oversee the creation of portals with information where people can ask questions about their circumstances. The portals will be there as a guide to creating understanding about information.”

The City of Johannesburg is clear about its intent to tap taxpayers in order to price private-sector competition out of the market. Jason Ngobeni, the municipality’s executive director for economic development, told ITWeb recently that, “ICT has become a right to the people, a right that should not be restricted by affordability,” adding that, “the city will absorb a bigger part of the cost that is currently passed on the user by other providers”.

Municipalities used to operate under Private Telecommunications Network licences. “The correct conversion for municipalities [under the new Electronic Communications Act] is a Private Electronic Telecommunication Network Exception licence, which is analogous to the old PTN where you could have a virtual private network and self-provide on a continuous piece of land or municipal area,” says Dominic Cull" rel=tag>Dominic Cull, a telecommunications regulatory expert with Ellipsis Regulatory Solutions. “In terms of this, municipal networks should be used ‘primarily for their own internal uses’ according to legislation, but there is no real clarity about this. If a municipality used 51 percent of capacity for their own purposes and retailed the rest it would be fine.”

Cull rubbishes metro broadband initiatives saying they are largely vapourware. “These networks have been in the pipelines for years but not a lot has been done. Tenders were awarded but nothing has been delivered. It’s all vapourware, a lot of talk about benefit accruing to the disadvantaged, but years down the line no one is enjoying access. It’s a mess.”

Is this service delivery?

But why is local government getting into broadband provision under the pretext of driving down market prices? Professor Chris Visser, Sanlam chair of Investment Management at the University of the Western Cape, smells a rat, and says local metros are veiling and misrepresenting their true intent.

“Broadband is just a delivery system. You still have to have the devices on the other end; it means nothing without the devices,” says Visser. “Electricity means nothing unless you have lights and stoves. People need the network technology and devices to utilise the technology.” He says since this is government, the likely motive is something else.

“When you are dealing with politicians, the only thing they are interested in is power. As an information tool, this means they could control access and information and could affectively control what is available on the channel. The problem here is that you are dealing with government and not a free press situation. This will be a channel owned by government, so it will be similar to the SABC.

“If government is getting into broadband as a delivery mechanism, then this will see the provision of connectivity becoming a commodity like water and electricity. One would think that this sort of initiative would be a national initiative where synergies could be leveraged and a lot of technical issues should be standardised throughout the country. Municipalities are about providing communal services. It is difficult to discover the real motivation, besides the motivation of spending money,” he states.

As a vehicle for improving service delivery the metro projects make sense, but manipulating the market at a time when telecommunications has just become deregulated has the critics confounded.

“There are two perspectives on the metro broadband initiatives. One, that as an organisational tool it can be valuable and useful and it can improve efficiencies in service delivery dramatically,” says Arthur Goldstuck, who heads research firm World Wide Worx. “But as a service for citizens it is an inappropriate source for that type of service. The prime reason is that it is not the business of municipalities to provide internet access when they are wrestling with delivering efficient municipal services like lights and water. While these function fairly well, there are frequent service issues in the less affluent regions of the city where people tend to be less empowered and have less of a voice. Municipalities – and specifically the Johannesburg municipality – are legendary when it comes to consumers not getting hold of people, particularly people who can resolve issues. Broadband is a high technology environment where people require a high level of service. For an organisation that already has issues with service, particularly in the billing environment, they are looking for trouble.”

Communication breakdown

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Compounding the trouble is the apparent lack of a national strategy, insufficient transparency and the fact that there is no clear communication on the multiplicity of broadband projects.

“All the municipalities are doing their own thing and there is no synergy between the different municipalities,” says William Stucke, who runs QPoP Internet Innovations, an ISP. “There was a lot of consultation at the beginning of the projects, but some have lost their way, and there is no longer any consultation process,” says Stucke, who was involved in the Johannesburg project. “Johannesburg has gone quiet. They have stopped talking to industry parties and stakeholders. Their last communiqué was in February 2007. It seems they have made up their minds about what they want and how they are going to implement it.”

Brainstorm did carry an article on the City of Johannesburg’s project last month, but spokesperson Virgil James admits lack of communication, which he puts down to “hard work”.

“We were excited and there was a big noise about the city starting this project, and then it went quiet because a whole lot of work needed to be done,” he says. “We only awarded the tender to Ericsson late last year. Soon we will do tangible work around broadband, but right now there is nothing visible to show. There’s still a lot of work to be done behind the scenes. We are looking at October to have something tangible, and then we will inform people in the city.”

Johannesburg’s project is being run under a privately held company that includes the municipality, global telecommunications company Ericsson and Centratel’s Masakhe Communications.

The project comes at a cost of R1 billion over three years. “A holding company has been established so that no one entity owns the infrastructure. Ericsson owns part and the city another portion. The city will develop for its own use and then use the infrastructure to cut down its own telecoms cost. As time goes by the selling of spare capacity to ISPs at cheap rates will help self-fund the project,” says Robert Wuestenenk, director of broadband networks for Ericsson.

Governments often take on large-scale infrastructure where the cost benefit analysis makes sense, when capital projects are too big for the private sector (as in the case of dams), or when a project involves too much risk (as with nuclear installations). That these criteria are met in the case of municipal broadband, however, is a dubious proposition.

Little success

“The only way to drive down prices, aside from the state or the regulator mandating lower prices, is by allowing greater competition, and not to establish just one or two entities, which would be a cartel,” says Goldstuck. “I believe that their stated intent is not the true mission behind this project. If the true mission was to drive down price then they would lobby for greater competition and allow for greater competition within their metros.”

Visser also warns that the projects are in danger of further entrenching monopolies, to the detriment of the tax payer. “If you look at other utilities that are provided by municipalities, it becomes a form of monopoly. You don’t have a choice of where to buy electricity. This kind of monopoly is dangerous because it means local government can make undue or excess profits which they use as a form of taxation. The danger is that they get a monopoly, squeeze everyone else out of the market and then manipulate prices,” he says.

The licences issued to the metros by Icasa, however, do not permit municipalities to profit from on-selling capacity on metro networks. Pricing has to be on a cost-recovery basis.

Has anyone got anything right? Cull says the answer lies in a small municipality along the Garden Route. Knysna launched its own broadband initiative in 2005, two years after the project was mooted in 2003. “Knysna is the first municipality to have launched broadband, and is the only one getting things right. They have their own internal voice traffic at a zero rate, and have established a WiFi network. They are also aggressively rolling out services to the previously disadvantaged through an entrepreneur programme that makes a lot of sense.”

Perhaps the big cities should turn to Knysna for inspiration. Then again, perhaps they should wait to see what self-provision permits the private sector to achieve, before taking on and monopolising a massive new infrastructure responsibility.

Where these projects will leave the telecoms landscape remains unclear. While the ICT industry welcomes cheap broadband in principle, many clearly believe turning it into a municipal service will cause more harm than good. Local governments are forging ahead regardless. Meanwhile, business and Joe Citizen could be caught in a no-win situation, left with a huge tax bill for another ill-conceived public service that excludes private alternatives should it fail to live up to its promise.