It feels like the year 2000 all over again in Jamaica’s telecommunications sector. That was the last year of the Cable and Wireless monopoly in voice telephony, a time when the media hardly ever referred to C&W without the sobriquet ‘telecoms giant’ to indicate its technological reach, social influence and financial muscle.

All of that began to change with the Telecommunications Act of 2000 which opened up the market for wireless telecommunication; allowed customers to buy their own equipment and enabled the resale of data, international voice and Internet access.

At that time, many were sceptical that the then minister responsible for telecommunications, Philip Paulwell, would be able to deliver on a promise to broker a deal to end the monopoly, several years ahead of its normal termination. There was greater doubt that the new entrants would pay as much as US$50 million for the spectrum and frequencies needed to set up and run their businesses. The rest, as they say, is history.

Fast-forward to 2012; there is one dominant player again. This time it is Digicel, the market leader with reportedly more than two million subscribers in a country of 2.7 million people. Digicel acquired Claro last year, thus removing one player. C&W, re-branded LIME in 2008, is the only competitor with some 350,000 subscribers, according to CEO Garry Sinclair in a TV interview Wednesday night.

LIME has been losing billions of dollars a year for several years and has been shouting loudly that the merger could make things worse.

So, is the country heading back to those dark monopoly days of high prices, poor service and low telephone density?

Not on my watch, says Mr Paulwell, who is again minister responsible for telecommunications in the Portia Simpson Miller administration following the victory of the People’s National Party (PNP) in the general election of December 29.

“I will not preside over the return of a monopoly in the telecoms sector. I make this as a pledge to Jamaica,” he said at a media briefing Thursday. He promised to sort out the quarrel between Digicel and LIME “within two weeks.”

While the country awaits the outcome of these discussions some of the issues transcend a commercial disagreement between two businesses but have important implications for good governance, coherent policy and ensuring that the country is served by a competitive telecommunications sector, which is not just about talk, but is a major driver of economic growth and human development.

Digicel and LIME have been at odds for a long time about competition issues in the sector but the quarrel took a turn for the worse with the disclosure that former Prime Minister Andrew Holness had reversed a key condition laid down by his predecessor Bruce Golding as a requirement for approving the merger.

Mr Holness said he “inherited” an appeal from Digicel against the conditionality that required the company to continue operating the Claro network as a separate entity, thus providing the service that Claro customers had contracted.

The former prime minister said he consulted widely, including with Mr Paulwell, and they both agreed that the condition did not make business sense, was unworkable; hence he issued the directive to remove it.

I agree that the condition does not make business sense; but there is a big but: It was there for a reason; and Digicel inked the deal knowing the condition was there. Why did Digicel sign on to a conditionality that was so clearly unworkable from a business point of view?

When Mr Golding announced approval of the Digicel/Claro merger last August in Parliament, he insisted Digicel must continue operating two separate networks, a move meant to keep in check Digicel’s dominance in the market.

He articulated a 12-point set of amendments which should better allow “the regulator” to discharge its functions. He further stated: “Given the urgency of the need for these amendments, efforts are being made to have the appropriate bill brought to Parliament within the next six weeks. The Fair Trading Commission is considering specific steps that may be taken within its statutory functions to ensure that the acquisition of Claro by Digicel does not adversely impact on the consuming public.”

As far as we know, the legislative framework has not been put in place and we don’t know what “specific steps” have been taken by the FTC. We only know that the FTC has filed a lawsuit in the Supreme Court against the merger going forward as the commission is of the view that the deal is anti-competitive.

Re-setting interconnectivity rates

Meanwhile, one of the main issues of contention between the service providers is the interconnectivity rate, that is, the amount each company charges to terminate a call on another’s network.

These rates are not now set by the regulator, namely, the Office of Utilities Regulation (OUR) as they are supposed to be ‘market determined’, the situation that obtained in 2000 when C&W was the dominant player.

Back then, the rate was $17.50 per minute during peak period, a rate which Digicel still retains though LIME dropped theirs to $12.00 per minute to terminate a call on Digicel.

In the shouting match between the companies, Mark Linehan, CEO of Digicel, has been stressing that they have only retained a rate that has been in existence from day one when there was no complaint from LIME. And LIME Chairman Chris Dehring insists that Digicel is “punishing” its customers for making calls across to LIME.

“Our issue with the Digicel/Claro merger is that it is being done in the context of an outdated and irrelevant telecoms legislation and regulatory environment — a fact that successive Governments and regulators acknowledge time and time again, but somehow, this is allowed to remain,” he argued.

If Dehring is correct, and it seems to me that he is; and if Mr Golding is correct that Digicel should wear the two-network strait until a new competitive framework is established, then an important question arises: Why the rush to reverse the condition without the legislative framework and in the heat of a general election campaign?

The merger had already been approved and Digicel had locked up what Mr Linehan acknowledged to be one of the most important benefits of the merger, namely the spectrum on which Claro was sitting. This, he explained in the TV interview, was vital to Digicel’s roll out of its next-generation 4G network.

The arguments presented at the Supreme Court hearings will be heard with great interest because the final rulings could say volumes about the power of the executive (that is Cabinet ministers) to issue ‘directives’ that alter agreements and contracts. They could also have implications for the deal going forward.

In addition to setting a competitive framework for connecting between networks, Minister Paulwell will also have to move on the other vexed issue of number portability, that is, giving customers the freedom to move from one network to another without changing numbers. The wasteful business of having two and three handsets should be a thing of the past.

The country has come a long way since 2000. Digicel has revolutionised the market. C&W missed out on the first round; now they have a second chance as LIME. Jamaica has a tremendous amount of telecoms capacity in place and both LIME and Digicel have plans for further investment.

Now, it is imperative that the Simpson Miller administration pass the new telecoms legislation tabled at the last session of Parliament to ensure competition and perhaps attract new players.

Mr Paulwell has vowed to reverse Jamaica’s fall over the last four years in the World Economic Forum’s Index. Again, he has an opportunity out of the present crisis — and if he succeeds, Jamaican wins.

kcr@cwjamaica.com