Will Digicel become an even bigger monopoly thanks to its new deal with the Government of Dominica?

Telecoms provider, Digicel, will be awarded a 15-year contract to provide ICT managed services to the Government of Dominica, to help rebuild the infrastructure and services lost due to the 2017 hurricane season. But could such a wide-ranging deal cripple the country’s telecoms and ICT industry in the long run?

 

In our news roundup published on Monday, one of the biggest news items was that global telecoms provider Digicel had been awarded a 15-year contract to provide telecoms and ICT managed services to the Government of Dominica (Source:  Business Wire). This deal comes on the heels of the devastation experienced in Dominica as a result of Hurricane Maria, which swept through the region in September 2017. In its aftermath, and in Dominica, 31 people were reported dead, 37 missing and presumed dead, 90% of buildings were damaged, and the much of the island’s infrastructure was severely compromised (Source:  ReliefWeb).

An expensive recovery

Based on its mountainous topography, with small communities is scattered across the island, Dominica is an expensive country to deploy infrastructure – when compared to other countries of similar size and/or population. Further, based on the severity of the devastation resulting from Hurricane Maria, and to a considerable degree, it cannot be assumed that the existing infrastructure can be salvaged, which would drive up the recovery costs.

To that end, the damage experienced has been estimated at over USD 930 million. Moreover, the cost of the recovery effort has been estimated at over USD 1.3 billion, which is over two times Dominica’s GDP (Source:  ReliefWeb).  It thus means that, as is currently the case, the recovery is likely to be slow and long, with the required funds not readily available to Dominica to speed up the process.

The deal of the decade?

To aid in the recovery effort, especially with regard to the restoration and continued development of the Government of Dominica’s telecoms and ICT infrastructure, it should come as no surprise that the Government has sought to delegate those requirements to a third party firm. However, what is somewhat disconcerting is the provider with which the deal has been made, and the term of the contract.

First, the provider. In virtually all of the Caribbean countries in which it has a presence, particularly those of the English-speaking Caribbean, Digicel holds considerable market share, especially, in the mobile/cellular segment, where it tends to be the largest provider. It therefore tends to possess significant market power, with the potential to not only have a considerable impact on the competition that exists, but also the ability of new players to enter the market.

With regard to the term of the contract, 15 years is a long time. It means, subject to the actual provisions of the contract between the Government of Dominica and Digicel, the firm would be the exclusive provider of ICT and telecoms services to the Government until 2033!

Further, as is the case in many Caribbean countries, Governments tends to be the single largest employer and purchaser of goods and services. Hence, it is likely that in the case of Dominica, this contract could result in not only the Government Ministries, Department and Agencies being a captive market for Digicel, but also its employees.

To that end, it is also worth noting that Digicel is not a mobile/cellular provider only, it is a quad-play provider, offering fixed telephone, broadband Internet and cable/subscription TV, in addition to mobile/cellular services. Most, if not all of these services are likely to be part of the suite of telecoms and ICT services that will be provided to the Government of Dominica, which as the country’s single largest customer, could affect the competitive dynamic of those four service segments.

Consequences of a ‘necessary trade-off’?

Now, based on the scale of the devastation experienced due to Hurricanes Irma and Maria last year, and the fact that every year, the Caribbean region must brace itself anew for the hurricane season, it means that countries need the support – from a variety of quarters – in order to rebuild. Moreover, and in order to secure that support, the arrangements must be benefit, or be attractive to, the benefactor.

However, when the implications of the trade-off are considered, and in the case of Dominica, could its telecoms and ICT industries be in a worse place at the end of the day?

 

Image credit:  Flazingo Photos (flickr)