Johannesburg - There are fears that the City of Joburg is planning to spend more than R1 billion for a broadband network that IT experts and the DA say is worth only about R400 million.
A broadband project that was meant to supply the city with fast internet connectivity is in limbo, after the council terminated its contract with suppliers over several alleged breaches in the agreement.
Four years ago, the city signed a deal with Ericsson that the company would invest R1.2bn to build a network that would service all 600 Joburg city buildings and provide connectivity to residential areas.
Ericsson ceded the contract to CitiConnect Communications, and the proposal was that after the completion of the network, it would be managed for the city for 12 years at a cost of R280m a year (R3.3bn in total).
The network comprised 900km of fibre-optic cables, and has been finalised. After 12 years, the city would take over the network.
But, at the end of last month, an urgent report was tabled before the council to terminate the contract because of “breaches of the build, operational and transfer agreement”.
Services for the city were meant to start in July last year.
CitiConnect said the alleged cancellation of the contract was in dispute and was the subject of arbitration.
“Essentially, the city has terminated the agreement unlawfully,” the company said. They would not give details of the dispute, saying it was sub judice.
“Regardless of whether there was a breach of contract or not, the city is liable to pay for the infrastructure that has been built,” CitiConnect said.
The infrastructure was worth R1.2bn, the company claimed.
The City of Joburg would not comment on the case, but said it had made “a business decision” to ensure quality broadband service delivery to its citizens.
The head of the city’s broadband project, Zolani Matebese, said it reaffirmed its commitment to rolling out 1 000 wi-fi hotspots by the end of 2016.
“The city will be paying for the infrastructure of 900km of fibre-optic cables installed, but we are still negotiating the price. We made a tough business decision to terminate the partnership with the telecommunications broadband-network provider.”
The build, operational and transfer agreement with CitiConnect was designed to ensure the availability of cost-effective broadband connectivity throughout the city, and eventually to support socio-economic development, accelerated growth, expanded productivity and enhanced quality of life for all, Matebese added.
The DA expressed concern over the pricing of the project.
Councillors Andrew Stewart and Martin Louw said they had established through the FTTH council (a body representing fibre-optic companies) that:
* A 900km network would cost a maximum of R400m to build.
* The maximum cost for maintaining and operating a network for 600 buildings was R100m.
The opposition party said this would leave about R1bn unaccounted for.
In the council meeting during which mayor Parks Tau announced that the contract would be terminated, the DA said it was told the city wanted to operate it as a municipal-owned entity.
An audit pointed out that the network was worth R1.1bn, according to the DA.
The Star spoke to two independent IT broadband experts, who spoke on condition of anonymity. Both expressed concern over the amount of money the city was said to be paying for the network, saying it was worth about R400m. They questioned the need for the city to have had its own network in the first place.
A telecommunications IT adviser said there were already at least three open-access fibre-optic cable networks around Joburg that overlapped with the city’s network, and companies could pay to use them.
“If the existing network could be used, why was the building of the city’s network even necessary?” the adviser asked.
The second expert questioned if the audit of the network included the entire business model, because “the asset alone isn’t anywhere near R1 billion.” He added that the city did not have the skills to run the network.