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Taking telecommunications beyond talk
Claude Robinson
Sunday, April 10, 2005
Now that liberalisation of telecommunications in the Caribbean has dramatically increased mobile telephone services and sharply reduced international rates, stakeholders in the sector have to take the next steps to overcome barriers to other goals such as faster and cheaper access to the Internet.
But while all the players know where they want to go, debate on the key issues at the 9th Telecommunications Policy Seminar of the Caribbean Telecommunications Union in Kingston, April 4-6, suggested they are yet to agree on the road map.
The seminar brought together senior policy makers, telecoms providers, industry regulators and analysts to assess the gains from liberalisation so far and how to ensure that telecommunications contribute far more to economic and social development of the region and its citizens.
Following on the break-up of the Cable & Wireless monopoly in Jamaica in 2000, many other Caribbean territories have also liberalised their markets. As was the case in Jamaica, step one was to grant additional mobile telephone licences.
In every market, there has been an impressive increase in mobile telephony, due mainly to the aggressive roll out of services by Digicel, the Irish challenger to the British Cable & Wireless, now operating in eight Caribbean countries and eyeing three or four more.
At present there are some 1.8 million cellular users and 500,000 land lines in Jamaica, giving the island a tele-density rate of 80 per cent, up from 30 per cent before liberalisation, according to Phillip Paulwell, minister of commerce, science and technology.
These usage rates rank Jamaica among the countries in the upper access category of the International Telecommunication Union's Digital Access Index, he told participants at the seminar.
Digicel's Group Regulatory Director Peter Dunn, speaking Thursday morning on Real Business (POWER 106-FM), says his company has 1.3 million customers, which he said was 60 per cent of the cellular market. Incumbent Cable & Wireless is next, while the other new entrant MiPhone is the smallest of the three players.
Dunn says the results far exceeded the expectation of the company, which must have been pretty high since they paid US$40 million for the licence.
Industry sources estimate that Jamaicans spend about $30 billion talking on telephones, a big chunk of this is for pre-paid cellular phones.
Meanwhile, testimonies from many participants at the seminar tell a story similar to Jamaica.
In Barbados, cell phone rates have been cut by 60 per cent and international rates by 50 per cent, but there has been no change in land line rates. In the Cayman Islands, there has been major expansion only in mobile services and there are lower costs for telephony.
But while cell phone rates and international telephone rates are coming down everywhere, the story is not one of complete success.
Telecom rates are generally much higher in the Caribbean than other regions, leading, among other things, to low Internet penetration and low-income consumers are spending a disproportionate share of their income on cellular telephony.
Universal access, lack of infrastructure redundancy, lack of affordable access to broadband services, inadequate regulatory and legislative frameworks, and the use of information and communications technologies (ICT) for education and broader socio-economic development purposes are among the goals yet to be achieved.
Policy makers generally believe there must be 'universal service obligations' on telecom providers for subsidised access to marginalised populations and some public and emergency institutions.
This is generally opposed by proponents of the market that should be the determinant of who gets connected and who does not. And they point to the phenomenal growth of mobile phones among the urban and rural poor as evidence of willingness to pay.
For Peter Dunn of Digicel, universal service is achieved once "the service is taken up on commercial terms by a good percentage of the population".
Then there is the issue of faster and cheaper Internet access. On this, there is the promise of substantial improvement when two additional undersea fibre-optic cable networks being constructed by Fibralink Jamaica Limited and Trans-Caribbean Cable Company Limited come on stream within the next 12 months or so.
But it will also depend on the investment and technology strategies of both Digicel and Cable & Wireless.
Magnus Johansson, vice-president for business development broadband at Cable & Wireless, affirmed C&WJ's commitment to invest substantially in broadband services, using both wire and wireless technologies. "Higher speed and better prices will come very shortly," he said.
Despite direct questioning, there was no firm commitment from Digicel about investing in a fixed wireless network to compete with C&W in the high-speed Internet crucial to business and education.
My impression is that Digicel is not about to stray too far from its core business of mobile telephony, which has already exceeded expectations.
Another issue that will affect the investment decision of the local telecoms firms concerns the future of Voice over Internet Protocol (VoIP), one of the newer technologies that enables consumers to use the Internet for telephone calls, thus bypassing telephone companies.
While some countries have laws and regulations against bypass, the technology is in use and will continue to grow.
In the United States, for instance, one of the leading purveyors of this service is Vonage, a small company founded in 2001. It has more than 500,000 subscribers and is adding 40,000 customers a month, chief executive Jeffrey A Citron said in an interview reported in the Washington Post recently.
VoIP works with a computer, but the consumer is required to have high-speed, broadband access to the Internet.
For a flat fee of about US$25 a month plus a high-speed connection for a similar amount, a subscriber can call anyone, anywhere, anytime at no additional cost.
In Jamaica, the basic retail price for an ADSL 'high-speed' line is US$45 a month before discount. At issue for Cable & Wireless is how fast and how much to lower the price of ADSL, knowing that the facility will allow its customers to bypass its network for international calls.
A related issue is the settlement price that United States carriers pay local phone companies for terminating calls from the US to Jamaica.
The current settlement rate is US2.5 cents per minute, which compares to an international benchmark of 10 cents a minute and way below what Cable & Wireless used to charge in the old monopoly days.
The reductions are driven both by US law and competition among the many new local entrants to the international phone business that used to account for some 70 per cent of Cable & Wireless' revenue.
How to develop the policy and regulatory framework that will encourage further growth in the telecoms sector, while maintaining viable businesses that can meet consumer and investor expectations is an exciting challenge for those charged with the responsibilities.
With some other Caribbean countries like Suriname, Trinidad and Tobago, Guyana, Bahamas and Turks and Caicos Islands just about to embark on their own liberalisation path, the experience of Jamaica and others can be instructive.
Claude Robinson is senior fellow in the Research and Policy Group, Mona School of Business at UWI.
[email protected]
Taking telecommunications beyond talk
Claude Robinson
Sunday, April 10, 2005
Now that liberalisation of telecommunications in the Caribbean has dramatically increased mobile telephone services and sharply reduced international rates, stakeholders in the sector have to take the next steps to overcome barriers to other goals such as faster and cheaper access to the Internet.
But while all the players know where they want to go, debate on the key issues at the 9th Telecommunications Policy Seminar of the Caribbean Telecommunications Union in Kingston, April 4-6, suggested they are yet to agree on the road map.
The seminar brought together senior policy makers, telecoms providers, industry regulators and analysts to assess the gains from liberalisation so far and how to ensure that telecommunications contribute far more to economic and social development of the region and its citizens.
Following on the break-up of the Cable & Wireless monopoly in Jamaica in 2000, many other Caribbean territories have also liberalised their markets. As was the case in Jamaica, step one was to grant additional mobile telephone licences.
In every market, there has been an impressive increase in mobile telephony, due mainly to the aggressive roll out of services by Digicel, the Irish challenger to the British Cable & Wireless, now operating in eight Caribbean countries and eyeing three or four more.
At present there are some 1.8 million cellular users and 500,000 land lines in Jamaica, giving the island a tele-density rate of 80 per cent, up from 30 per cent before liberalisation, according to Phillip Paulwell, minister of commerce, science and technology.
These usage rates rank Jamaica among the countries in the upper access category of the International Telecommunication Union's Digital Access Index, he told participants at the seminar.
Digicel's Group Regulatory Director Peter Dunn, speaking Thursday morning on Real Business (POWER 106-FM), says his company has 1.3 million customers, which he said was 60 per cent of the cellular market. Incumbent Cable & Wireless is next, while the other new entrant MiPhone is the smallest of the three players.
Dunn says the results far exceeded the expectation of the company, which must have been pretty high since they paid US$40 million for the licence.
Industry sources estimate that Jamaicans spend about $30 billion talking on telephones, a big chunk of this is for pre-paid cellular phones.
Meanwhile, testimonies from many participants at the seminar tell a story similar to Jamaica.
In Barbados, cell phone rates have been cut by 60 per cent and international rates by 50 per cent, but there has been no change in land line rates. In the Cayman Islands, there has been major expansion only in mobile services and there are lower costs for telephony.
But while cell phone rates and international telephone rates are coming down everywhere, the story is not one of complete success.
Telecom rates are generally much higher in the Caribbean than other regions, leading, among other things, to low Internet penetration and low-income consumers are spending a disproportionate share of their income on cellular telephony.
Universal access, lack of infrastructure redundancy, lack of affordable access to broadband services, inadequate regulatory and legislative frameworks, and the use of information and communications technologies (ICT) for education and broader socio-economic development purposes are among the goals yet to be achieved.
Policy makers generally believe there must be 'universal service obligations' on telecom providers for subsidised access to marginalised populations and some public and emergency institutions.
This is generally opposed by proponents of the market that should be the determinant of who gets connected and who does not. And they point to the phenomenal growth of mobile phones among the urban and rural poor as evidence of willingness to pay.
For Peter Dunn of Digicel, universal service is achieved once "the service is taken up on commercial terms by a good percentage of the population".
Then there is the issue of faster and cheaper Internet access. On this, there is the promise of substantial improvement when two additional undersea fibre-optic cable networks being constructed by Fibralink Jamaica Limited and Trans-Caribbean Cable Company Limited come on stream within the next 12 months or so.
But it will also depend on the investment and technology strategies of both Digicel and Cable & Wireless.
Magnus Johansson, vice-president for business development broadband at Cable & Wireless, affirmed C&WJ's commitment to invest substantially in broadband services, using both wire and wireless technologies. "Higher speed and better prices will come very shortly," he said.
Despite direct questioning, there was no firm commitment from Digicel about investing in a fixed wireless network to compete with C&W in the high-speed Internet crucial to business and education.
My impression is that Digicel is not about to stray too far from its core business of mobile telephony, which has already exceeded expectations.
Another issue that will affect the investment decision of the local telecoms firms concerns the future of Voice over Internet Protocol (VoIP), one of the newer technologies that enables consumers to use the Internet for telephone calls, thus bypassing telephone companies.
While some countries have laws and regulations against bypass, the technology is in use and will continue to grow.
In the United States, for instance, one of the leading purveyors of this service is Vonage, a small company founded in 2001. It has more than 500,000 subscribers and is adding 40,000 customers a month, chief executive Jeffrey A Citron said in an interview reported in the Washington Post recently.
VoIP works with a computer, but the consumer is required to have high-speed, broadband access to the Internet.
For a flat fee of about US$25 a month plus a high-speed connection for a similar amount, a subscriber can call anyone, anywhere, anytime at no additional cost.
In Jamaica, the basic retail price for an ADSL 'high-speed' line is US$45 a month before discount. At issue for Cable & Wireless is how fast and how much to lower the price of ADSL, knowing that the facility will allow its customers to bypass its network for international calls.
A related issue is the settlement price that United States carriers pay local phone companies for terminating calls from the US to Jamaica.
The current settlement rate is US2.5 cents per minute, which compares to an international benchmark of 10 cents a minute and way below what Cable & Wireless used to charge in the old monopoly days.
The reductions are driven both by US law and competition among the many new local entrants to the international phone business that used to account for some 70 per cent of Cable & Wireless' revenue.
How to develop the policy and regulatory framework that will encourage further growth in the telecoms sector, while maintaining viable businesses that can meet consumer and investor expectations is an exciting challenge for those charged with the responsibilities.
With some other Caribbean countries like Suriname, Trinidad and Tobago, Guyana, Bahamas and Turks and Caicos Islands just about to embark on their own liberalisation path, the experience of Jamaica and others can be instructive.
Claude Robinson is senior fellow in the Research and Policy Group, Mona School of Business at UWI.
[email protected]
Taking telecommunications beyond talk