South Africa cutting cost of the world’s most expensive broadband

Competition will improve services
Mayor De Lille also believes that  accessing broadband internet in Cape Town would be cheaper and more reliable as a result of agreements concluded with internet service providers (ISPs) that have taken up the spare infrastructure capacity generated via Cape Town’s broadband network, a move that greatly facilitates the space for competition on an unprecedented scale.

Organisation for Economic Cooperation and Development (OECD) telecoms analyst Taylor Reynolds reported in 2005 that broadband access in South Africa would improve with more competition.

“Aggressive price reductions and better services in the broadband market are always a result of competition,” he maintained. This is true today.

The South African communications arena, with both monopoly players and competitive markets, is the ideal test bed for the OECD’s views.

If the organisation is correct that competition is the driver behind lower prices and better services, this will happen in competitive areas, but not where one player dominates.

According to Mayor De Lille, the Cape Town’s fibre-optic network has reached the point where it is robust and extensive enough for the overflow to be put to use by the private sector.

“Smaller operators would be able to access the infrastructure to enter the market, generating competition in the ISP sector and stimulating economic growth in the Western Cape. It would also generate revenue for the city.

Cape Town city council has set aside R222m ($21m) of the budget for a three-year rollout of broadband infrastructure throughout the metro. The aim is ‘bridge the digital divide’ by connecting less advantaged communities in particular.

So far lease agreements have been concluded with eight third-party licensed network operators – including RSAweb, Cybersmart, Comtel, Vanilla and Neotel – with cross-connections already in place with Internet Solutions, Vodacom and  MWEB. Negotiations are continuing with 20 more.

“The city of Cape Town does not want to be a telecoms provider,” insists De Lille. “We want to grow the pool of service providers to end users. We invest in infrastructure, which we use internally then rent out to independent service providers.

That way we stimulate competition in the communications market, and that means we will not only have one service provider, but as many as possible. Continuously growing of the industry is the best way to bring down prices.”