What are the implications of the Fair Trading Commission’s conditional approval of the LIME and Flow merger?
When the planned merger of the regional telecommunication operations of LIME and Flow was announced last year, the news was followed by a torrent of concern, locally and regionally.
At the root of the criticism was whether it would lead to a concentration of market control in some areas and some countries, namely in broadband (Internet) services, fixed telephone service and internet-delivered entertainment, including television.
The background to the merger can be found in the merger and takeover of international and indigenous banks before and since the great economic crisis of 2008. Many telecommunication companies have also floundered and vanished, including big ones with deep pockets. Think of Karib Cable, think of TeleBarbados.
Our Caribbean economies are simply very small, economic activity remains stymied and the telecommunications landscape has changed. LIME and Digicel now have to face external competition such as “over-the-top” services, including Skype, Google etc, whereas before their revenue base from international calls was far more secure.
The Fair Trading Commission has taken unusually progressive measures and stepped out of its conservative mould, recognising the substantial concerns raised for consumers and the economy should a concentration of market control become the norm.
It has implemented a decision which, while approving the merger as I recommended, sought to ensure competition by requiring divestment of broadband infrastructure and, hopefully by my estimate, allowing a competitor to woo more than 45 000 households where Karib Cable and Flow fibre to the home passed.
Secondly, it has sought to restrain some prices at the lowest levels available. Thirdly, it has mandated that the merged company be technically ready to implement local number portability (for landline telephone service) and mobile number portability (MNP) for cellular phone services by September 30 and November 30, respectively. Certain regulatory access policies such as equal and indirect access, as well as virtual unbundled local access must be adhered to as directed by any regulator agency.
The commission has also taken a progressive step by ensuring that consumers will not be charged for “over-the-top” services including online video calls and other messaging services, despite concerns by service providers that they have to bear the cost of delivery. This is the realm of net neutrality where consumers argue that if they pay for broadband service they should be allowed to use it as they so plese. In this regard, Barbados has joined the United States as a champion of net neutrality.
The big decision, however, is that LIME has been mandated to divest broadband infrastructure and take responsibility for finding a buyer, all in the interest of ensuring competition. Questions remain about whether a buyer will be found.
Did the commission exceed its own rules of public engagement by virtually deciding for the public that there should be a move to LNP and MNP? Should the commission not have removed one-year contracts offered by LIME and Digicel which Flow introduced as policy? What about other charges?
Digicel and LIME have welcomed the decision and LIME has followed up on the growing trend of merger approvals with conditions by announcing investment plans to the tune of $1.5 billion. This debate has really only just begun.
