Swiss army knife or blunt tool?

The implication is that government wants to use Sentech as its "Swiss Army knife", an all-purpose vehicle to help it solve the problem of bringing affordable communications to the vast majority of the population. However, considering the track record of such policies, Sentech could find itself becoming a blunt instrument to hammer in problem ICT nails.

Earlier this year, the ICT sector was stunned by the news that Sentech would be a key part of government`s programme to reduce the cost of ICTs. The first hint of government`s new train of thought was when trade and industry minister Mandisi Mpahlwa told a parliamentary press briefing in February that a competitor to Telkom would be formed by government, at it would "dovetail" with Sentech`s infrastructure roll-out that should see its wireless broadband network be completed in the 2006/07 financial year.

In May, public enterprises minister Alec Erwin announced that as part of government`s "Accelerated and Shared Growth Initiative for SA" (ASGISA), policies directly related to the overall ICT industry would include reducing of the costs of communications, Sentech funding for its wireless broadband network and conditions for the participation in the East African Submarine Cable System (EASSy).

Later that month, communications minister Ivy Matsepe-Casaburri stated in her 2006 budget two policy directions for Sentech after noting that government had decided it was a strategic national asset. The first policy direction was that Sentech would form the core of a national wireless broadband infrastructure network, and secondly, the wireless broadband infrastructure network would be expanded beyond the current footprint and enabled to carry voice to the end-user - giving full effect to its multimedia licence.

"Government`s policy smacks of desperation," says Raven Naidoo, head of independent ICT consultancy Radian. "Government`s main problem is bringing coverage to the majority of the population who don`t have it, mainly the poor and those in rural areas. Telkom was originally mandated to do this and it turned out a disaster for which we are all still paying."

Naidoo says government has now mandated Sentech to provide this coverage. "But they (government) have not learned from the past. They will tell Sentech to do this and when it proves not to be financially viable, government will turn to Sentech and say: `We are not responsible for your finances`."

Speculation that the Department of Public Enterprises is mooting a plan to combine the assets of Eskom`s Easytel to those of Sentech to form a new broadband parastatal have just added to the sector`s confusion. This is because Easytel was earmarked for sale to the Second National Operator, along with the Transtel assets. However, it seems the SNO will now rent this rather than buy it outright - again raising questions on just how a change in policy will play out.

Naturally, Sentech is a little coy over releasing details on how it sees its current and future roles changing. This is not surprising as it is still recovering from the tongue lashing it received from deputy communications minister Roy Padayachie after bemoaning the shortfall it had received in government funding to prepare itself for the migration to digital terrestrial TV (DTT) in time for the 2010 Soccer World Cup.

A written reply by Sentech acting chief operating officer Frans Lindeque to iWeek`s questions says that Sentech`s overall mission has not changed. "Sentech continues to fulfil government`s mandate in bridging the digital divide in both urban and rural areas," he says.

Lindeque says that Sentech sees its role in reducing ICT costs through a greater investment in digital network infrastructure and reinventing its technologies according to market needs.

According to Lindeque, Sentech also has a specific focus on rural areas in terms of the network roll-out. However, he also says that Sentech has had only limited discussions with the Universal Service Access Licensees (USALs), the telecommunications co-operatives currently being set up by government to do just this.

Several of the USALs have petitioned the regulator, ICASA, and the Department of Communications to allow them to install W-CDMA (Wireless-Code Division Multiple Access) networks - a technology that will allow them to carry voice and data and put them directly in competition with Sentech`s MyWireless offering.

MyWireless has been the most visible expression of Sentech`s transformation from being a supplier of infrastructure, mainly broadcasting, with one customer, namely the SABC, who told them exactly what to do and when, to an organisation that has to cope with multiple clients, many of them individual consumers.

A year ago, Sentech admitted that it had 4 500 MyWireless subscribers after investing R80 million in the network. Since then it has decided not to release those numbers and iWeek has learnt that the subscriber base is now around 6 500, but most certainly less than 10 000.

These numbers are not altogether encouraging. Privately-owned WBS iBurst, effectively a direct competitor to MyWireless, says it has around 23 000 customers after spending R200 million on its network over the past two years.

iBurst clearly feels Sentech should not be competing against the private sector. Alan Knott-Craig Jr, MD of iBurst, says: "It is not possible, nor is it fair, to create an environment whereby private companies compete with state-owned enterprises. The reality is that Sentech does not have a profit motive, as opposed to a private company such as iBurst. Therefore, it becomes harder for private companies to operate viable businesses.

"In addition to the above, Sentech is being funded by taxpayers` funds, including taxes paid by iBurst. It is the ultimate irony that iBurst is funding its own competitor." But Sentech`s other fish to fry is the controversial roll-out of DTT after it bemoaned the fact earlier this year that government had not given it sufficient funding - an issue both say is now sorted out.

This R1 billion capital expenditure project will mean a radical change in the way in which South African TV viewers will receive not only their broadcasts, but also other information they can access.

Sentech chairman Colin Hickling told this reporter that the "beauty of digitisation of the TV network was that a far greater amount of information can be transmitted than just the broadcast." He said an outgoing transmission (including a voice call) can be carried over the broadcast network and then another technology can be used to carry it back to the originator.

But how is the country going to migrate to DTT? It will be far more expensive than just the R1 billion as many poor TV viewers will want some kind of subsidy so they can afford the set-top boxes (the decoders) that have to be plugged into the sets.

Lindeque says industry players and government are currently looking into the funding models. The two most obvious options are that of "free-to-air", or "free access". In the former option viewers will need a "zapper box" to receive the signal. The disadvantage of this option is that the broadcaster has very limited interaction with the viewers and control is limited.

The more attractive option, says Lindeque, is the "free access" option that requires a smart card that can be turned off if viewers don`t pay their TV licences. The system is also able to accommodate more value-added services. Lindeque says Sentech`s DTT ambition is to have 92% of the country covered within five years.

Considering Sentech`s ability to roll out a number of wireless communications services, funded by the taxpayer, means that it is perfectly positioned to be a multi-purpose tool for government. However, this is where the crux will lie, because it really depends on how the policy makers see it being used.

"The problem is that within government there is little understanding of the difference between an infrastructure supp-lier and a services supplier. In Europe, governments own the infrastructure and they use the open access model. Unfortunately, in SA, this is not the case as these infrastructure players end up selling the services," Radian`s Naidoo says.