Waiting on telecom crumbs from C&W, TSTT table

Trinidad and Tobago and Antigua are the only two countries in the island states of Caricom where the telecommunications sector remains monopolised by the incumbent companies. Interestingly, in both these countries, the government either fully owns or has majority shares in the telecommunications company. Their monopoly position in the sector allows the accumulation of profits that could not be easily accrued in a market that is open to competition. So while it is correct that the international call centres in TT have been operating in contravention of the law, it is also true that the law supports the interests of the monopoly holder, rather than the society at large.

Indeed, I have often wondered at the passive acceptance by the business sector in TT of the slow pace of liberalisation of this sector when compared with other Caricom countries. Indeed, the economy of TT is the most dynamic and vibrant in the region, with the highest level of production of goods and services (except tourism). The cost of production could be lowered with better telecommunications rates. TT needs liberalisation more urgently than the rest of Caricom. Yet, we are lagging behind trends in the region and internationally.

J’CA, OECS gone clear
It is instructive to note that in Jamaica, the telecommunications sector was fully liberalised in March 2003. Riding on the wave of the WTO mandate to liberalise, a phased approach was used, over a three-year period starting March 1 2000. Between then and August 2001, the markets for domestic mobile services, data services (internet service provision), premises equipment and wholesaling of the incumbent’s international switched voice minutes were opened. Between September 2001 and February 2003, markets were opened for domestic voice facilities and services, resale of the incumbent’s switched domestic voice minutes, and Internet access over facilities of subscriber television.

On March 1, 2003, all markets were opened to competition. The Jamaican Fair Trade Commission used the Fair Trading Act to discipline C&W and to pave the way for liberalisation. The OECS countries (except Antigua) have also made significant progress in liberalising their telecommunication sector. The governments of Dominica, Grenada, St Kitts and Nevis, St Lucia and St Vincent and the Grenadines negotiated as a unit with Cable and Wireless and asserted their right to end the stranglehold which that company had in the sector. Unlike Jamaica, the OECS countries chose to liberalise all at once, with the conviction that the actors in the market will adjust quickly to the new market conditions. A regional regulatory authority, the Eastern Caribbean Telecommunication Authority (ECTEL) was established to oversee the full liberalisation of the sector, and to regulate the sector. National Telecommuni-cations Regulatory Commissions deal with regulatory issues at the national level, with support from ECTEL.

C&W delay tactics
The incumbent, C&W, is alleged to have resisted the introduction of competition in many ways, using delaying tactics in a vain attempt to hold on to the exclusive license for as long as possible, or to extract endless concessions and influence in designing the regulatory regime. In all the countries, the new service providers had a struggle to finalise interconnection agreements from C&W. The threat of competition led C&W to reduce rates in St Lucia by up to 59 percent in less than two years, and they launched billing by the second. They tried to flood the market with cell phones before DIGICEL began operating, their sales having increased from 17,000 to 55,000 in four months. Similar strategies were adopted in St Vincent and the Grenadines. The most recent strategy adopted by C&W triggered an investigation by the regulatory authority in the Cayman Islands, resulting in a decision that the company’s conduct was anti-competitive.

C&W came under scrutiny by the Information and Communications Technology Authority (ICTA) of the Cayman Islands at the beginning of March 2004, following price reductions of up to 67 percent on mobile telephone rates. Both DIGICEL and AT&T entered the market in March of this year. The ICTA’s ruling requires C&W to withdraw its low rates, which were found to be below cost. The company might be fined for its anti-competitive conduct. Such predatory conduct is intended to drive competitors out of the market.

Once this happens, the predator can raise prices once more. Cable and Wireless has dominated the telecommunications sector in this region, having succeeded in negotiating agreements that could bring a blush to the faces of negotiators today. It gave them a monopoly not only of existing technology, but technology to be invented, in the case of Jamaica. They proceeded to milk this region, charging much higher rates than obtains in other countries. In no other sector has the benefits of liberalisation been more successfully demonstrated than in the telecommunications sector.

Drawbacks
However, there are drawbacks and the public should be aware of them. The subsidising of local calls by revenue gained in international calls will become a thing of the past, and the cost of rental and local calls on land lines will most likely increase. This is because consumers will increasingly move to use of cellular phones for domestic calls, this being cheaper, and the economies of scale will be lowered on land lines. In Jamaica, it is cheaper to call internationally than locally. The business sector, which depends on landlines, may be paying more. All things considered, however, there are great benefits in liberalising this sector and bringing in more service providers, and the sooner the government gets its act together, the better for us.

The views expressed in this column are not necessarily those of Guardian Life. You are invited to send your comments to guardianlife@ghl.co.tt