Is Jamaica prepared for the fallout from the Claro-Digicel sale?
Yesterday, March 31, the University of Technology in Jamaica hosted a panel discussion on the state of telecoms in Jamaica. This post summarises some of the key views shared and provides food for thought on whether Jamaica is equipped to manage her telecoms sector, specifically as it relates to the Claro-Digicel transaction, and to develop that sector in the long term.
The panel discussion on “The State of the Telecommunications Industry” was precipitated by the recent announcement of the sale of Claro to Digicel in Jamaica. The transaction requires regulatory approval from the Minister with responsibility for telecoms and is currently being reviewed by the regulators. (See Is the sale of Claro to Digicel good for competition in Jamaica?, which highlights some of the regulatory issues that should be considered.) The panel discussion sought to touch on a wide range of issues including, competition, the consumer, spectrum management, policy, fair trade and the economy. Dr. Paul Golding, a Lecturer in the Faculty of Engineering and Computing, University of Technology, moderated the session. The members of the panel were:
- Ms. Diane Edwards, former Director, Legal Affairs, Spectrum Management Authority
- Mr. Donville Hastings, Consumer Advisor – Communications on Utilities, Office of Utilities Regulation (OUR)
- Mr. Courtney Jackson, former Deputy Director General (Telecommunications) at the OUR
- Ms. Deborah Newland, Attorney-at-Law and former board member Fair Trading Commission (FTC)
- Mr. Phillip Paulwell, former Minister of Industry, Technology, Energy and Commerce
- Dr. Darron Thomas, Lecturer, School of Business Administration, University of Technology.
The discussions were guided by questions posed by Dr. Golding and eventually the audience was invited to pose questions to the panel. Summarised below are some of the keys views shared by the panel that shed some light on the likely impact of the Claro-Digicel purchase, but more importantly on whether Jamaica is equipped to manage (or regulate) its telecoms sector.
What kind of impact will the Digicel-Claro sale have on the industry?
Most of the panellists were of the view that the jury is still out on that issue. Dr. Thomas said there was a possibility that if Digicel is in a monopoly situation, it could benefit the sector through lower rates and better Quality of Service (QoS). On the other hand, dominant operators can demand high rates and offer poor service, which would be bad for the market. However, Mr. Jackson was inclined to believe that the likely outcome would be highly dominant behaviour, hence he was more concerned about whether Jamaica had the legal and institutional framework to handle the market as it is today.
What role does or can the OUR play if the purchase is approved and to manage anticompetitive behaviour?
The panellists did not answer the question directly. However the gist of what was said suggested that there is not much that the OUR can do. Mr. Paulwell said that there needs to be greater effectiveness in regulating the industry, and for a number of years there had been discussions that a more focussed regulator was required. The matter is still being considered and currently, the present government has proposed that a telecoms regulator be established.
What intervention, if any can the FTC provide with regard to the purchase?
Ms. Newland indicated that the FTC could give oversight on situations where behaviour has the potential of significantly lessening competition. However, Dr. Thomas was not as complementary. He felt that the FTC was not sufficiently empowered to intervene as it relates to mergers and acquisitions. Mr. Paulwell was able to shed some light on powers of the FTC. He noted that although the Fair Competition Act was a significant piece of legislation, it was not necessarily designed to allow the FTC to take pre-emptive (ex ante) action. Where the FTC excels is in addressing behaviour when it occurs (ex post), especially with regard to abuse of dominance and anticompetitive behaviour.
Final words, what should be in place to get the Jamaican telecoms sector more competitive or to where we would like it to be?
Mr. Paulwell indicated that the sector is not yet where we hoped it would be: it was supposed to develop Jamaica’s people and to increase her wealth. He stressed increased ease of entry into the market and positive effects for consumers. Mr. Paulwell strongly believes that the Jamaican market can comfortably handle three mobile operators. Further, he was adamant that the focus has to shift from promoting voice, to doing more with regard to Internet/broadband, for example, promoting more innovation, such as through developing computing/mobile applications and moving Jamaica to the higher value end of ICT.
Ms. Edward said that the current Telecommunications Act 2000 was supposed to be a transitional arrangement, so we need to encourage policymakers to advance the new telecoms policy. Unless the new policy is established, along with the accompanying legislative framework, we will not be in a position to realise whatever we hope to achieve.
Mr. Hastings noted that capital investment is the only thing that will change in the sector with the purchase. Most Claro customers are also Digicel customers, so things have not really changed.
Ms. Newland indicated that in the short term we have to figure out what regulatory powers can be exercised. The already drafted ICT policy needs to be on the front burner, as we do not have the framework to take us into the future.
Mr. Jackson listed five key issues that must be addressed: (i) review spectrum pricing; (ii) mandate key terms for interconnection and streamline the process; (iii) address matters related to the sharing of towers; (iv) eliminate cross network penalties; and (v) establish mobile number portability.
Dr. Thomas supported Ms. Jackson’s list and added that the seamless transfer of all customer data must be established. He also drew attention to current mobile rates. Digicel’s rates are considerably higher than those offered by Claro and LIME, but the FTC has not addressed this. He further opined that the FTC might not be equipped to successfully tackle and resolve such matters based on its track record to date.
Food for thought…
Do you agree or disagree with the views shared by the panellists?