Many Possibilities

On Wednesday this week, the City of Cape Town made the final approval to launch its ground-breaking municipal Broadband Infrastructure Project. Over the next two years, the City of Cape Town will invest close to R300 million in creating a state of the art, fibre-optic network which will not only reduce the city’s telecommunications costs over time but also offer affordable communications infrastructure to anyone who needs it.

Critics may argue that the city should not be investing in an area that should be dealt with by the private sector but in the case of cities, the situation is a somewhat unique. Cities are already in the business of maintaining infrastructure. They build and maintain roads, sewers, water pipes, traffic signaling infrastructure, security monitoring equipment, the list goes on. One of the most significant costs in deploying fibre can be the cost of excavation and securing rights of way. The city already carries out excavation and has rights of way. As a result they can deploy fibre infrastructure at a far lower cost than a commercial company. Every time a municipal crew digs up a road, for whatever reason, is an opportunity to extend the municipal fibre network.

Having said that, this does not mean that cities should be turning into internet service providers or telecommunications operators. The City of Cape Town has wisely avoided this potential pitfall, which has been the undoing of a number of cities in the United States, by choosing to base their project on the City of Stockholm’s Stokab model:

The Stokab project was based on the view that the provision of an enormous broadband capacity would enable the city to position itself at the forefront of the telecommunications revolution.

The city envisaged the provision of advanced infrastructure would generate an educated workforce, a prosperous economy, and an attractive lifestyle. In addition, Stockholm did not want multiple competitors digging up its streets time and time again.

The City of Stockholm also recognised it would be far cheaper and more practical for operators to lease Stokab fibre, rather than each build their own backbone network

So this means that the Cape Town Broadband Infrastructure Project will do the trenching, install manholes, ducting, and fibre optic cables as well as build switching centres with appropriate IT-friendly infrastructure such as false floors, redundant electrical supplies, security systems, etc. The city will also carry out the operation and facilities management for the fibre network. But it won’t be offering services itself. It will simply be leasing excess capacity on its own network. This means that anyone can install their own switches and connect using the city’s fibre. Thus the city will be enabling the market as opposed to interfering with the market. Everyone will be able to connect on an Open Access basis.

Having said that, the city doesn’t need to justify its decision on the basis of providing access to others. Cape Town has over 500 municipal buildings and spends approximately R100 million a year on telecommunications costs. The project will break even in 6 years based on the city’s needs alone. But that is just the tip of the iceberg. The city commissioned an economic impact study, carried out by Prof. Barry Standish of UCT, to better understand the potential of a municipal fibre network in Cape Town. The study projected that the project:

would have made a cumulative contribution to GDP of R5.7 billion by 2011/12 when the majority of the infrastructure development will be complete. This cumulative total increases to over R211 billion by 2026/27.

Municipal fibre networks have the potential to reduce operational costs for cities, increase competition and improve services in the telecom sector, attract businesses, facilitate telework and tele-enterprises, and be a critical link in a national fibreoptic backbone. Cape Town is poised to become the leading city on the continent in terms of high speed information infrastructure. Let’s hope many others follow their model.