BRIDGETOWN, Barbados-Jamaica is banking on two additional cellular licenses playing a lead role in spurring competition for current monopoly provider Cable & Wireless and financing its emerging information technology sector.
The two licenses, scheduled to be awarded 1 January, 2000, by auction are for either the 800, 900, 1800 or 1900 MHz frequency bands. Cellular One Caribbean, a franchise holder of U.S.-based Cellular One, won the first license for the 800 MHz band at an auction 17 December. The government netted US$45 million for the sale.
A bid for a second license by Mossel of Dublin, Ireland, failed. Mossel offered a price of 5 percent over the highest bidder, but the conditions for the auction stipulate that a firm offer must be made.
Dr. Phillip Paulwell, Jamaica’s minister responsible for telecommunications, said that the government stipulated that at least one license would be for GSM. Paulwell cited Jamaica’s trading links with Europe and a desire to easily evolve to third-generation (3G) mobile communications for the stipulation.
Government signed an historic agreement with Cable & Wireless on 30 September, 1999, to become the first of Britain’s former colonies in the Caribbean to move toward full liberalization.
Paulwell said government expects that competition from the new wireless companies will play a major role in the liberalization process, which is expected to be complete in three years. This would be 10 years short of the full run of a 25-year Cable & Wireless exclusive agreement on residential service, long distance and wireless telecommunications that the administration has been keen to break in recent years.
Prior to signing the accord, Cable & Wireless’ claim to a monopoly on very small aperture terminals (VSAT) and cellular services-hotly disputed by government-had led to court cases. This included a situation where Internet service provider (ISP) Infochannel wanted to offer VSAT-delivered Internet service. The case was dropped as part of the agreement.
Government also had turned down a request from Cable & Wireless Jamaica (CSJ) for higher local rates and reduced long distance charges in late 1998 when a new telecommunications policy, disputed by the British multinational, was announced.
Paulwell told Global Wireless that about 16 major global companies had indicated an interest in the two wireless licenses and he believed the market, with a 5-percent penetration rate for wireless, could support another half a million subscribers. Jamaica had 101,000 wireless subscribers, all served by CWJ, at the end of June 1999.
“We believe that we have been able to attract major players into the wireless business, people who are going to effectively challenge Cable & Wireless and (we) will no doubt see a competitive environment now in Jamaica that will enhance consumer welfare, technology and prices,” the minister added.
But Cable & Wireless appears to have won major concessions. For example, competition in international voice communications will be permitted initially with new entrants, such as cellular providers, purchasing minutes wholesale from the incumbent.
In addition, the government agreed to reissue VSAT licenses to existing providers, and there will be no competition for 18 months. And while, as stated in the accord, the Office of Utility Regulation (OUR) will rule on interconnection disputes, there are concerns from government officials in the eastern Caribbean that some elements of the newly signed agreement bypass the regulator, raising the question of protection for new competitors and whether aspects of the accord are World Trade Organization (WTO) compatible.
For example, an independent, confidential interim assessment of the agreement by private consultants, obtained by Global Wireless, raises the question of “abandonment of transparent and independent regulation.”
The assessment states: “In lieu of its governmental authority, Government has obligated itself to manage every aspect of the sector for at least six years in strict accordance with five sets of documents that are the product, not of its independent judgment, but of bilateral negotiations with CWJ.”
The document describes these as the policy-drafting instructions approved by the Jamaican Cabinet, a new telecommunications policy document, new CWJ licenses, phase 1 and phase 2 competitor licenses, and new VSAT licenses.
“If the key feature of modern telecommunications regulation in a liberalized and open environment is the transparency of the policy and regulatory process, as a conceptual matter at least, the Policy Drafting Instructions should have been made publicly available for comment prior to adoption,” it states.
The British multinational company appears to have won key concessions that protect it from long-distance bypass, such as call-back services and Internet telephony, and thereby protect its dominant position.
Jamaica, at 2.6 million people the most populated of the former British colonies, is a jewel in the Cable & Wireless crown. It easily accounts for the highest long distance traffic in the island nations. The Caribbean’s group operating profits for Cable & Wireless, at 278 million (US$447.8 million) for the financial year ended 31 March 1999, were behind only the multinational’s leading revenue center, Hong Kong.
But there are some significant benefits for Jamaica in addition to an early end of the monopoly. Cable & Wireless committed itself to providing 100,000 main lines within the first year of establishing the new telecommunications legislation and a total of 217,000 lines within the three-year, phasing in period.
Sixty Internet terminals are to be installed at public locations, namely post offices, and Cable & Wireless also will refurbish a former car tire facility to accommodate companies engaged in information services. As a result, Government expects 40,000 jobs to be created over a three-year period through new job opportunities in professional fields, teleconferencing facilities, warehousing, distribution and technical support.
Cable & Wireless also will provide scholarships over three years for Jamaicans to pursue courses in computer programming at a branch of the Caribbean Institute of Technology to be established in the capital city, Kingston.
But while Jamaica agreed to compensate Cable & Wireless if it breaks the agreement, the British multinational company also agreed not to seek compensation in exchange for an end to its monopoly.
