Undersea cable plan tangled in acrimony in South Africa

"If the South African Government has this responsibility, why has it not exercised it over Telkom's SAT3 prices? The Department of Communications talks the talk but does not walk the walk."

The sole active supporter of the NEPAD-backed Broadband Infrastructure Project that will never be built, the South African Government is trying to arm-twist EASSy because the project has slipped free of NEPAD control. This is the arrogant display of naked political power that those who have not signed the NEPAD political protocol feared would occur if the larger African brother failed to get its way.

The 10,000km Eassy cable will be 27% owned by Telkom, Neotel and MTN, and is designed to provide desperately needed cheap bandwidth to 21 African countries. But SA's communications department has taken umbrage at what it sees as the commercial nature of the enterprise, and intends to withhold landing rights.

Instead, the government will use taxpayers' money to roll out two rival cables heading east and west, jointly known as the Nepad Broadband Infrastructure Network. Denying landing rights to EASSy will be detrimental to the three local companies, which, they say, have had the foresight to invest in the project to slash bandwidth prices.

It will also be anticompetitive if EASSy members are not allowed to sell bandwidth to other operators in SA, says Mohsen Khalil, a director with the International Finance Corporation (IFC). He also says the government's hostility shows it has not understood a new commitment the consortium has made to open access.

The IFC is part of the World Bank, and is investing $32,5m to help about 15 small operators participate in Eassy. Yet the director-general of the communications department, Lyndall Shope Mafole, remains vehemently opposed to the project. "Eassy is bad news for developing countries that are not at the level of SA," she says.
"We have many problems with it. The fact that you work for the World Bank makes you think you know what's good for Africa even when you don't live in Africa. I find that quite insulting."
Because Eassy's biggest shareholders are giants like MTN and Telkom, their bulk buying power gives them an advantage over smaller operators also trying to buy and resell capacity to customers in each country, she says.

"South African companies could use their dominance to compete unfairly in other countries. We have a responsibility as the government to ensure there is fair competition. We are not willing to look at something that is clearly discriminatory. We couldn't rest with a clear conscience." If the South African Government has this responsibility, why has it not exercised it over Telkom's SAT3 prices? The Department of Communications talks the talk but does not walk the walk.

A bigger issue threatening not only Eassy but also other foreign-backed cables is a demand that any cable landing in SA is partly owned by local companies. The minimum percentage of local ownership will be determined by Communications Minister Ivy Matsepe Casaburri.

The instant reaction is to question whether SA has the right to do that. It has, under the Electronic Communications and Transactions Act, Shope-Mafole says. The second reaction is to assume that foreign investors will be deterred. The government's belligerent stance in an effort to promote local industries may backfire and deprive consumers of cheaper bandwidth if foreigners opt to bypass SA's coastline.

Nonsense, Shope-Mafole says. "There are millions of people who want to enter into arrangements and land in SA. We welcome anybody who wants to invest in submarine cables that land on South African soil, but we need South African companies to invest."
Although Eassy boasts 27% local ownership, that may not be enough. Seacom, another private cable already under construction, must also recruit local investors for the plans on its map to match reality. Seacom has signed a deal for SA's second network operator, Neotel, to operate the local landing station, which does not impress the government.

Shope-Mafole said the demand for local ownership in the entire cable linking India to Europe via SA was discussed with Seacom's mostly US investors over a cup of coffee. "I don't think they thought it was unreasonable. I wouldn't say they loved it, but they didn't throw their cups at us," she says.
(Source: Balancing Act / Business Day)