Jamaica: growing to full broadband penetration

Sunday, October 20, 2013

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Achieving 100 per cent broadband penetration in Jamaica stands to yield significant economic gains.

Estimates show just eight per cent of the population are presently using high-speed Internet service, while studies suggest that for every 10 per cent increase in telecomunications and broadband penetration there is a 1.3 per cent boost to GDP.

But the Government may be holding on tight to available spectrum that would allow rapid expansion of the technology, particularly as it is chasing additional revenue to meet fiscal targets laid out under the latest International Monetary Fund (IMF) agreement.

Plans to sell two 700 megahertz (MHz) band licences, which allow for the provision of 4G technology, such as Long Term Evolution (LTE), fizzled earlier this month as none of the 24 persons from 10 countries showing interest bid on them (priced at a minimum of US$40 million and US$45 million, respectively), according to telecommunications minister Phillip Paulwell.

The Government won't admit to overpricing the licences and the Ministry of Science, Technology, Energy and Mining (MSTEM) is reluctant to sell them for cheaper — it views them as a "valuable natural resource".

"If the interest in the 700 MHz band does not exist to the tune of what the Government believes it is worth (indicated by the reserve price of the auction), it may choose to hold that spectrum until such interest presents itself," said an email from MSTEM in response to Sunday Finance queries.

Telecommunications operator, LIME, reckons that it would be useful for the Government to consider the technology that enables full broadband penetration as the means to an end and not the end itself in relation to the levying of licensing and other fees.

"This, we feel, should be considered above the immediate windfall potential of licensing fees which, if set at rates that are not economically feasible, could hinder the Government's desired objective," the company said.

The long-term view should focus on the tremendous economic spin-offs that increased broadband penetration can deliver, according to LIME.

Digicel's take is that the 700MHZ spectrum is usually part of the overall licence in many Caribbean markets and that approach results in more rapid expansion of 4G LTE technology in those markets while increasing broadband penetration.

"It is very important that operators are permitted to acquire the available spectrum required to continue rapid and aggressive rollout of mobile broadband services," said Krishna Phillipps, chief technology officer at Digicel.

Now, the Government has the Spectrum Management Authority (SMA) reviewing available spectrum with a view to allocating additional spectrum to facilitate the development of broadband networks.

Indeed broadband expansion through mobile networks can be achieved through many other bands, including the 2.5 or 2.6 gigahertz (GHz), 850 or 900 MHz, 1800 MHz and 1900 MHz bands, which are available for use in Jamaica (some are already in use by local players), while advanced wireless spectrum — 1700 or 2100 MHz (AWS-3) — is also available although not yet allocated for use in Jamaica, according to the SMA.

Of course, additional spectrum will have be issued within the framework of a recently imposed Aggregate Spectrum Cap Policy that limits the overall spectrum holdings of mobile operators at the level of 80 MHz.

"It is our view that at the level of 80 MHz per operator, there is sufficient capacity for existing operators to rollout out voice and data services to customers while leaving sufficient spectrum to accommodate a new entrant to the market," said Paulwell.

The spectrum cap, along with amendment to the legislative and regulatory framework, which allow for the development of infrastructure sharing rules, as well as, the pursuit of number portability were viewed as critical steps towards enhancing competition in Jamaica's telecommunication sector.

But other factors may limit the pace at which broadband penetration can reach its full potential.

The cost of web-enabled devices, such as laptops and PCs, are considered to by high for many Jamaicans, even while both telecoms offer smartphones for well under $10,000.

LIME suggested that the Government could consider some form of tax or other relief that would cut the acquisition cost of these devices, "thus driving broadband demand to a level where provisioning of 100 per cent penetration of the technology becomes economically feasible".

But perhaps more importantly, Jamaica needs to create an enabling environment to position itself as a large user and supplier of broadband services and products.

"The Government should drive demand for broadband by causing more citizens to interface with it via the Internet and provide incentives for businesses to use the Internet to offer their services," recommended LIME. "From the supplier perspective: the Government should incentivise private operators to invest in the development of broadband services and products."

For instance, encouraging large ICT providers, such as Intel and Microsoft to invest, manufacture and export ICT products from Jamaica would return significant economic gains.

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