Caribbean ICT and telecoms companies have submitted a proposal to Caribbean governments for financial and other forms assistance to offset the losses they have experienced during the COVID-19 pandemic. We break down some of the issues and offer some broad recommendations.

 

Within the past week, it came to light that telecoms companies operating in the Caribbean region have approached the Caribbean Community (CARICOM), requesting assistance from member countries. According to an article published in The Gleaner (Jamaica), the Caribbean Association of National Operators (CANTO), which represents 48 operators in 28 countries, submitted a proposal for the consideration of the Council for Trade and Economic Development (COTED), which had convened a meeting in mid-June.

The impetus for the proposal was reportedly the considerable loss in revenue telecoms companies have been experienced, due to the global pandemic, COVID-19. According to the article, companies have been experiencing a serious liquidity problem, as around 70 per cent of all collections are direct cash transactions, which have since dried up, due to the lockdown and the financial hardships consumers (themselves) have been experiencing. As a result, some operators have reported losses of more than 60% of revenues, and many have been tapping into their cash reserves, in order to stay afloat.

On the other hand, the telecoms infrastructure has become more important than ever. According to David Cox, Chairman of CANTO,

…most operators have reported ‘incredible’ increases in traffic to their networks – an ordinarily positive indicator – but without the accompanying financial inflows..

It is urgent that support be provided now…. It would be short-sighted to think that telecoms will take care of itself and that there is simply no need to intervene or help…

The bald truth is that if policymakers do not support the telecoms industry, their larger objectives for their countries are unlikely to be achieved.

 (Source:  The Gleaner).

From all reports so far, there has not been any public response from the COTED Ministers or from CARICOM on the matter. However, the Jamaica Minister for Technology, Hon. Fayval Williams, indicated that “COTED decided that CANTO’s request should be considered on a “country-by-country basis”, as a unified approach was not required”. Below, we offer some initial thoughts on the issue, along with some key areas of concern and a possible way forward.

 

COVID-19 has had an impact on everyone

Without a doubt, and over the past four months, COVID-19 has had a considerable impact on business and life globally. Consistent with the measures implemented worldwide, virtually all Caribbean governments implemented partial or full lockdowns of their respective countries. It thus meant that there were relatively large swathes of our populations that could no longer work (or earn a living), whilst for others, impromptu arrangements were made for them to work from home.

Mobile/cellular service is the most ubiquitous segment of the telecoms offerings available in the region, and up to around 90% of customers in some countries secure prepaid services – thus emphasising the cash-based nature of the business of telecoms in the Caribbean. It has been widely known that an important benefit of the prepaid arrangement, is that it inherently facilitates some semblance of budget control. If customers have the funds they will top-up their account to the amount they can afford; if they cannot, the will not; and they will only consume what they have already paid for. If funds were uncertain or limited during the lockdown period, it is likely that the corresponding spend on mobile/cellular services (including mobile data) would also be limited.

On the flipside, with children trying to access online education platforms, employees working from home, and people just generally relying more on the Internet for entertainment – such as via the video streaming services – the telecoms networks have become even more congested, resulting at times in even poorer quality service, and more complaints. In that vein, and to varying degrees, Caribbean governments, and many governments worldwide, have come to appreciate the deficiencies that exist in their countries’ telecoms and ICT infrastructure, and are eager for it to be improved. However, to upgrade the infrastructure, in order to expand access and improve service quality, will take money, which essentially, Caribbean telecoms companies have said they do not have.

Further, it ought be highlighted that although much of the focus in terms of organisations has been on those that could institute work from home arrangements, there were sectors crucial to the Caribbean economy that were essentially obliterated by COVID-19. The largest and most prominent being tourism, which can account for up to 80% of some countries’ GDP (gross domestic product). In March, when most of the lockdowns and port closures occurred, the region was in the height of the 2019/2020 tourist season. However, hotels, restaurants, attractions, etc., all had to close, resulting in loss of revenue for not only for those business, but also to the telecoms companies as well.

 

The requested areas of assistance

CANTO’s proposal to CARICOM outlines a litany of areas in which the aforementioned assistance can be provided to the telecoms companies, including:

1. Partial or complete forgiveness or moratorium on all regulatory fees for 2020.

2. Temporary provision of additional spectrum at no cost for an agreed period, to support increased data usage. Such spectrum to be provided by way of an abbreviated approval process…

4. Access to the Universal Service Funds to support the socially displaced in obtaining telecommunications packages.

5. Relaxing or removing any net neutrality restrictions to allow operators to manage congestion and safeguard the security and integrity of their network. This is also crucial for permitting operators to zero-rate government and educational websites, among others.

6. Taking Government and regulatory interventions to require streaming platforms, such as Netflix and other similar streaming services, to move from High Definition (HD) to Standard Definition (SD), so that more capacity is available on the network for emergency services, persons working from home and homeschooling…

10. Set-offs of government debt on taxes owed by operators.

(Source:  The Gleaner)

It is unlikely that CANTO and the telecoms companies expect that they will get all of the concessions they have requested. Some of the requested concession are financial, whilst others would directly affect the networks and some of the congestion that is being experienced. However, noting that the CANTO’s full submission has not been made publicly available, it is not clear exactly what support and justification had been included, in order to examine the reasonableness of each of the requests. Having said this, below are a few observations and concerns.

First, and with regard to the requested monetary-based concessions, it is hoped that figures were included in the submission, which would clearly indicate the losses the telecoms companies have realised, and correspondingly, how much financially the companies hope recover from the requested concessions. Many of the telecoms companies that operate in the Caribbean region are privately owned, and so are not required to make their earnings public. For the multinational and public ones, their financial reports tend to be presented on a regional basis, making it challenging to examine the performance of individual countries. Hence, there ought to some clarity with regard to impact of the requested financial concessions on the companies’ bottom-line.

Second, and with regard to accessing the Universal Service Fund (USF), some USFs function better and more efficiently than others. As a result, adjusting or broadening the scope of some of the USFs as proposed may require a process to be implemented, which will take time. Further, some of the USFs have been used to support infrastructure and access, such as network expansion, the outfitting of schools, community centres, libraries, health centres, etc., with computers and/or to subsidize the cost of connectivity. However, the extent to which USFs should now be used to cover the “the socially displaced’, ought to be carefully considered.

In the first instance, a clear definition for socially displaced ought to be developed and agreed. Second, there ought figures, in terms of the numbers people and the corresponding cost that may need to be covered. Third, there may need to be some mechanism and controls in place to ensure the system cannot be manipulated, and that it can withstand scrutiny. In essence, this concession – if agreed to – would need to be carefully managed, and ought not to be viewed as an avenue through which telecoms companies could, for all intents and purposes, get a blank cheque.

Finally, and in relation to net neutrality, though the objective of the proposal may appear reasonable, it could be argued that conceding on that point becomes a slippery slope, where a precedent can be established, which may be difficult to claw back. Further, an objective of the concessions is to allow the telecoms companies to improve the infrastructure. Hence, if other concessions are approved, technically, a relaxation of net neutrality may not be necessary. Once again, something that ought to be carefully considered.

 

Parting thoughts

As much as the telecoms companies have been struggling thanks to COVID-19, virtually all governments worldwide have also suffered. Economies have contracted, and governments are projecting losses, typically in the range of tens of millions to even billions of dollars. Further, many Caribbean governments would have been looking to the taxes they receive the telecoms companies to help offset some of their losses, especially for countries that had instituted special taxes or levies on telecoms services. However, as was noted previously, very few of us have come out unscathed financially from COVID-19, and more importantly, the challenges continue.

So, should Caribbean governments bail out the telecoms companies? To some degree, they might not have a choice. As was noted in an earlier article, 3 reasons why Gov’t investing in ICT may be the only way to improve the service quality, for years, Caribbean governments have taken an arms-length posture with respect to telecoms and ICT, although it is widely held as a key economic driver for our countries. However, government intervention might be the only way Caribbean countries will get the improvements in access and service quality they would like, which also has a knock-on effect on the economy.

To that end, and in addition to prudent examination of the requested concessions, it is strongly recommended that if there is consent to (one or more of) the concessions, goals, targets, expectations also ought to be established. The proposal submitted by CANTO provides a basis for engagement between the telecoms companies and Government. Now, the discussions and negotiations should begin.

 

 

Image credit:  skeeze (Pixabay) 

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