The Department of Public Enterprises (DPE) has been sent back to the drawing board and has until 22 August to come up with a better-thought out plan for Infraco's operation.
A newly-tabled Broadband Infraco Bill states that the new company be "deemed" to have been granted a network service licence.
But during yesterday's hearings by Parliament's public enterprises committee, network operators came out strongly against suggestions that Infraco be allows to bypass licensing by ICASA (Independent Communications Authority of SA).
Vodacom, MTN and Cell C all opposed Infraco being allowed to bypass the regulator as well as a deal signed by government that would give Neotel exclusive rights to Infraco's broadband serices for four years.
They were supported in their opposition by both Telkom and Sentech.
Sentech, which was set up by the Department of Communications, went so far as to question the need for Infraco's existence, since it says it could provide the services outlined in the Bill.