State-owned telecommunications infrastructure provider Broadband Infraco has used its latest annual report to criticise a decision not to grant it a service licence under the Electronic Communications Act.

It says the decision, taken by the Independent Communications Authority of SA (Icasa) and backed by communications minister Siphiwe Nyanda, undermines financially its investment in a new undersea cable system.

“Broadband Infraco has assessed the impact of not being awarded the [service] licence and we wish to report that the most significant impact is in the area of ensuring connectivity services for the projects of national interest in accordance with the remaining element of the Broadband Infraco mandate,” it says in its 2010 annual report.

“This impact will be most severe from a financial perspective in the context of the business plan for Broadband Infraco’s investment in the international submarine cable project,” it says.

Infraco is one of four principal investors in the West African Cable System (Wacs), a new, high-capacity submarine cable being built between Cape Town and London. Wacs is expected to be ready for service in about 12 months.

The company is worried that without a service licence — it has been granted only an infrastructure licence — it won’t be able to provide connectivity to science projects like the Square Kilometre Array (SKA), a multibillion-rand radio telescope project for which SA is bidding against Australia.

Infraco is already bidding to provide communications infrastructure for the Karoo Array Telescope/Meerkat project, which forms part of the initial phase of the SKA’s construction.

But Infraco’s lack of a service licence isn’t the only challenge it’s facing. Chairman Andrew Mthembu and CEO Dave Smith admit in the annual report that the company’s raison d’être has been undermined by a sharp reduction in national bandwidth prices in the past year.

Wholesale national long-distance prices fell 73% in the past year, they say, with international bandwidth falling by 60% since Infraco’s inception.

“International network capacity by way of submarine cables connecting SA to Europe and the East has also increased dramatically during the past year and will continue to do so in the near future with the additional of two new cable systems on the east and west of the African continent.”

Mthembu and Smith warn that the combination of much lower prices and the potential for a large oversupply of international capacity has an “important bearing on the financial sustainability of all telecoms operators” and that the “risk exposure is even more significant for newer operators that have not yet established their presence in the market”. — Duncan McLeod, TechCentral