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PETER WICKHAM: I ‘fraid monopolies


Peter Wickham, [email protected]

PETER WICKHAM: I ‘fraid monopolies

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IT IS DIFFICULT to see how the Fair Trading Commission’s approval of the merger of Columbus and Cable & Wireless does not represent a backward step in the ongoing effort to provide best telecommunications deal for Barbadians.

Mercifully, the approval has come with some conditions which appear to provide comfort to Digicel which is the entity one presumes has most to lose from the merger.

The fact that we will once more have a single entity in the realm of fixed broadband and telephony, along with Internet-based cable TV services, appears to take us back to the “bad old days” when C&W dominated our telecoms sector.

It is interesting how we moved form a situation in the 80s where our governments invested heavily to establish some influence and control in this sector, through the era of divestment brought on by the economic challenges of the 90s.

This divestment carried a concomitant anxiety related to the apparent recreation of a private monopoly which was subdued in the early 2000s when competition entered the local marketplace and C&W voluntarily surrendered its monopoly status and agreed to compete on the basis of service and rates.

Sadly the promise of a widely competitive environment has given way to the reality of our market size which no doubt influenced the exit of AT&T and demise of Sunbeach. However, hope was once more rekindled when Flow entered the landline and Internet marketplace a few years ago. We are therefore now back to a situation where the single landline alternative has merged with its main competitor and we are naturally concerned that this new “800-pound gorilla” will use its influence to impact on the limited competition that remains in the cellular market.

Unlike other commentators, I am realistic about the size of our market and the concomitant limited prospects for competition here. Certainly this reality presents itself frequently in several sectors and telecoms is no different to local and regional transport. It is for this reason that considerably greater attention needs to be paid to the role of regulatory agencies and consumer watchdog groups (if any such exist) as we will have to rely on them exclusively for defence against the realities of the monopoly.

Areas of concern

The full impact of the merger will reveal itself in due course, but there are some key areas of concern that one would hope the FTC’s conditions would speak to comprehensively. Primarily there has to be a realisation that this merger is a monopoly which closes off fixed telephony, fixed broadband and Internet-based cable. In a scenario where the merged entity seeks to “bundle” services and offer cellular facilities as part of that bundle, then this will obviously create an uneven playing field for the lone competitor in the cellular telephone and data market.

It is unclear whether the FTC’s conditions will address this concern but one takes some comfort in the proposed ability to transfer numbers between providers which should at least remove the single most important factor which discourages us from pursuing more attractive offers from competitors.

The extent to which Cable and Wireless will now fully control the fixed line environment for Internet and cable television is another area of serious concern which cannot be addressed by the argument that competitors are welcome to pursue fixed line licences.

The infrastructure associated with this fixed line environment is expensive to establish and maintain and where the two sets of infrastructure become one, it is possible to leverage this control of the infrastructure to discourage competitors from pursuing their own network or offering services that rely on such networks.

The specifics of the FTC’s conditions in this regard are complex, but appear to have identified with the need for the merged entity to divest itself of specific assets (some of which are now duplicated) such as fibre cables and also to adopt behavioural conditions which allow access to the merged entities’ infrastructure such as poles.

Since monopolies appear unavoidable in small economies like ours, the role of the regulator becomes paramount and it is equally important that we scrutinise the conditions imposed by the regulators. While cursory, my review of the FTC’s conditions appears to have identified some of the critical issues.

However, I am yet mindful of the need to consider the ramifications of this merger from a regional perspective.

Peter W. Wickham ([email protected]) is a political consultant and director of the Caribbean Development Research Services (CADRES).

 


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