David Hall

Digicel Jamaica is to form a consortium with two or more foreign partners to invest at least US$40 million to lay down fibre optic lines between Miami and the Caribbean - allowing it to eliminate the middle company through which it now routes some of its calls to Jamaica.

Digicel, which has around 900,000 cellular customers in Jamaica alone, is now spending about US$750,000 to set up a base in North Miami that will serve as the spring board operation for the fibre optic ring around the region.

The company says it is now undertaking due diligence on potential investors to see if they were deep pocketed enough to handle the scale of the investment.

"We plan to form a consortium to build a fibre line over a couple of years and the starting point is Digicel USA," explained David Hall, chief operating officer of Digicel.

Digicel USA was incorporated in Florida last month to build a hub in North Miami Beach. Hall estimates that the centre will be operational "in about four weeks" and that it is costing "between US$500,000 and US$750,000 to set up".

At present, Digicel has an arrangement with a Miami-based telecoms company that collects those international calls originating outside the USA, and from small American carriers, and routes them to Jamaica. However, once the Miami centre is complete, Digicel will be able to discontinue the arrangement with this firm.

"We are taking out the middle man," says Hall.
Initially, Digicel will route international calls from Miami via satellite onto its network in Jamaica and the rest of the region. Eventually it will use its fibre optic lines to transmit those calls to the region.

The fibre optic investment will not only vastly improve Digicel's handling capacity and speed, but it will allow the company to enter into a segment of the business that still remains the exclusive preserve of its competitor - Cable & Wireless Jamaica.

At present, companies that offer Internet services must go through C&W's network to connect their customers in Jamaica to the rest of the world.

But the OUR - the government agency which regulates the telecoms industry - claimed last year July that C&W was charging its competitors too much for rental of its fibre optics gateway. The regulator said that rental by Internet service providers (ISP) between Jamaica and Florida was US$16,000 per month, one of highest in the world, and compared with US$5,000 to US$7,000 per month charged between Colombia and Florida.

Hall envisions a reduction in rates once Digicel's infrastructure is in place.

"Once we have the fibre, we will have a situation where the rates would be much lower," he told the Business Observer. "Competition is good in every sector. If you do not have competition then they can charge whatever they want."

The USA is a critical link in connecting Jamaica to calls originating in Europe, Africa and Asia - which are routed via Miami. Without a hub in Miami, Digicel has had to enter into agreements with third party telecoms in the US for them to send that traffic into Jamaica or any of its Caribbean operations.

But Hall acknowledges that the investment was very costly, and that those with whom Digicel will partner will have to be deep-pocketed.

"It is very expensive to build a fibre and could cost between US$40 million to US$80 million," he says. "So you have to make sure that you are making the right choice and that your partners do not run out of money midway."

He anticipates that within three months the company will be able to announce the three groups of investors - with the creditworthiness of the potential partners now being investigated.

Jamaica, the Cayman Islands, Turks & Caicos and the Dominican Republic have been identified by Digicel as the countries around which the fibre ring will initially run, with others slated to be phased in, according to Hall.

"We feel we can complete the fibre ring in about two years," he says.

The fibre line will physically run for hundreds of miles along the ocean floor, from one country to the next. It is embedded deep in the ocean floor by special cabling ships in a manner similar to what has already been done by Cable & Wireless.

The first leg of C&W's fibre ring, called TCS-1, was set up in 1992. A second major leg running into Cayman from Jamaica and then to US, called the Cayman-Jamaica Fibre Optics System (CJFOS), was set up in 1994. The fibre optics cables leave from two main points out of the island - one at Bull Bay, St Andrew, and the other at Montego Bay.

The investment being contemplated by Digicel will be among the largest single outlays since the Irish investors paid the Jamaican government in 1999, US$47 million for the licence to operate cellular service in Jamaica. Since then, the company has borrowed hundreds of millions of US dollars to build up its infrastructure to keep up with the frenetic demand for its service.

Digicel has used Jamaica as a springboard to the rest of the region.

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