Sector liberalisation: some considerations as the Bahamas opens its mobile/cellular market to competition
Earlier this month, the monopoly restriction ended on Bahamas’ mobile/cellular market. This post highlights some issues and considerations in opening that market to competition.
Late last month the media in the Bahamas highlighted the fact that full liberalisation of the country’s telecoms sector would be effective as of 1 April 2014. Earlier this week, local publications reported that the Bahamian government had appointed a committee of advisers to provide guidance regarding the liberalisation of the telecoms sector (Source: Telegeography).
Prior to 1 April, all major segments in Bahamas’ telecoms sector, with the exception of the mobile/cellular market, had been open to competition. The incumbent operator, the Bahamas Telecommunications Company (BTC) has been the sole provider of mobile/cellular services. However, when the Government sold majority stake in the BTC, 51%, to Cable and Wireless Communications (CWC) in April 2011, a condition of that agreement was that exclusivity in the mobile/cellular market would be maintained for three years.
In the intervening period, the BTC has been aggressively expanding and improving its mobile/cellular operations across the Bahamas, thus strengthening its position in the market. Now that this segment is being open for competition, the approach and systems that will be implemented ought to be carefully examined. Discussed below are a few issues that merit consideration.
Securing the best entrants
In anticipation of extending an invitation for new entrants into the Bahamas telecoms market, it likely that policymakers and regulators alike will be revisiting the current application and licensing frameworks to ensure that the best approach has been established. As a relatively small market, and learning from the experience of other countries, a challenge that the Bahamas might be keen to manage is ensuring that the best telecoms firms – reputable, well resourced, experienced, etc. – are granted access to its market.
When cost of entry is relatively low or the resources required are plentiful, the application process to secure a licence might remain open indefinitely, and applications evaluated on a first-come-first-served basis. In the case of the mobile/cellular market, for which limited radio frequency spectrum might be available, a small number of operator (or carrier) licences is likely to be issued. Under that circumstance, a fixed-term application process might be the best approach, as it would allow evaluation of a number of applications at the same time, and the best potential licensees to be identified.
The impact of precedent
One of the hallmarks of a sound regulatory environment is the existence of transparent and clear procedures, which fosters predictability among prospective investors and players in the sector. As indicated earlier, the Bahamas already has competition in many of the key telecoms segments; hence a precedent may already exist with regard to the process through which entities are issued licences to operate in the Bahamas.
Currently, and on the local regulator’s website, the Utilities Regulatory and Competition Authority, the licence application form contemplates and already includes mobile/cellular networks. The form includes over 20 services, which suggests that a clear and functioning procedure may already be in place to receive and process submitted applications.
Having said this, procedures and policies can be changed. However, the process through which that is done, again, ought to be clear and transparent.
Levelling playing field
Generally, incumbent entities in a sector are considered to have an advantage over new entrants, who still must deploy their infrastructure, build relationships, gain customers, and develop market share. More importantly, these incumbents also tend to control essential facilities, which other players in the market might find difficult (or very costly) to replicate, which could create a barrier to entry. Hence in order to create an environment in which competition in the mobile/cellular market can thrive, both policymakers and the regulator ought to identify, and be prepared to lower (as appropriate), possible barriers to entry into that market.
Having said this, and on the premise of levelling the playing field, it is also possible to so tightly constrain the incumbent over an extended period of time that it becomes considerably weakened, and an imbalance in favour of the newer players is not only created, but maintained. It is therefore crucial that the systems or directives instituted to facilitate the development of competition are carefully managed, adjusted and even removed completely, as competition develops.
Realising the investment
Finally, the mobile/cellular market has been one of the most lucrative markets in which to invest, and that it likely to continue into the future, evidenced by the continued high take-up and demand for mobile/cellular services worldwide. Further, a newly liberalised single entity monopoly environment, typically, would be expected to offer potential players more attractive opportunities enter that market, than one that already has multiple players and vibrant competition.
However, over the past three years – since the sale to CWC – the BTC has been actively positioning itself for eventual competition. Hence, although there might still be gaps in terms of coverage areas and services offered, for example, a prospective provider may find it a bit more challenging to develop a business case that guarantees it the desired return on investment.
It is with this in mind that the Government of the Bahamas may have to consider what incentives (or inducements) it might be prepared to offer to lower the cost of entry into the market. Additionally, it is likely that some of the prospective entrants would not have had any experience operating in the Bahamas, and more so in the country’s telecoms sector. Hence it may be argued that inducements are necessary to lower those firms’ risk, in what to them might be an untested market.
Image credit: Yuen-Ping aka YP (flickr)