In a development that could change the dynamics of SA’s telecommunications industry, mobile operator Cell C, Dimension Data division Internet Solutions and Andile Ngcaba’s Convergence Partners have teamed up to build a R5bn, 12 000km national fibre-optic network.
The three companies have formed a new entity, FibreCo Telecommunications, in which they are equal shareholders, to build and operate a long-haul terrestrial network based on open-access principles.
The move is a direct challenge to incumbent fixed-line operator Telkom, state-owned fibre operator Broadband Infraco — which is launching commercially next week — and a consortium of Neotel, Vodacom and MTN, which is building its own national fibre network.
TechCentral first broke the news about talks between the three FibreCo investors in August.
FibreCo CEO Arif Hussain says there is room in the market for another national fibre operator. “If you take a three-year or five-year view, there is a need for a huge amount of additional infrastructure to meet requirements,” he says. “There will be significant demand for national transmission. Everyone will need more infrastructure, not only for sheer capacity, but also for resilience.”
Though FibreCo has no plans to take fibre into consumers’ homes, it will offer services to large corporate users. And Hussain expects FibreCo’s network will eventually spur local telecoms service providers into building fibre to the home. “The falling cost of national transmission will have a knock-on effect.”
Convergence Partners, Internet Solutions and Cell C say the new network will support what they expect will be an “explosive growth in bandwidth requirements” in SA in coming years. FibreCo will sell capacity to large businesses, to telecoms operators and to Internet service providers.
Construction will follow a three-phase approach and the network ultimately will cover more than 12 000km.
The initial phase, construction for which will take about two years, will focus on constructing a 4 500km “redundant core ring” linking Gauteng, Cape Town and Durban to international cable landing stations — in Mtunzini on KwaZulu-Natal’s north coast, and at Yzerfontein and Melkbosstrand north of Cape Town.
The first stage of the network roll-out, which should be completed by late 2012, will cost between R1,5bn and R2bn, says Hussain.
FibreCo will give Cell C, which is building a national third-generation (3G) mobile network, access to high-capacity backhaul fibre to cater for growing demand from consumers for wireless broadband.
FibreCo says Cell C’s 3G network will provide a platform for the “co-location of optical transmission equipment at its base stations and provide wireless access solutions for FibreCo’s customers”.
Cell C CEO Lars Reichelt says the investment will “completely transform the dynamics of the SA broadband sector”.
The new network will allow Internet Solutions to lessen its reliance on Telkom for national connectivity. The Didata division has facilities in urban areas where it can host optical transmission equipment.
Convergence Partners brings expertise in structuring finance for large telecoms infrastructure projects. The company, majority owned by Ngcaba — who is also chairman of Didata SA and a former communications department director-general — is an investor in the Seacom undersea cable and is helping drive the New Dawn communications satellite project.
Ngcaba says national transmission costs in SA account for a “very significant proportion of telecoms costs to end users and constitute a critical bottleneck to ordinary citizens and businesses”. — Duncan McLeod, TechCentral
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