‘You need to pay’
DIGICEL chairman Denis O’Brien has called again for over-the-top (OTT) platforms such as Google/YouTube, WhatsApp, Netflix and Facebook to be made to share a portion of revenues generated in the region with the telecommunication networks on which their services are accessed. O’Brien, who is scheduled to retire as chairman in two weeks, when he will take up a non-executive directorship, reiterated the call at a glitzy retirement party held for him at the AC Hotel Kingston Tuesday night, saying if they are not made to pay, the telco will not invest in 5G technology.
“The telecoms industry is in a difficult place right now where investors are pulling back,” O’Brien told his audience as he outlined observations he has made. “It’s because of the ever-higher amounts of investments needed to keep the business relevant in the eyes of the consumer,” he continued.
But the most pressing issue impacting telcos currently, he said, is “because we are building capacity for OTTs such as Facebook, WhatsApp, Google, YouTube, Netflix and others to ride across our network.”
“You know, I was viewed as a bit of a madman when I said, ‘let’s block WhatsApp‘, okay, and unfortunately, I was talked out of it, but I regret it, because it’s a similar service. It’s for free and, you know, it’s a great product, but, if you have a great product, you need to pay for it,” he said as he pressed his case for OTTs to share revenues with telcos.
Despite not blocking WhatsApp, Digicel did briefly block other voice over internet protocol (VOIP) platforms such as Viber, Tango and Nimbuzz in 2014 which consumers then used to make “free calls” and “free messaging” similar to how WhatsApp is used today. It is not clear what portion of Digicel’s network usage was dedicated to OTTs back in 2014, but O’Brien said independent analysis said now the OTT traffic carried on the Digicel network is significant.
“Seventy per cent of the traffic we carry is from these OTTs. We get no money from any of the OTTs and that has to stop, because, you know, the world is not for free and businesses have to make a return on investment,” he told the Jamaica Observer in an interview on the sidelines at the retirement party.
“The cost of capital is so high, fees are high and employing people costs money, and you know, OTTs [such as] Facebook or any of these people, [like] Google, don’t employ anyone in Jamaica, and they pay no taxes to your Government. We are happy to pay taxes because we operate in this country, but they don’t believe in employing anybody or paying any taxes or paying us for the network usage that they incur,” he pointed out to the Caribbean Business Report.
“Until OTTs start paying for network costs, I fear that the outlook for the industry is getting bleaker and bleaker. Google/YouTube generates US$12 per month from its users in the Caribbean. That’s their ARPU (average revenue per user). Facebook generates US$5 but has no distribution and no network costs. Our cost of capital is now 15 per cent. We are spending 18 per cent on capex every year, and this is making the industrial unviable,” he argued.
And he said, as long as the situation persists, Digicel and other telcos in the region have indicated that their investment decisions in the region going forward will be stymied.
“All the biggest operators, Caribbean networks, nine of us, have all come together to say we are not going to roll 5G out because there is no business case until this issue has been resolved. We’ve told that to Canto, we’ve told that to all the ministers in Caricom. There needs to be a solution here. There needs to be a mature solution that all the governments are happy with,” he stressed. Canto is an association made up of Caribbean operators, organisations, companies and individuals in the ICT (telecommunications) sector.
“The governments in the Caricom region need to force the OTT players to come to the table and contribute money. They’ve done this in Korea and also Australia, so this is not something new. If you take Google, they pay 36 per cent of their revenues to Apple for access to Apple users. So, all the advertising that an Apple phone user enjoys or videos or whatever, they actually pay them 36 per cent of the advertising that they generate out of the iPhone. So this is not new, this is not a crazy concept, as such; this needs to happen.”
Asked to outline more specifics about what he would want the OTTs to pay, O’Brien told the Caribbean Business Report, “The proposal is that they start contributing to the very significant network cost that we incur every year carrying their traffic for free.” He gave no further details.
O’Brien said he has brought the issue to Daryl Vaz, Jamaica’s minister with responsibility for the telecoms sector, adding that the minister has used his leadership position at the Caricom level to start a conversation about how the matter can be addressed. Efforts to reach Vaz for additional comments proved futile: Calls to his cellular phone went unanswered and a message sent to him went unanswered up to press time.
Still, despite O’Brien indicating that telcos may be reluctant to spend investing in 5G while the issue of OTTs not paying a share of their revenues generated in the region prolongs, he said Digicel still needs to “keep innovating and keep reinventing” itself.
“Because when we came to Jamaica, it was a voice market, now it’s all data, completely data and digital. So we need to keep on the front foot all the time as a competitor, and we need to be stronger and have more products with an even bigger network.”
Leadership change and reflection
Still, leading that charge will fall to new people. O’Brien is set to step down from the role of chairman of Digicel in two weeks after 25 years, as part of a deal which saw a consortium led by PGIM, Contrarian Capital Management, and GoldenTree Asset Management gain a controlling stake in the company. He is to be replaced by chairman-designate Rajeev Suri.
Suri has worked in the telecom industry for around 35 years, most recently as chief executive officer of Inmarsat from March 2021 until its acquisition by Viasat in May 2023. He joined Inmarsat from Nokia, where he was president and chief executive officer from 2014 to 2020, having served as chief executive officer of Nokia Siemens Networks since 2009. He was a commissioner of the United Nations Broadband Commission and served as chair of the Global Satellite Operators Association (GSOA).
“Rajeev brings new ideas… and also has a proven track record in running a multinational as big as Nokia Networks, but also in recent times, Inmarsat. I am delighted to welcome you, Rajeev, and I’m delighted to hand over the baton for what will be another exciting period for Digicel. I wish you every success and you know you will have my support as a non-executive director at board level,” O’Brien told the audience.
Also, Oliver Coughlan, who took over the role as CEO of the Digicel Group, retired at the end of December and has been replaced by Maarten Boute, the former head of Digicel Haiti.
But as those changes take effect, O’Brien summarised the highs and lows of his involvement in Digicel for the last 25 years.
He reflected on how the company started in the aftermath of the liberalisation of Jamaica’s telecoms sector led by former telecoms minister Phillip Paulwell, who was at the ceremony, and supported by former prime minister PJ Patterson, who was also in attendance.
“Minister Paulwell, the minister of telecoms at that time in 2000, advertised in the Financial Times that the Government was going to auction two mobile phone licences and that’s how it all started,” he told the Caribbean Business Report. “I read the ad and I sent somebody down… to an auction and he paid US$47.5 million. I’ve never been to Jamaica, but, you know, at that time, I only asked three questions: ‘How big is Jamaica?’ and somebody said 2.6 million people. ‘How many of them have a [cell]phone?’ and the answer was only two or three per cent, and ‘What were the prices like?’ and I was told a dollar a minute. So, once I got the answers to those three questions, it was like a no-brainer to come to Jamaica. But little did I know, you know, coming to Jamaica, what would that mean, and that it would spawn going to 25 Caribbean countries and another six in the Pacific.”
He also reflected on the choice of the colurs for Digicel. Though it is mostly red now, when the company was launched in April 2001, it was red and green. He said both colours were chosen after the directors could not decide on either.
“Then someone said, the PNP is red and the JLP is green, why don’t you go with DIGI in red and CEL in green and I said, ‘fantastic'” saying it showed the “lengths [through] which we went to get things right here.”
O’Brien also joked about how when the company was successful in getting the licence to operate, he and his business partners, speaking on the phone about it, spoke Irish because they were scared that Cable & Wireless was listening to them.
And after that licence, the company set about island-hopping around the Caribbean, targeting markets that had spotty or pricey mobile service. In Jamaica alone, the company signed up 100,000 customers in 100 days. It had targeted 100,000 in the first year.
“We then went on a binge of licence getting. [We] went everywhere looking for licences and ultimately we ended up in 31 markets.” O’Brien said the company even got a licence in Iran, North Korea, Lybia but didn’t follow through with establishing on advice.
He also told how he came to build the company’s global headquarters in downtown Kingston as part of the renewal of the area.
“The encouragement that we got to create what really has been a Jamaican multinational company with its global headquarters in Kingston here, is really amazing. I remember Minister Audley Shaw ringing me and saying ‘when are you coming to Kingston’, and I said why?, and the next thing you know, the next thing I was in a helicopter flying over the docks here in Kingston, and I said ‘why, what is this all about?’ and he said, you see there, down there, you should build a building there, you should put your headquarters there. I thought he was on drugs. But that area of the city has now become West Palm Beach-like.”
Now as he steps aside and has more time for himself, O’Brien said he will push more for reparation for the offspring of enslaved people in the Caribbean.
“Having a business in the Caribbean gives me a healthy perspective of histories and the economies and also the outstanding talents in all of these countries. But for 300 years, they suffered the absolute dehumanising brutality of chattel slavery. When it all ended in the 19th century, the plantation owners of the enslaved were the ones who were compensated. The colonising nations of Great Britain, France, Holland, Spain, and other EU countries, owe their vast wealth today and economic well-being to Caribbean countries. When Jamaica got its Independence in 1962, the new nation state was left with a bare cupboard to build its economy and society, while Great Britain had the benefit of all the wealth that was plundered out of Jamaica over 300 years.”
“Great Britain alone borrowed 40 per cent of its GDP in 1838 to compensate the owners of the enslaved and only paid off this debt in 2015. France, and this is the shocking bit, forced Haiti to pay half its Government budget in compensation, all the way until the 1950s.”
“All these reasons are the reasons why we have started the repair campaign just over a year ago, so that negotiations can take place with the EU and the United Kingdom, in order for them to recompense for a shocking period of history. The repair campaign is in keeping with the 15-nation Caricom 10-point plan for reparatory justice. We are working with all 15 governments and civil society on individual, social and economic reparatory justice plans. These will be ready to be considered by each of the governments and Caricom in the coming months. These plans include cost-based plans for the next 25 years to develop health, to get more children in school early, but also to go and study at the third level, infrastructure, green energy, agriculture, but also memorialising what happened.”