ICT Competition Remains Uneven Across the Caribbean

The Caribbean Telecommunications Union (CTU) is gearing up for its big ICT week in Jamaica on December 2 to 6, with the event’s main focus being Internet governance and spectrum management. These are important, policy-driven initiatives, but they steer clear of a major concern of organizations doing business in the Caribbean: the lack of competition, which many argue has resulted in higher prices and lagging service.

“In the Caribbean you don’t see the wireless penetration levels that you do in the United States,” says Paul Bowersock, President of International Operations for Atlantic Tele-Network Inc. (ATN), which has operations in Guyana (GT&T), Bermuda (CellularOne), Turks & Caicos (Islandcom Telecommunications), and the US Virgin Islands (Choice Communications). “Many markets have two players, and rarely more than three.”

This compares poorly to the United States where, even in less-affluent markets, there are usually five to six carriers. To address the issue, Caribbean nations have been on a multi-year path of market liberalization. The opening salvo was fired by Puerto Rico (1986), followed by the Dominican Republic (1992), Jamaica (2000-2003), Barbados (2003), Trinidad and Tobago (2005) and Suriname (2007). As well, in 2002 (correction: 2000) five smaller Island nations created the Eastern Caribbean Telecommunications Authority (ECTEL), which allowed for a harmonized liberalization process.

A Monopolized Market

However, the move to liberalization in the Caribbean has been uneven. Guyana, for example, initiated a project to modernize its telecom sector in 2000, but to date it has had little effect on the market, which is dominated by GT&T. Part of the present-day challenge is that GT&T is two years in to a 20-year contract, and the government has yet to decide on how to allocate wireless spectrum.

“We are actually pushing for liberalization as it would allow us to bundle more services,” says Bowersock. “Our long-distance revenue has been shrinking. Just like in the United States, in the Caribbean long distance is not a business you can rely on.”

If traditional landlines in the Caribbean are going the way of the Dodo Bird, then the money is going to be in cellular and Internet. But many Caribbean nations are challenged by having a monopolistic history in which individual, highly-regulated telco providers have invested millions of dollars. In order to break up a market, these issues need to be addressed.

“Over the past 23 years we have invested more than US$400 million in infrastructure,” says Bowersock. “This is robust and well developed. As far as our contract is concerned we are ready and willing to give up the remaining life for a fair and reasonable settlement for all parties involved.”

Early in November of this year, Guyana’s National Assembly sent its Telecommunications Bill to a special select committee with the hopes of moving the legislation forward. The Bill has the provisional support of the opposition, but has been slow to materialize: it had its first reading over a year ago, on August 9, 2012. Until the government can confirm how it is going to move forward, challenges will remain for businesses in the region, particularly BPO providers that are heavily reliant on connectivity.

“When you have only one provider, that can cause a lot of problems,” says Adrian Collins, founder of Clear Connect, a Miami-headquartered BPO company active in Guyana. “Now there is redundancy on the cable and things are a lot better – it’s more reliable and the bandwidth is better. Before that, we had to purchase satellite backup.”

Still, satellite backup might not be a bad idea for emergencies, given that even a redundant cable can go out, as happened recently when there was damage to the offshore Suriname-Guyana Submarine Cable System (SGSCS).

Islands of Opportunity

Guyana is an atypical Caribbean nation in that, as the only English-speaking country in South America, it is not an island. One would expect that many island nations in the Caribbean would have larger challenges with telecommunications infrastructure, given their isolation, low-population, and modest purchasing power.

But that isn’t always the case. In fact, many Caribbean nations have telecommunications services and technologies that match those in North America, with carriers rolling out 4G LTE mobile broadband, and residential customers in small jurisdictions like Trinidad and Tobago, Curaçao, Grenada, and Jamaica able to purchase Internet bundles with download speeds of up to 100 Mbps – and at reasonable price points.

That spells opportunity, which has not gone un-noticed by big players like ATN, which in September closed on the sale of its US-based Alltel assets for about $804 million, using the cash to draw down debt and look for opportunity elsewhere.

“That deal has given us a significant amount of flexibility,” says Bowersock. “We’ve paid down long-term debt and now have about $300 million in the bank in pure cash. We’ll use that to go out and look for growth, to look for good deals, for solid ways to invest. We are looking for ways to scale up in the region, and see some opportunities to expand in the Caribbean and Latin America.”

With that kind of money, ATN could purchase infrastructure and spectrum in the region, and secure itself as the dominant player in what remains a fragmented market.

“We are especially interested in deals on the wireless side in Latin America and the Caribbean,” says Bowersock. “There are scale advantage with wireless, in that it builds and spreads on or core markets.”

And will ATN expand its core business, perhaps by offering back office support, or outsourcing services specific to industry demand in the United States? Don’t count on it.

“Our bread and butter is market operations,” says Bowersock. “That’s where we work with a lot of third parties, and where having supporting capabilities makes us part of that equation. That’s our sweet spot.”