Thursday 21st April 2005

 

Deregulation of telecom sector

What to expect

 
 
 
 
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With T&T on the verge of full telecommunications competition (cellular and international), the Business Guardian starts a forum on this sector which is so important for this country’s development.

The first contribution comes from Marlon Morris, a former national footballer who is a telecom professional currently employed with majority State-owned TSTT.

This is a forum—it is meant to be an exchange of ideas—and it is hoped that companies who are interested in participating in T&T’s telecom future would contribute to it as they see fit.

We also expect participation of the representative trade union, the Telecommunications Authority, Canto, academics and, most importantly, the customers. —Business Editor

By Marlon Morris

The telecommunications market of T&T is a multi-billion dollar sector with the potential to offer reasonable returns on investment for new entrants.

While the mobile market is considered the most lucrative, there are other segments such as international voice and data services, as well as local voice services that are also considered attractive.

The sector is rife with competitive expectancy since, and based on the Telecommunications Authority (Tatt) pronouncements, the market should have two new mobile operators and several other providers of international telecommunication services before the end of year.

What does this

mean for T&T?

If the Tatt is successful in establishing a “well deregulated” market then this market should be characterised by interconnection and wholesale rates that result in acceptable margins for all providers, including the incumbent, TSTT; increased innovation; industry growth; additional employment; and of course lower rates, particularly in international voice.

Evidence of this can be observed from the experiences of our Caribbean neighbours such as Barbados and Jamaica.

A McKenzie Quarterly article showed that for eight European countries that experienced deregulation, international voice rates declined, on average, by 50 per cent within the first year of competition. In Jamaica’s case, international outgoing voice rates declined by 66 per cent.

One can also assume that the Tatt will want its policies to lead to the attainment of the goals of the Government’s 2020 Vision as outlined in its Fast-Forward plan, such as greater broadband penetration, higher tele-density, increased mobile coverage, and continuous technological innovation particularly within the mobile arena.

International services/

networks entrants

The Tatt has received 11 applications from facilities-based providers, that is, companies that intend to build their own network.

Of the 11, I consider the Cable Company (CCTT) as being ideally positioned to gain significant market share.

CCTT already has 90,000 plus customers and a pervasive network throughout T&T.

Their fibre/coax hybrid network can enable the triple play services—cable TV, voice and broadband Internet services, and even other compelling plays such as security/video surveillance type services.

Some of the fixed wireless providers (for example Lisa Communications) currently use VSAT (via satellite) technology to facilitate the offering of their Internet service plays.

Such providers would be considering the establishment of their own international link, either as part of a consortia or a leasing agreement with an existing international provider.

This will allow them too capitalise on the origination and termination of both data and voice traffic.

Many operators will be eyeing the termination market, particularly the current bypass market ie traffic terminating in T&T but bypassing the incumbent’s network.

Emerging roles and opportunities

A full blown competitive market would also create opportunities for those in the telecommunication support and ancillary services.

Telecommunication consultants and advisory service outfits that offer research, advisory, project management, and brokering services; telecommunication agents will be re-selling services for existing providers; emergence of private pay phone providers as well as more Internet cafes.

We do however anticipate a shakeout among international call centres because of the expected substitution effect that is expected from pre-paid cards and other IP enabled devices that can be used from the comfort of someone’s home or business.

The international calling centres may not survive as a stand-alone model, expect for those in high traffic strategic locations.

In order for this business model to survive they will have to broaden their service offering. There will also be opportunities within the legal space for lobbying and association type services.

Emerging technology

Currently, there are over 100 international call centres and Internet cafes, several unlicensed pre-paid card providers and other players offering international voice services throughout T&T, of which 105 have actually applied for concessions to offer such services.

Should these licenses be granted, the market would experience a myriad of new devices and voice enablers, such as, Analog Adaptors, IP phones and Voice over Internet Protocol (VOIP) service via personal computers (PCs) enabled via either dial up or broadband connections.

On the mobile side, consumers will benefit from the new services such as m-Commerce (eg mobile banking), location based services security and surveillance, mobile videoconferencing, and mobile gaming that are enabled by the deployment of GSM and CDMA 3G technology such as EDGE and EVDO, R4 (mobile IP), and UMTS (which enables broadband mobile Internet access).

Summary

I strongly believe that once the market is properly regulated, T&T will witness an expanded and larger telecommunications sector that will be a net add to the GDP and employment roles.

A sector that is well managed with interconnection agreements between the players that leads to reasonable win-win profit margins, that is looked favourably upon by the financial markets, and where new entrants as well as existing providers will continue to invest in new and emerging technology and services.

Some experts have asked whether or not the current dispute between Digicel and C&W can delay the interconnection agreements.

My take on this is that it would not significantly affect this exercise. In my opinion, the most important predictor is the effective and skilful role of the Tatt in its policy making and adjudicator role.

Who’s who, what’s what?

Mobile

Of the five mobile applicants, I would consider the three front-runners to be Digicel, Cingular and Laqtel.

Digicel

Digicel, which prides itself on being a monopoly buster, is the second largest mobile operator in the English-speaking Caribbean and has already begun to lease sites and establish distribution and supplier relationships within T&T. Moreover, it recently secured over $US400 million in additional funding which places it in a strong “bidding” position in the proposed T&T auction.

However, they are definitely doing themselves a disservice on the public relations front. I was a bit surprised at their decision not to try and influence the WICB to still select the seven players who had personal contracts with Cable & Wireless, especially in light of their public relations troubles in other regional countries.

They are before the courts in Guyana responding to allegations which the Irish company has described as “baseless, spurious and malicious.”

Even if Digicel is successful at obtaining a mobile license in this country, they will have to expend significant resources restoring their image.

And I am sure that their job will not be made any easier by the competition, which will remind the public (covertly or overtly) of Digicel’s “treatment” or lack thereof of the West Indies seven, particularly the three local heroes—Brian Lara, Dwayne Bravo and Ravi Rampaul.

Laqtel

While Laqtel may not have the financial war chest as Digicel, it has a strong telecommunications partner in Sasktel of Canada, and respected local management and leadership talent.

While much has been made of the fact that several of their members have a close association with the ruling PNM Government (including their late chairman Anthony Jacelon), Laqtel’s leadership has always downplayed that dynamic and instead has focused on the salient business and technology issues.

Being a local applicant should also be considered a plus especially with an administration that is championing greater local involvement in the “commanding heights” of the economy. Laqtel is also doing some excellent public relations of its own.

A couple weeks ago, one of their technology experts, Scott Maciahs, was a guest on the Gladiator’s Sunday morning Talk Show. He highlighted the benefits of their chosen mobile technology—CDMA. He rightly identified the efficiencies of CDMA mobile technology over GSM when he noted that AT&T/Cingular and Digicel would need about twice the level of spectrum compared to a CDMA provider.

Moreover, in the interest of technology diversity and innovation, it would be more prudent for the country to have one of the three providers with CDMA technology instead of all providing GSM service. If we are serious about being a telecommunication hub of sorts then having CDMA as well as GSM will definitely be a big plus.

Cingular

Even though Cingular may not consider the Caribbean as strategic since its recent acquisition of AT&T Wireless, my sense is that they would still seriously bid for one of the licenses.

This market is the largest and fastest growing in the Caribbean, one of the proposed venues of the Free Trade Area of Americas, and is of significant national security importance to the United States given this country’s position as a major exporter of natural gas to that country.

Cingular is also cash rich, and as they have shown in Barbados, where they were initially denied a license in favour of Digicel and Sunbeach, they aren’t afraid to use the “moral ‘suasion skills” of the relevant United States agencies to get a licence.

Contact information: [email protected]

 

 

 

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