Will the sale of Columbus International to Cable and Wireless cause the Caribbean to step back into the dark ages of monopolies? We throw our two cents into the debate.

Though it is over three months since Cable and Wireless Communication plc (CWC), which trades in the Caribbean as LIME, announced its intention to purchase Columbus International, which operates the Flow and Columbus Business Solutions brands in the region, to date, it is only Jamaica that has approved the transaction. Nevertheless and as expected, the proposed sale has been the subject of much discussion and debate across the region.

From all indications so far and as unpalatable as it might be, the regulators in Barbados, Trinidad and Tobago, and the ECTEL member states (Saint Kitts and Nevis, Dominica, Saint Lucia, Saint Vincent and the Grenadines, and Grenada) may have little choice by to approve the sale. As a result, concerns are being raised on whether a monopoly player is being created that effectively undermines the progress countries across the region had made since liberalising their telecoms sectors 10—15 years ago (Source: Trinidad and Tobago Guardian).

Jamaica’s position

In the case of Jamaica, which as indicated earlier has already approved the CWC/Columbus purchase, Minister with responsibility for telecoms, Philip Paulwell, has been adamant that the country will not return to a monopolistic situation:

“I want to assure you that as the person who was involved in liberalising (the sector), I am not going back to monopoly situations and I am making sure that in whatever joint ventures that emerge, there is the preservation of competition…”

Paulwell explained that at present, the laws governing the telecommunication sector do not allow the Minister to regulate mergers and acquisitions. However, he said that a number of checks and balances have been imposed to guarantee fair competition and better rates for the consumer.

(Source: Jamaica Observer)

Monopolistic safeguards?

The purchase of Columbus International by CWC, will affect many of the main telecoms services in the countries in which both firms operate, specifically: fixed-line telephony; fixed broadband Internet, and cable/subscriber television. In many instances those two firms are the only service providers in the aforementioned market segments. Hence should they merge their operations, they will by default have a monopoly on the delivery of those services.

Having said this, this sale is highlighting a number of deficiencies in the current regulatory regime, and the limited powers of the regulator to effectively intervene. Moreover, the process to amend the existing legislative and regulatory frameworks would not be a short-term exercise. It is likely to be a highly protracted process that ought to be preceded by careful research, analysis and the preparation of well developed policies. Instead, and similar to Jamaica, countries may have to rely upon the latitude that Ministers with responsibility for telecoms might have to try to incorporate some safeguards into their decisions on the CWC/Columbus transaction in the interim.

Introducing “more” competition

It must be emphasised that very little has been placed in the public domain on how LIME and Flow will operate in the region, post sale. Many envisage a merger will occur, but it is also possible that the two entities will remain separate with common management control. Nevertheless, the competition dynamics between those two entities, and in the wider market, will undoubtedly change.

There is the possibility that new players will enter those markets where the LIME/Flow behemoth operates. However, the business case must be viable, and highlight opportunities (or needs) that are not being adequately addressed. It may also require countries to provide incentives to increase their attractiveness to investors, and for those investors to take the risk.

Equally important, the regulators would need to be sufficiently empowered to regulate markets that traditionally have not had close oversight, such as Internet service provision and subscriber/cable television. Specifically, they may need to be in a position to regulate firms that demonstrate significant market power, which not only adversely affects new entrants, but also consumers and the consumer experience.

Additionally, regulators may also need to re-rationalise how limited national resources, such as the radio frequency spectrum and telephone numbers, have been assigned. Most Caribbean countries have experienced a telecoms-related merger or acquisition in the past, resulting in the surviving entity possessing a considerable stock of numbers and frequencies, in comparison to other players, which can place them at a distinct advantage, and limit the prospects for existing and newer entities.

In summary, it is becoming increasingly evident that telecoms in the Caribbean is going through a cycle. Having started with monopolies, the countries have experienced liberalisation and competition, and through mergers and acquisitions, the pendulum is swinging back, and monopoly situations are likely to eventuate. However, how those anticipated monopolies will operate, is yet to be decided. Unlike the past, most countries have a regulatory framework in place, which hopefully will limit the degree to which the progress that has been made, will be eroded.

 

Image credit:  MTSOfan (flickr)

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