Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
The Caribbean poses an intriguing paradigm to telecom players in the Americas. Geographically it is part of the region, but unfortunately the development of its telecom sector is mostly ignored in the continental markets. This analysis provides background information about the dynamics that take place in more than 30 Caribbean telecom markets and briefly describes the next evolutionary step of the regional telecom industry.
First, it’s important to understand that the liberalization of the Caribbean telecommunications market has been taking place (it’s still ongoing) in various phases. The first of such phases took place in the Hispano markets in the region, Puerto Rico and the Dominican Republic, where competition in mobile service offers began in 1986 and 1992, respectively. The most recent liberalization phase started in 2001 with the aperture of the telecommunications market in Jamaica. The success of the Jamaican experience served as a catalyst for the aperture of other markets – especially the ECTEL countries – in the region and for the growth of telecommunication service users in the Caribbean.
However, the liberalization process has not been uniform in all of the various Caribbean markets. Signals Telecom Consulting identifies two main streams in the asymmetrical development of the liberalization process in this region:
- Regulatory asymmetry: Government authorities of several political entities in the region have yet to open all telecom services in their markets to competition. For example, mobile services continue to be a monopoly in The Bahamas while international data traffic is the sole domain of incumbent GT&T in Guyana.
- Service asymmetry: The success in liberalizing Caribbean telecommunications markets has been mostly limited to the mobile telephony sector. The vast majority of the Caribbean markets don’t have strong fixed services competition, although it is gradually increasing through the expansion into new markets of cable television operators like Karib Cable as well as the diversification of service portfolio of mobile operators like Digicel.
Still, the arrival of new technologies combined with regulatory reforms that foster increased competition in all market segments will contribute towards changing this panorama. This process has already started in most regional markets, as mobile saturation has driven telecom players to seek new revenue generating alternatives. Furthermore, there’s little doubt that broadband rates and transmission speeds are better in those markets that have access to several international gateways and at least two aggressive broadband providers (typically the incumbent fixed line operator and a cable TV provider). Some of the markets that fulfill these requirements are: The Bahamas, Dominican Republic, Grenada, Jamaica, Puerto Rico and Trinidad & Tobago.
Importance of the regulatory framework
The establishment of a proper regulatory framework for the telecommunications sector is essential for the development of telecom services in the Caribbean, with higher broadband transmission speeds – both fixed and mobile – and video content being the priority of all operators. Guarantees must be established to ensure a healthy competitive framework, avoid crossed subsidies and foster the number of services provided to the general population as well as the enterprise clients. The fact is that the emergence of full service providers that offer customers all the basic telecom services (mobile and fixed telephony, pay TV and Internet) took longer than expected in the Caribbean with some markets still waiting for the arrival of triple-play services.
Nevertheless, regulators must understand that telecom operators are going through a reinvention phase beyond where the drive to become vertically integrated entities is no longer enough. The next step of competition is already being driven by the proliferation of over-the-top applications that would cannibalize some of the operators’ traditional revenue generators. In other words, the fight for data transmission services and 3G/4G must now be accompanied with further efforts on local content production and the management by regional telecom players of cloud computing services that provide their customers with virtual music libraries, video stores, or even bookstores. The coming fight is not about Digicel vs. LIME vs. FLOW, but about how many revenues would these operators be losing at the hands of Amazon, Netflix, or iTunes.
It has been more than a decade since Digicel’s launch in Jamaica in 2001. Since then, the landscape of most of the Caribbean has drastically changed. However, a new challenge is coming to the region and telecom operators need to start preparing their response to increased bandwidth use, but lower revenues. Signals Telecom Consulting believes that this new evolution presents many opportunities to Caribbean players and opens the door to non-traditional players to enter the telecom sector. In the coming years, telecom operators could enter strategic partnerships/alliances with content providers to finally enter the entertainment business, while regional regulators study, discuss and eventually implement net neutrality regulation that establishes parameters that promote competition and investment while protecting consumer rights.
Of course this is not an easy task to accomplish in markets whose priority is to increase telecom investment for the modernization of their current telecom infrastructure to help diversify their economies by accelerating the switch from agriculture exports to financial services, call centers, IXPs and inevitably content generation.
Jose Otero is president of Signals Consulting. Follow him on Twitter (@Jose_F_Otero) or email him at [email protected].
