EYES WIDE OPEN: Telecommunications merger could spell potential danger for OECS sub-region

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EYES WIDE OPEN:  Telecommunications merger could spell potential danger for OECS sub-region

For months speculation have been rife that the telecommunications landscape in the region as we know it, could change significantly. And whereas change is the only constant in today’s ever-changing world, not all change brings along the highly touted benefits that are often boasted.

This particular imminent change for instance – yes the announcement earlier this month that Columbus Networks and longtime telecommunications provider in the region Cable and Wireless Communications (CWC)… the parent company of LIME – will constitute a joint venture that would provide international bandwidth in the Caribbean and the Americas.

The new network merger according to one industry insider, “will result in 42,000 kilometers of cable connecting 42 countries in the Caribbean, the US and Central America.”  Columbus would retain 72.5 percent stake and management control of the joint venture which will now be known as CNL CWC Networks, with Cable and Wireless Communications…yes LIME, controlling the remaining 27.5 percent share.

The casual reader at first glance might think what’s wrong with that? This potential joint venture could mean many positives for the St. Lucia and indeed the region. After all, don’t such mergers provide joint sales and marketing services for each of the parties? Are not such mergers tantamount to greater bargaining power by the newly formed entity and ultimately through economies of scale, better pricing and product choice for consumers?

Whereas the answers to the preceding questions may be ‘yes,’ there are some very worrying signs and ominous dangers posed by this joint venture. Under the current arrangement the parties (Columbus and Cable and Wireless Communications) will contribute their submarine cables into the joint venture company (CNL CWC Networks) subject to obtaining regulatory approval and other conditions being met. Then too, the new entity will assume ownership and management control of the international wholesale capacity operations of the parties and finally, all new investment in submarine cables will be made and owned by the joint venture.

On paper this all sounds succinct but here is where it gets technical and I dare say tricky.  Industry experts all agree that international bandwidth is the key and most expensive component used to provide internet and Cable TV services in the Caribbean. One of the benefits of liberalization in the Caribbean has been the landing of new submarine cables that are used to provide the international bandwidth required to provide consumers, businesses and governments with internet and Cable TV services. As a result of the ready availability of these new submarine cables and the accompanying competition they make possible, the prices of international bandwidth in the Caribbean has decreased significantly.

This in itself has spelt price reductions in the amounts paid by consumers, businesses and governments for internet services; increased speed at which consumers, businesses and governments can connect to the internet, with many of us no longer relying on the traditional slower speeds associated with dial-up internet services. So much progress has been made that many of us can hardly remember that annoying beeping sound as we waited, seemingly forever, to connect to the world-wide-web.

So significant was this leap forward that in November 2012, the Inter-American Development Bank estimated that on average, countries that increase broadband penetration by 10 percent have associated increases of 3.19 percent in GDP and 2.61 percent in productivity, and generate 67,016 new jobs. This is why this announced joint venture poses a clear and present danger, one that has the potential of rolling back the clock and by extension much of the progress St. Lucia and the OECS have made in terms of liberalization of the telecommunications sector.  One can think back to the late 90’s when moves began in earnest here on St. Lucia to open up this once tightly guarded sector.

St. Lucia took the lead role with Senator Calixte George coming under much fire as government’s lead proponent championing legislation that would liberalize telecommunications and provide a more leveled playing field.  The telecommunications provider at the time – CWC which operated a monopoly, responded with threats of layoff and termination of workers. St. Lucia stayed the course and eventually new entrants were introduced to the marketplace.

The introduction of Digicel, AT&T and others brought with it a renewed sense of competition that invigorated consumers and reignite the marketplace, thus resulting in a wave of new and exciting innovative products and out-of-the-box marketing strategies to boot.  Almost overnight the number of persons owning cellular handsets increased exponentially. No longer was the cell phone the exclusive domain of the rich and affluent as regular folk sported the latest handsets; the obvious results of outright better value for money for customers. Internet connections got faster as greater bandwidth became more readily available. Almost a decade later, St. Lucia and indeed the OECS are the envy of many other geographic regions, many of whom have ventured to study our telecommunications models with a view to implementing them in their own jurisdictions.

And herein lies the crux of the matter as this new joint venture could, literally overnight or with one stoke of the pen, jeopardize those gains made so tirelessly over the years. It could erode the work of the OECS governments at increasing broadband penetration – as submarine capacity is a key component required to provide broadband services.  Also, statistics show that as a result of competition, prices of international wholesale broadband services have decreased by more than 50 percent since liberalization.

So damning is the possible impact of this merger that one industry expert – Bevil Wooding, an internet strategist with Packet Clearing house, a US based nonprofit technology research firm, stated “the benefits of this joint venture must be weighed against the possibility that this new entity can negatively influence pricing, competition and downstream market growth. Unhealthy collusion or price-fixing in this significant sector of the telecommunications market could deal a serious blow to already fragile economies in the region. This must not be allowed to happen.”

For us to now revert or retrogress into such a monopolistic situation, brought about via this joint venture, where a single large and dominant telecommunications provider emerges, will seriously undermine all of the achievements made to date.

With this somewhat unholy alliance, consumers in St. Lucia and the OECS, who have become so accustomed to competition and all of its accoutrements, will now have less choice as Columbus… yes that parent company of LIME and sister subsidiary FLOW, has now announced its acquisition of former competitor Karib Cable. It’s a given that consumers benefited immensely from the introduction of Karib Cable to the region, as that entity for five years offered increased choice to customers.

Competition was so badly needed in that particular market segment that Karib Cable quickly built up a huge customer base offering increased broadband speed; digital cable TV with additional and exciting major US television stations; landline accessibility  and did it all at a reduced cost. Again I say, this merger could literally mean that all residential TV, landlines and broadband will now revert to just one major player, thereby further eliminating customer choice.

Regulatory institutions like National Telecommunications Regulatory Commission (NTRC) and watchdog agencies like the Eastern Caribbean Telecommunication Authority (ECTEL) and indeed OECS governments should therefore watch and track the progress of this merger with eyes wide open.

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7 COMMENTS

  1. this is VERY In-ter-rest-in to say the least. what I found most fascinating is LIME & FLOW(which jus bought over Karib Cable) has essentially the same parent company. something not right with that one. lets not go backwards people. Forward ever. Governments plz don't step back.

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    • I dont think that Columbus Communications and Lime have the same parent company. Columbus Communications was founded in 2004 by Brendan Paddick its Chairman and CEO.

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  2. what i ask is where we in the caribbean seem to without laws which guard against any one company controlling more than a certain percentage of a market? this is much needed not only in the telecommunications sector but also in the supermarket and wholesale, and other sectors. imagine here one company(CFL) controls almost the entire supermarket sector. monopolies usually means gouging of customers

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  3. This is a very scary prospect. More people need to be concerned about this. Reminds me so much of a video I watched a few weeks ago

    http://www.youtube.com/watch?v=0ilMx7k7mso

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    • Nice ad, reminds me of the banking industry. However, on the flip side, this may not be so bad after all. We are all now so totally immersed in online and mobility, that an i increase in prices may not be so fatal. I wonder about increases in productivity mentioned as studies have shown that a significant amount of time at work is spent on things unrelated to work either online or on phone/tablet/phablet. We walk with our heads down and ears blocked, disconnected from our surroundings. Technically more proficient, but more socially deficient. Ironically, if we were to examine our bills monthly for telecom (phone/cable/internet) as a fraction of our salaries, on average, I am really curious to find out how cheap it really is. By the way, I am aware that increases may affect my ability to comment on this forum.

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  4. Very very interesting article; well written even to instill some "fear" into the hearts of many of us who have taken for granted what has become a very liberalized tele-communications market. I sincerely hope that the governments of the OECS are watching with "eyes wide open" at this latest development and will take the necessary precautionary measures to protect all consumers.

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