The creation of the company, Broadband InfraCo, is meant to improve the underdeveloped information network systems and to curb the high costs of long-distance connectivity relating to broadband systems. The government will use technology based on the long-distance, fibre-optic networks developed by Eskom and Transnet.
Three concerns had to be remedied in order for South Africa to fully participate in the global information communications technology (ICT) sector: limited access to and the high cost of broadband; the lack of international competitiveness of broadband; and the digital divide between the first and second economy.
The InfraCo initiative is in response to demands that call for the government to take action to curb the costs of such network systems.
The Organisation for Economic Co-operation and Development (OECD) recently released a study assessing the usage of broadband internet amongst 30 of its member countries. While the average OECD country provided broadband access to 15.5% of the population, only .05% of South Africans have access to such technology. Countries assessed by the OECD span across Asia, as well as the UK, the US, and Western and Eastern Europe.
The monthly average cost of an individual broadband connection in South Africa is currently estimated at $47. The average price in Asia is a nominal $17 per month, while in the US connections can be found on average for $30. South Africa's prices, according to Jens Montanana, the chief executive of Datatec Limited, are "outrageous... and out of sync" with the rest of the world.
Erwin said the company's formation would fast-track the emergence of a globally comparable information and communications technology (ICT) market in South Africa. While the government has taken privatisation of this project into consideration, Erwin stated that creating the government-monitored InfraCo would achieve the necessary goals by early next year, which is substantially faster than the two-to three-year estimates if private enterprises were to undertake such a an initiative.
InfraCo's mandate is specifically focused on long-distance infrastructure and will not be involved in the urban infrastructure, where the Electronics Communications Act will promote strong private competition.
Broadband InfraCo would be registered as a Schedule Two public company under the Public Finance Management Act. In other words, it will be a commercial enterprise intentionally designed to deliver a return that is meant keep the company self-sustaining in terms of future expansion but with no intention of maximising profits.
The government anticipates that this move will swiftly place South Africa on track to become an international comparable ICT market, where operators compete for customers based on service and prices, while using significantly common infrastructure.
Ivy Matsepe-Casaburri, the minister of communications, has expressed enthusiasm for a timely completion of the project, indicating that clarity on communications infrastructure was imperative as architects and engineers proceed in designing and building stadiums, offices and hotels for the 2010 World Cup.
"We want to make sure that communications infrastructure is being considered as the stadiums are being built," Matsepe-Casaburri was quoted as saying.
The formation of this new government entity will not only bring faster internet and telecommunication connections at an affordable price to many South Africans, it is also expected to become an "enabler of economic growth" according to Henry Chasia, executive deputy chairperson of the New Partnership for Africa's Development's (NEPAD) e-Africa Commission.
The announcement has not come without criticism. Many feel this is a digression from the government's earlier stated intentions of privatising portions of state owned telecommunication enterprises.
In answer to such suggestions, Erwin has stated that the government would privatise the utility once the government's goals of cost-reduction and access were accomplished.
Similar remarks came from Matsepe-Casaburri who said she does not expect this project to negatively impact on the liberalisation process in South Africa and in fact will place the country on a fast-track to the emergence of a globally comparable ICT market.