The announcement by President Jacob Zuma in his state of the nation address that Telkom will be the “lead agency” for the roll-out of broadband in underserviced parts of South Africa has ignited a political firestorm.

Democratic Alliance leader Helen Zille has accused Zuma of giving Telkom, in which government still holds a direct 40% stake, a monopoly over the provision of services to the poor.

Indeed, Zille said the decision runs contrary to the constitution, which states that when government contracts for goods or services, it must do so “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective”.

“The story of how Telkom ‘won the bid’ is so brazen that it demonstrates just how complacent the Zuma administration is about placing itself above the constitution and the law,” Zille said. She labelled Telkom boss Sipho Maseko a “Zuma crony” and alleged he received exclusive access to senior government leaders to lobby Telkom’s case.

She also suggested that ANC insiders, with knowledge of government’s plans, had profited unlawfully by buying Telkom shares, though she didn’t offer evidence to back this up and, indeed, the rise in the shares is more likely to do with management’s turnaround plan than anything else.

But Zille is right to be concerned that government has done a cosy deal with Telkom.

There’s no doubt that broadband penetration outside South Africa’s urban centres needs to be improved. Tens of billions of rand in investment is needed. But handing one company, driven by commercial interests, a taxpayer-funded monopoly over providing those services isn’t the best approach, even if there are checks and balances built in.

Indeed, I’ve heard much smarter ideas from several industry leaders in the past week about what to do. One in particular, which involves using the allocation of scarce radio frequency spectrum, has the potential to solve South Africa’s connectivity challenges in a matter of years, while preserving competition and ensuring prices are reined in.

South Africa’s telecoms operators are desperate for access to new spectrum, particularly in frequencies that are harmonised globally for 4G broadband services. These include the “digital dividend” that will be freed up when the country’s broadcasters finally complete their migration to digital technology — now only expected in 2017 thanks to staggering ineptitude by government.

So, how’s this for an idea? South Africa makes this spectrum available to operators on the condition not only that they use it to provide coverage in underserviced areas but that they meet agreed-to deployment targets before they are allowed to use it to build infrastructure in well-to-do areas.

That would certainly focus the operators into getting rural roll-out done more speedily.

In return for targeting these lower income areas, government could reduce the cost of spectrum licences. The more the operators agree to do, the less they pay for access to the new spectrum.

Helen Zille (picture: Western Cape provincial government)

Yet the market is still kept competitive, preventing a return to the exorbitant prices consumers were charged when Telkom was the only game in town.

Do remember that Telkom was given a state-sanctioned monopoly in the late 1990s to roll out services to new areas. It did that, but all those new lines were soon cut off, in large part because consumers couldn’t afford the company’s skyrocketing tariffs.

One challenge of delivering affordable broadband to underserviced communities is ensuring there isn’t unnecessary duplication of infrastructure. In a model where operators are incentivised to roll out capacity in these areas as quickly as possible, and to keep that infrastructure running as cheaply as possible, they’re quickly likely to find commercial solutions to sharing networks.

That’s not anticompetitive, provided they compete at a services level. Indeed, government probably should mandate that those networks be provided on an open-access basis, meaning any interested party could use that infrastructure to provide services.

What’s now needed is a proper plan to do this. Telkom may have the best intentions in the world, but simply naming it as the lead agency for a taxpayer-funded broadband roll-out is going to lead to problems down the line. Smarter solutions are needed and are on offer.