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Jul 30 2014

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Ready or not, it is coming: why telecoms companies need competition

All too often telecommunications companies blame competition for the changes they need to make to their operations. However those changes tend to be necessary, but are not undertaken without that external pressure…

Snail Race 2010 (by SlugsOnTheRefrigerator, flickr)

Last week, the Chief Executive Officer (CEO) of the Bahamas Telecommunications Company (BTC), Leon Williams expressed the view that the BTC was not ready for competition, and that employee jobs are at risk from the anticipated competition (Source: Nassau Guardian). Currently, the BTC is the sole mobile/cellular services provider in the Bahamas. However, the government is actively engaging potential new entrants for that market.

The sentiments expressed by the BTC’s CEO are not new. Companies that have enjoyed exclusive monopolies in one or more segments of the telecoms market have uttered similar views. In the Caribbean, and in addition to the Bahamas, Belize and Guyana readily come to mind as not having fully liberalised telecoms sectors. Moreover, the incumbents in those countries are likely to demonstrate considerable resistance to spectre of competition. However, their arguments do not tell the whole story, as discussed below.

Is the time allotted ever enough?

Typically, the transition from a monopoly to a liberalised and competitive telecoms environment is not immediate. Governments need time to develop the requisite policies and frameworks, whilst the incumbent telecoms firm will also negotiate for time to re-position itself for the expected changes.

In the case of the BTC, a condition of the purchase of the Government’s majority stake in the firm by Cable and Wireless Communications (CWC), was that the mobile/cellular market would not be liberalised for a period of three years. That period, which officially ended in April of this year, gave the company some lead-time to adjust its systems to accommodate new players, in addition to whatever efforts might be needed to thrive in a competitive environment.

Further, by no means should there be an expectation that the grace period given should be elastic – in order for incumbent carriers to have additional time to prepare perfectly for competition. The onus is on them to execute strategically with regard to readying themselves for the intended development of the sector.

Fear-mongering about job loss?

With the threat of competition imminent, frequently, incumbent telecoms firms appear to cultivate a fear of job loss. In last week’s interview with Mr. Williams, and as indicated above, stated that jobs were at risk:

“[There are] 738 employees at BTC whose jobs are presently at risk because any new competitor coming into this market will not come with more than 70 people”…

“That will put those 738 jobs at risk and the people at BTC, the employees, must understand that, and the public at large must understand that… (Source: Nassau Guardian).

Although it possible that a new player in the market might commence with as few as 70 employees, in order for it deepen and expand its operations in the Bahamas, it will (eventually) need to increase its employee base. Hence it appears that an unequal comparison was being made, since the BTC is a well-established operation with about 40 retail stores across the Bahamas; with existing infrastructure that must be developed and maintained; and already serving a large customer base.

It is also important to highlight that the BTC has undertaken its own initiatives to downsize its operations when competition was not as imminent. In July 2011, it launched a voluntary separation programme (VSP), through which it sought to reduce its then 1,300-strong staff base, by around 400 (Source: ICT Pulse). At that time, reports were that the VSP was oversubscribed, suggesting that employees were more than eager to explore opportunities outside of the BTC.

Furthermore, new and existing players tend to benefit considerably when incumbents releases staff, as experienced talent become available for recruitment. Hence the BTC might find itself in a position of trying to hold on to key employees, who might be open to consider more lucrative or potentially rewarding opportunities with other firms.

Competition is not only good for the consumer, but also the telcos

To hear incumbent telecoms providers speak about the introduction of competition, one would believe that competition would be exceedingly damaging to them, with a broad range of negative and undesired consequences. However, on their own, those firms tend to be “fat and lazy”, meaning, among other things, one usually finds that:

  • their infrastructure is poorly maintained, and tends to be concentrated in profitable areas
  • their service offerings are limited and not the best quality, and
  • though customers might be dissatisfied, they are not particularly eager to address their concerns.

However, when they must position themselves to operate in an environment where customers might have some choice in service provider, and the other players will be aggressive in their effort to secure market share, the incumbents’ posture begins to change:

  • they begin to whittle away the fat in their organisations to become more streamlined
  • they aim to become more efficient – systems and processes are optimised
  • they are more prepared to invest in their plant and infrastructure, and
  • they become less complacent, and aim to be more agile and responsive to the markets and customers they serve.

When all is said and done, those changes in incumbents are really not a bad thing. However, in most instances and without that external push (such as competition), they tend not to be proactive in introducing those measures from which both themselves and consumers benefit.

Internal pushes for greater efficiency and profitability tend to result in similar outcomes

Finally, although the BTC may be expressing a knee-jerk reaction of doom and gloom about competition, it is important to emphasise the fact that if the company, on its own, optimises its operations – in keeping with the goals set out by its parent company, CWC – job loss, among other things, would likely result:

… Williams suggested that, as BTC’s parent company Cable and Wireless Communications (CWC) cuts costs in a competitive market, it will likely look at BTC’s employees, who represent the highest cost per employee for CWC in the Caribbean…

…“If you heard, [CWC CEO] Phil Bentley and the other people said Cable and Wireless is looking to eradicate $100 million worth of costs,” Williams said.

“This is not rocket science to know what the cost first targets will be, what the low hanging fruits are…” (Source: Nassau Guardian).

It could thus be questioned whether the BTC is using “competition “as a scapegoat for the internal changes that it must make, since cost management, efficiency and profitability are critical imperatives for tis organisation. However, those changes can be unpalatable to policymakers and the public at large; hence to the extent that another, somewhat unrelated, event can be blamed, the opportunity is being taken to do so.

 

Image credit: SlugsOnTheRefrigerator / flickr

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About the author

Michele Marius

Michele Marius has a wealth of experience in the telecoms and ICT space, which has been gained in the Caribbean, Southeast Asia and the South Pacific, and in the public and private sectors. She is the Editor and Publisher of ICT Pulse.

Permanent link to this article: http://www.ict-pulse.com/2014/07/ready-not-coming-telecoms-companies-competition/