|Latin America IV 1999
|Technology and the Prospect of Competition in the Caribbean Telecommunications Market
|Caribbean Association of National Telecommunication Organisations (CANTO), Trinidad & Tobago
A technology-stoked revolution is transforming the Caribbean’s traditional safe, protected, telecommunications markets. The Caribbean revolution is a scaled-down version of what is happening globally. New technologies are sidestepping traditional market niches and hallowed legal structures to bring a wide variety of cost-effective services to the public. Technology is re-defining the competitive arena. The region’s service providers need to shake off their old habits, improve efficiency, lower costs and offer new services before the competition in order to survive.
The Way We Were A very long time ago on the telecommunications time-line, incumbent telephone operators in the Caribbean were secure. With guaranteed government-sanctioned monopolies, competition was not an issue. The provision of a telephone service was at the discretion of the operator, usually in areas that were commercially viable and sometimes with political prompting. Their networks were analogue and fixed. The final link to the subscriber, who was tethered to his telephone set, was by means of twisted copper pairs. With respect to service offerings, the customer had two choices – take it or leave it. Incumbent operators generally waited until the demand was obvious before providing a new service. In those days, international communications were provided partly by way of marine cable systems, but mostly via geo-stationary satellite systems requiring earth stations. There were concerns then, that the availability of orbits could limit the expansion of satellite communications. When digital technologies burst on the scene, the incumbent operators invested heavily in digital equipment, added Fibre Optic Transmission Systems (FOTS) to their networks and phased out the older technologies. Even then they felt safe because they were confident that if the climate changed, a new competitor would have to make significant investments and expend considerable time in building a network that could compete with or match their copper/fibre based infrastructure. In the unlikely event that there should be competition, they believed that there would be enough lead-time to put their houses in order. Governments in these developing island-states recognised that to ensure growth of their economies, they needed to invest in scientific and engineering education for their populations and so they embarked on secondary and tertiary educational programmes. They understood that their survival as independent nations would require regional cooperation and formed regional technological and economic organisations. The Changing Times How times have changed! The hallmark of this present age is the phenomenal pace of technological innovation. Advances in the field of fibre optics, microprocessor technology, digital signal processing, compression techniques and methods for enhancing spectrum efficiency have changed the face of telecommunications forever. Some new technologies matured and are facing obsolescence in unprecedentedly brief time intervals. Others that survive are proving to be efficient, readily available and relatively affordable. A more important reality of this age is that information and telecommunications technologies have become inextricably linked. The most significant example of the linkage has been the Internet. Incumbent Operators have been modernising their networks in response to the changing technological scene. Many of their networks are being challenged by Internet traffic, and informed customers are making demands for new services. Seeing how advances in technology are enabling visionary entrepreneurs to bypass the existing networks and offer alternative telecommunications services, they have been attempting to invoke the protection to which they feel entitled under the existing national telecommunications law. As dramatic as the developments may have been, they did little to ruffle the feathers of Caribbean incumbent operators until the winds of WTO commitments by regional governments to open up the telecommunications sector to competition began to blow. The United States Federal Communication Commission’s decision to unilaterally benchmark international call accounting rates increased the strength of the discomfiting winds. There are serious implications for incumbent operators’ profits since they are largely derived from international calls. The Technological Drivers Caribbean operators have every reason to be alarmed. Competition is no longer a future prospect but a present reality. The technical advancement of this age can pave the way for a new competitor to enter the marketplace and steal their business overnight. In areas where a handful of localised business customers generate the majority of revenues, the situation becomes more alarming. Several major corporations are in the process of encircling the globe with marine fibre optic systems. Dense wavelength division multiplexing (DWDM) equipment is delivering transmission speeds approaching the order of terabits per second and bandwidth is fast becoming a commodity. Landing stations having switching and routing capabilities and facilities for voice, data and multimedia, that can also accommodate city fibre-rings, will be able to provide both local services and alternative international communications. Wireless technologies supporting cellular and Personal Communications Systems (PCS) can negate any advantage the incumbent operator enjoyed by virtue of his fixed plant infrastructure. Mobile and fixed cellular systems and last mile wireless access will minimise the time required to deploy a network to match the incumbents wired infrastructure. What is more, the digital evolution of these systems has made them feature-rich. New high-powered GEO satellites that are being launched, allow for greater mobility and smaller earth terminals. Medium and Low Earth Orbit (MEO and LEO) satellites, (some of which communicate directly with hand-held terminals), are being deployed by several major corporations for global wireless services. Such satellites systems may provide the opportunity for competitors to build an instant infrastructure and to offer modern communications services in previously unserved areas. Competition Is Here To Stay The Organisation of Eastern Caribbean States (OECS) has been forging ahead in precipitating changes in the telecommunications landscape for its eight member-countries. They have been pro-active in dealing with competition issues, talking with incumbent operators to develop a policy that will allow for competition and developing programmes for telecommunications sector reforms. In Dominica, a high court ruling last year declared the incumbent operator’s exclusive telecommunications licence to be unconstitutional, opening the door for a local television company to provide telecommunications services. The company recently announced the introduction of telephone service by mid-December. Earlier this year, Trinidad and Tobago invited tenders for the provision of cellular services to compete with the incumbent’s service. Most recently, in September, the Jamaican government, through skilful negotiations, successfully broke the monopoly enjoyed by the incumbent operator. Soon after, the Ministry of Commerce and Technology announced their intention to mount a campaign in key foreign investment centres to market two additional cellular licences at an auction that will close in December. Liberalisation has started and the trend will continue. Governments recognise that high speed, high quality, electronic information is essential for economic, social and cultural development of their countries and the region. Competition will stimulate the development of the telecommunications sector and in the long term, facilitate the provision of universal access at affordable prices. It is hoped that as they embark on opening up the telecommunications sector for competition, governments will first establish the proper legal and regulatory framework to ensure an orderly transition to an open market. The framework must ensure a level playing field for both the incumbent and new entrants and the policies formulated for competitive issues must be clear and unambiguous. Battle Lines are Drawn The situation may be disconcerting for incumbent operators but the battle for market presence and market share is far from lost. The battle will be fought on the field of service differentiation, high-speed local access and ultimately customer satisfaction. Incumbents must view inevitable competition as a business opportunity and be proactive. They can fight back using emerging technologies for leverage. Technological innovations of the day is validating the confidence operators had in their fixed plant. Digital Subscriber Loop (DSL) technologies using the twisted copper pairs can now deliver high-speed access to customers. With increasing Internet usage, opportunities for distance learning, tele-medicine, e-commerce and general demands and for more bandwidth, DSL technologies open the door for additional revenue. DSL may well become the preferred technology for local high-speed access. Leasing copper facilities to competitors offering similar services present yet another business opportunity. Another advantage in the incumbent’s arsenal is that of national coverage. The cost of building a network using the new technologies is still going to require considerable capital investment for the competitor. This presents another business opportunity for the incumbent operator – that of leasing facilities to its competitors. Interconnection issues, when successfully negotiated, may also give rise to additional sources of revenue. Incumbent operators should be wary of engaging in price wars, the benefits of which can be short term and the effects potentially detrimental. Rather, emphasis should be placed on creative pricing stratagems, cutting costs and eliminating inefficiencies in their operations. They must strive to build relationships with their customers by recognising and rewarding loyalty and to embark on aggressive customer care programmes that ensure that services demanded are readily available and that their customer’s needs are met. These, coupled with a comprehensive marketing and public relations program that delivers the goods and services promised, will go a long way in the battle for market share. Such programmes however, must be implemented before the advent of competitors to prevent the exodus of subscribers to the competition. What is Your Business? Operators may have been excused for investing in TELEX switches when facsimile was making its debut because it was difficult, then, to understand the pace and direction of telecommunications innovation. It is no easier to understand it today, but we have the benefit of hindsight. Technologies are advancing at an unrelenting pace, and what seems like science fiction today is the reality of tomorrow. Operators therefore need to be vigilant, because such mistakes are inexcusable today and cannot be tolerated in the competitive environment. They must embrace technologies that maximise their existing infrastructure while migrating their voice-centric networks to multi-service platforms. In our emerging competitive environment, we in the Caribbean need to consider what our business is going to be in the future. Revenues from international/long distance service are falling rapidly. Alternative revenue sources must be found since provision of dial tone will not be profitable. Operators need to stimulate traffic by offering services that incorporate phone usage in the normal activities of their subscribers. They need to consider their market, anticipate what services will sell and position themselves to offer them. This will no doubt require some vision, a strategic plan that scrutinizes technological trends and business re-engineering. It may well become necessary to form alliances to stay in business. Cable companies that might easily be competitors in the provision of telecommunications services may be worthwhile partners in the current environment since customers appreciate the benefits of one-stop shopping. Processes that are not core to the mission may have to be outsourced or perhaps eliminated all together. For example the operator should consider the efficiencies involved in labour intensive activities such as telephone instrument repair/refurbishing services. Would the operator still want to maintain a telex switch with three subscribers? Can he offer those three subscribers a viable alternative? These are questions that must be answered. Conclusion As far as technological developments in telecommunications are concerned, the only certainty is that the pace will continue. Caribbean Governments are fulfilling their WTO obligations to liberalise the telecommunications sector. It is hoped that systems are implemented to make the transition as painless as possible. Incumbent operators must move with haste to improve the efficiency of their operations and to satisfy their customers’ demands before the new competitors put in their appearance. They must view the advent of competition as opportunities for business and must be aggressive in identifying and grasping the opportunities that arise. Careful consideration of the emerging technologies will enable incumbent operators to position and transition their infrastructure to provide the services demanded now as well as those required in the future.