Monopoly broadband network problems are common, solutions are not

by Steve Blum • , , , ,

Better markets attract better supply. Everywhere.

It’s not just best practices for broadband development policy that’s common to countries and communities, regardless of location or circumstance. Lack of competition at the network level is as big a barrier in South Africa as it is in California.

In South Africa the biggest gap in the national broadband infrastructure is currently in the access network illustrated by the fact that 86% of the population is within 10km from a fibre access point. Broadband access is provided via mobile, fixed wireless, ADSL and, to a very limited scale, by fibre to the premises (FTTP).

The difficulty and high cost of building broadband infrastructure – whether it’s for last mile connections to homes or middle mile backhaul to core Internet exchanges – is a natural barrier to competition. Without competitive pressure, incumbents can keep prices high and focus investment on lucrative, high income areas while effectively cutting off less affluent communities.

The South African government’s solution, according to it’s national broadband policy roadmap, is requiring network owners to allow access to competitors at wholesale rates…

The intent of this policy is to provide a clear framework for the implementation of an open access regime for the wireless and fibre networks planned for the country. Bearing in mind that there is no single definition of “open access”, for the purposes of this policy open access refers to mandatory wholesale access to network infrastructure or services that is provided on fair and reasonable terms, for which there is some degree of transparency and non-discrimination. It is considered as applying to fixed and mobile access networks, backhaul and backbone networks, undersea cables and Internet exchange points.

The mechanism for achieving this goal could be problematic, however. Large scale public sector broadband spending isn’t an option. So the recommended fix is to try to entice or coerce private sector investors to participate in a government-coordinated national broadband network. In effect, replace market forces with central planning.

That’s hard enough – arguably, impossible – when governments invest their own money. It’s even less attractive to private capital, which has other options, internationally and in South Africa. Long term, the result will be even less competition.