Key telecoms sector trends in the Caribbean
Over the past 10—15 years, telecoms sectors across the Caribbean have changed considerably. This post highlights some of the trends that have been observed.
Across the region, telecoms companies are under increasing pressure to provide quality, modern and cost-effective services, while managing operating costs and at the very least, maintaining current profitability. However, the result is not only an uneasy balancing act between countervailing interests, but some unfortunate consequences also tend to eventuate. Over the past several months we have witnessed a number of changes in telecoms sectors across the Caribbean. This post highlights a few of them.
Telecoms liberalisation and competition are still relatively new in the Caribbean. However the changes that have occurred in telecoms in the region over the last 10—15 years have resulted in a changed approach among telecoms companies, a few of which are outlined below.
- Speedier roll out of newer technologies. In the past, the telecoms technologies and service capabilities available in the Caribbean would have been years behind those available in developed countries. This is no longer the case. Today, the services and technologies tend to be either on par with or better than those available in developed countries. For example, across the Caribbean, the major mobile/cellular carriers have been rolling out 4G mobile broadband service, which is an important selling feature of many of the most recently released smartphones. Additionally, in some Caribbean countries, specifically Curaçao, Grenada, Jamaica and Trinidad and Tobago, Internet broadband packages with download speeds of up to 100 Mbps are being offered to residential customers. Such speeds are not readily available in many developed countries, and if they are, the price points typically are considerably higher.
- A focus on multi-play. With very few exceptions, most of the major telecoms carriers across the Caribbean are offering a range of services over a common infrastructure. For example, traditional cable companies, such as Flow, Karib Cable, Cable Bahamas, have expanded into Internet broadband, and to lesser degrees, voice telephony.
As discussed in What is the impact of triple play on telecoms and ICT?, a multi-play strategy can allow carriers to increase competitiveness by taking advantage of economies of scope, along with the relatively minimal costs and substantial savings that can be realised when additional services are launched on a common network.
- A more competitive posture. In most Caribbean countries, telecoms sectors have been fully liberalised and competition has been introduced. In those countries, along with those where partial liberalisation has been introduced, players in the market, most notably the incumbent providers, are now taking a more competitive posture. For example, in the Bahamas, where all markets except mobile/cellular have been liberalised, the incumbent has been implementing an aggressive suite of network upgrades and expansions in the mobile/cellular and Internet markets. This strategy not only increases its market share, but also strengthens its position against imminent competition.
In the past and in other countries in the region, the incumbent telecoms carrier was often far more laid back about the pending competition, and might have been more inclined to try to use its dominance in the market to delay or otherwise hinder those new players. However, strong telecoms regulation, along with innovative strategies by new entrants, has resulted in many former incumbent providers losing considerable market share and profitability. In turn they have adopted a more aggressive and proactive stance in the markets they serve.
Casualties of progress
Through the above trends, among others, individual consumers, countries and the Caribbean region as a whole has benefitted considerably. Countries now have a critical contributor to international competitive, and their transition to Information Societies and knowledge-based economies. However, inevitably, this progress does come at a price. Below are some of the casualties of the progress in telecoms that have become evident over the last few years.
- Organisational restructuring. Traditionally, telecoms companies were typically government-owned and operated, or if private but operating as a monopoly, those entities could support considerable staff numbers. In the highly competitive environment that now exists, there has been increasing focus on fostering operating efficiencies, which has resulted in comprehensive organisational restructuring in many Caribbean countries, along with initiatives to downsize the staff complement. (For a most recent example, see our latest news roundup, which includes articles on the loss of 300 jobs at LIME in Jamaica, and the agitation that has been occurring in Dominica around staff restructuring).
- A shift to outsourcing. In tandem with organisational restructuring, many companies are resorting to outsourcing in order to increase efficiency and manage costs. Although the more popular model might be to contract third parties to provide certain services, such as customer care, back-office and technical support, telecoms companies have also been employing a shared services approach. Under that approach, specific services or operations for a number of countries (or locations) are centralised and delivered either in-house, or via a third party,
- Digital divide widening. Although Caribbean countries as a whole may enjoy most of the trappings of a modern telecoms environment, the use of telecoms, and more importantly ICT, varies drastically across the society. As discussed in The digital divide: Can we close the gap?, for persons in the lower socio-economic brackets (or at bottom of the pyramid) there is generally limited take-up and use of ICTs. Key factors for the limited use include the relatively high cost of devices and of Internet service, but also the seemingly limited relevance of ICTs to make meaningful improvements in their daily lives.
To varying degrees, Governments have been trying to address such issues, for example through the implementation of Universal Access Obligations, to increase Internet broadband network deployment into uneconomic areas, and through programmes that provide subsidised computing devices, such as One Laptop Per Child (or Per Student, or Per Family). Sadly, many of those initiatives have a number of challenges – some of which we have discussed in earlier posts – resulting in the digital divide not being narrowed.
- Introduction of additional taxes and charges. In most, if not all Caribbean countries, Governments collect telecoms licence fees from the major carriers, which is an important source of revenue for countries. Generally, the licence fees are paid annually, and are often calculated as a percentage of the company’s revenues (typically gross revenues with some adjustments made). However, many governments are also levying a number of additional charges, such as the following:
- a Universal Service or Access charge, which may be paid solely by the telecoms companies, or is passed on directly to customers
- telecoms usage taxes payable by customers, which tends to be either a flat rate or a percentage added per call
- Value Added Tax, or General Consumption Tax.
All of these charges, while contributing to Government revenues, do have an impact on the telecoms companies’ revenues, and profitability, due to the sums that must be paid to Government, and resulting lower spend by consumers. Hence, these fees, which governments might consider critical, can also have the effect of widening the digital divide between those who can, and those who cannot afford certain telecoms services.
Image credits: Master isolated images (FreeDigitalPhotos.net)