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Thanks to the hard work of Dionisia Tabureguci, the Coconut Wireless has been featured in July’s edition of Pacific Islands Business Magazine. It is a matter of great pride for me to have to this site referred to in a publication like Islands Business. It’s all part of an effort to give the public a better understanding of how telecommunications affects the future of our islands.
Recently, I came across this article via the Radio New Zealand website, that included the following:
Two more months and then we'll know what the beast looks like
Until the announcement on July 17th of the 2nd round of telecom sector liberalisation, we are like the people in this picture, only able to guess at the parts of the elephant. We have already seen what competition in mobile means, and on that day, we will be given the road map for how Internet will advance in Fiji.
So, as we attempt to piece together what the elephant looks like, let’s take a look at what Dionisia has for us over at FijiLive:
The deregulation of international access, scheduled for July 17 this year, is phase two of the process. It will mean that any domestic reseller of telecommunication services may directly source its international bandwidth needs without going through FINTEL, as was previously the case.
Her article was very informative and helps us get a better understanding of how FINTEL is positioning itself with regard to future competition and government regulation. By getting out ahead of government calls for liberalisation of the international gateway they hope to avoid more serious measures that government might push.
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Since yesterday, a flurry of blog posts and emails have been circulating claiming the government is interfering in the operations of the telecommunications companies. Bloggers have jumped on these unsubstantiated rumors and reprinted the original post, helping to give credibility to untrue claims.
In response Vodafone CEO, Aslam Khan, has been sending out emails following a press release to make it clear to journalists that there has been no government interference:
Growing demand for traffic in South Pacific, means that infrastructure needs have to be re-examined. You can read from a sample of previous Coconut Wireless posts on the issue here:
- update on the SPIN cable project
- upgrades to the Southern Cross Cable Network
- developments with the American Samoa-Hawaii (ASH) cable
- launch of the Gondwana cable connecting New Caledonia – Sydney
The literature on Internet affordability and accessibility in the Pacific is pretty clear on the explosive growth in IP traffic the region is set to undergo. But behind a statement like “demand for internet access will be 192% greater in the Solomons Island” is a more complicated picture of demand for internet services in the islands.
Consider the following chart of international voice calls from countries in the region:
This graph is from a report titled “Satellite services in the Pacific” compiled by Network Strategies, a consulting firm (Download the PDF of the full report here). It is a representation of the number of minutes used by people in the Pacific making international phone calls. Note the general upward trend, showing a growing demand for international service.
Since 2004, Fiji’s outgoing minutes have been in decline, something that can be attributed entirely to the proliferation of VOIP services like Skype.
What would this graph look like if projected out to 2009? The general decline in minutes used over traditional land-lines would continue downward as more voice traffic in Pacific countries is diverted the Internet.
As more users become fluent with VOIP offerings, telecom operators will face the same fate as those in other parts of the world:
Thanks to European broadband service providers treating voice as a loss leader to attract triple-play customers, local voice has become almost free in Europe, according to research conducted by Telegeography, a division of market research firm PriMetrica.
Source: GigaOM “In Europe, VOIP Grows and Grows“
Triple play refers to the provisioning of telephone service, broadband, and television over one network by a single provider. As landlines become less profitable for telecoms in Fiji, the providers will inevitably have to move toward providing voice services in the manner described above, as a loss leader for broadband internet and TV. Yet another reason to make sure regulatory policies ensure a competitive environment.
If this makes no sense to you yet, don’t worry as it’s causing sleepless nights for our existing telecoms. Right now, in high-rise offices all over capitals in the Pacific, people with Accounting degrees are examining spreadsheets very closely trying to figure what these shifts in traffic mean for future profitability.
Yet, no discussion of future possibilities for retail services and offerings can proceed without assessing the underlying need for cheaper backhaul facilities. The chart below is taken from a World Bank report (Download the PDF of the full report here):
Proposed Cable projects. click image to view in Hi-res. (Source: World Bank)
The chart shows three types of proposed networks: regional, sub-regional, and point-to-point. Point-to-point refers to connecting two countries directly. The World Bank does not have recommendations for many projects of these types, tending to throw its support for projects which solve the connectivity issue at the regional level. The few instances where they support sub-regional projects are for the Solomon Islands, Tonga, and Samoa to connect to the infrastructure in Fiji (Southern Cross Cable Network).
By far, the most promising project is the regional New Caledonia to French Polynesia project. Trying to connect the two French territories to each other would present opportunities for many other Pacific Island countries to jump onto a project which could bring significant additional bandwidth capability. But, with an estimated price tag of USD $250 million, this project will be a long time in getting past the planning stages (a big reason to hope for the success of efforts like O3B Networks).
The same World Bank report shows how countries in the region could share in the costs of deploying the NCFP cable:
NCFP costs and benefits shared by countries in the region. Click image to view in Hi-Res (Source: World Bank)
Under this scenario, all participant countries could benefit and help help shoulder the costs of the project. To become reality, significant policy and regulatory hurdles would have to be overcome to ensure all participant countries receive access to the cable.
On Wednesday, I had the chance to speak with representatives of O3b Networks via conference call. I talked to Nara Sihavong who is their Regional Director of Sales, Asia-Pacific. Also on the call were John Dick, from Regional Sales and Mike Serrano, Director of Marketing. Together, they updated me on what has been going on at O3b since the launch of operations in Sept. ‘08. They also briefed me on the company’s plans in the Pacific.
ITU Ministerial Forum in Tonga, Feb 17-20: "Connecting the Unconnected"
O3b launched operations in September of 2008 with Google, HSBC, and Liberty Global as primary investors. Initial focus of the company’s sales and marketing efforts has been on African countries. However, O3b’s overarching mission is to provide improved connectivity for emerging economies, the “other 3 billion”. They have been quick out of the gate, signing agreements with several operators & ISPs, including the Microcom, the largest ISP in the Democratic Republic of Congo.
Coconut Wireless has covered O3b Networks here, here, and here. O3b’s presence at PTC ‘09 in Honolulu was the kick-off of its efforts in the Pacific. It was at PTC ‘09 where they revealed details of their plans to offer improved connectivity to the Pacfic Islands.
The recent ITU meeting in Tonga was part of this effort and the O3b team met with Ministerial level delegates to pave the way for further talks in Pacific Island nations. Nara then spent a week in Fiji, where he held meetings and discussions with the telecom operators.
He reports an enthusiastic response from the operators and adds that he sees the business development units within these companies moving with an urgency that reveals their understanding of what increased competition means for market dynamics.
Nara Sihavong
O3b also met with the members of the Communication Ministry and outlined to them the kind of support and guarantees government would have to come forward with in order to get services underway in Fiji. For ministers in the region, O3b offers a new pathway to building up ICT sectors which can become generators of employment and income.
As a provider of backhaul service, O3b would not provide direct service to customers in the region. Instead, they are looking for agreements with ILECs, CLECs, mobile providers and ISPs. For remote areas not currently served, O3b would be interested in talking to entrepreneurs interesting in building ISPs.
When agreements are in place, O3b will work with existing operators in Fiji, like FINTEL, Vodafone, TFL, and Digicel. O3b is also in similar discussion with operators in other Pacific countries. Any provider who signs on with O3b gains superior quality connectivity to the international infrastructure, something that is only possible now through two very expensive options, the Southern Cross Cable Network or GEO satellite service providers.
With O3b, at the national level, governments do not have to wait for undersea cables. A look at the following map of the region will show how O3b is mapping all the islands for service:
Proposed coverage for Pacific Islands (Please click image to view in Hi-res)
They can leap frog that process that can take years, take a look at what O3b can do and create a congruent domestic and international network to inter-connect all their remote islands:
How O3b works: A diagram of QuickStart and QuickVar Solutions
O3b would provide the backhaul service and the telecoms would deploy wireless (WiMAX or LTE) or cable networks to reach customers. Signing service agreements with O3b would mean realizing huge cost savings, which hopefully is the incentive that the incumbent telecom operators need to ensure wider propagation of services at much lower costs.
View Slideshow with company info:
PowerPoint available for download here (approx. 3 MB)
3.5m fixed terminal for Tier 1 service
The savings are significant. Telecoms in the Pacific currently pay in the range of $3,000-$6,000/mbps, where O3b can provide superior service at a fraction of that cost: $600/mbps for QuickStart.
O3b is a Medium Earth Orbit (MEO) operator meaning much smaller satellite dishes are required. This is because the satellites will orbit about 8,000 km above earth, as opposed to the 36,000 km of existing Geostationary (GEO) platforms. This is an important distinction because it means significantly lower costs for ground equipment. The shorter distance that the signal has to travel to reach a satellite in MEO orbit is what allows for low-latency connections. As MEO technology becomes more widespread and cheaper, even greater savings could be realized. Learn more about what MEO and GEO mean.
A large part of our conversation revolved around the regulatory picture in the S. Pacific. With the ADB and World Bank pushing for liberalization of telecommunications in the region, there is for the first time considerable pressure to change the status quo, which has protected monopolies and the high prices and poor service they offer.
According to Nara, O3b’s technology offering necessitates a re-examination of plans for coping with future infrastructure needs. This moment presents an opportunity for telecom operators, regulatory bodies, and those at the ministerial level to look at their long-term planning and reformulate their outlook for the next 5 and 10 years.
O3b Service can help ISPs and mobile providers address their needs
There are early signs of misunderstandings that can take place. As the people who have to ensure successful implementation of liberalization efforts, regulatory bodies have a key role to play. In Papua new Guinea, regulators require fees for licensing satellite operators to provide service. This is a deviation from normal practice and could be a hindrance to O3b’s entrance into the PNG market.
The challenge is on for all stakeholders in the Pacific to be creative in getting the most out of this technology. In my early posts on Ensuring Universal Access (Part I, Part II), I outlined how next generation wireless deployments should allow for ‘piggybacking’ for schools and emergency services. For this to be realized, this is something that regulators need to demand of operators.
John remarked that the game-changing technology is an example of how innovation is being used to overcome a real problem. Low-cost satellite offers the potential to deploy ubiquitous Internet coverage, dramatically altering the landscape of what is possible for the economies of these countries. This is something not true of submarine cable projects, which can languish on the drawing board for years without any real progress.
For many Pacific countries who have been contemplating spending many millions to get undersea fiber connections , the dream of high-speed connectivity is a step closer to reality. With O3b, they can pursue fiber-like connectivity at a fraction of the cost, allowing them to invest in other projects critical to social and economic development.
Getting from here, to where we need to be...
It seems like just the other day that I was writing about Digicel’s arrival in Fiji. 
Well, it’s safe to say that their impact has been immediate and significant.
Earlier reports confirm what everyone in Fiji already knows about mobile calling rates. Digicel entered the market in October of 2008 and since that time incumbent provider Vodafone has slashed rates by 44% to hold on to market share.
Peak rates for Vodafone “on-net” calls have been dropped from 27 cents a unit to 15 cents a unit or 30 cents a minute in comparison to 54 cents previously. Off peak rates have been slashed from 18 cents a unit to 12 cents a unit or 24 cents a minute. SMS charges have been dropped by 50 per cent to 10 cents per txt compared to 20 cents earlier.
As these two companies battle it out, it should be consumers who rejoice. 
Real Competition in the mobile sector will mean continued improvements in these areas:
- improvements in call quality
- expanded coverage areas
- responsive customer support
- more frequent releases of services and features in-demand with customers
And really, the list of benefits is far too extensive to be detailed here. The real measure of the success of Digicel’s entry into the market will be made several years down the road.
Digicel has built its reputation on monopoly-busting in small markets all over the Caribbean and the Pacific and there’s nothing to indicate that they will stray from their credo as they expand in Fiji.
Announcement of their donation of $500,000 to assist victims of the recent floods in Fiji, as well as their plans to build a green-powered mobile network in Vanuatu show Digicel’s comittment to being a genuine partner in the Pacific.
Clip below shows TFL CEO Taito Tabaleka discussing services in the pipeline such as video-on-demand and how services like social networking will drive demand for increase bandwidth:
approx 1:05 in length (apologies for the poor vid quality)
For 14 long years, Fiji has suffered under a telecommunications arrangement that granted exclusive licenses to operators and prevented the entry of new companies to challenge these monopoly agreements. As a result, Fiji has had to endure terrible service, non-existent customer support, prohibitive pricing, and a host of other issues that one would expect when monopolies rule the day.
No longer. With the entry of Digicel into the mobile market in Fiji today, there will be real competition in the mobile market. Benefits to the consumer will be immediate. Already, Vodafone has started slashing rates to compete and in unprecendented moves, has even responded to widespread customer complaints about SMS promotions. Offering competitive pricing, excellent customer support, and the genuine motivation to shake up the market, it will not take long for Digicel to make a serious dent into Vodafone’s business.
Digicel stores in Suva open at 8 AM and the company is putting on a free concert at Albert Park, where a crowd of 60,000 is expected. The show will feature Sean Kingston, NZ-based Katchafire, and several local artists who get the thrill of playing for the largest crowd ever to gather in Fiji (for a non-religious event). The people of Fiji are not used to being shown any sign of appreciation from the companies they deal with. For a company to thank them with a free concert, before they have even started operations is a clear sign of great things to come.There are areas of concern. While the mobile sector has been opened up to competition, the internet gateway/backhaul function under the control of FINTEL will not be challenged anytime soon. This is an issue that has been dealt with extensively on this blog.
Change in internet will be more gradual and even there, Digicel will be a key mover. As it signs up more people to its data services, expect Digicel to show more interest in investing in internet backhaul capacity. It is only at this point that we can really expect internet service, quality, and pricing to show any movement in Fiji.
Today is a step in that direction.
The recent round of deregulation brings promise (Digicel launches in two weeks), but the internet is still an area of uncertainty because the monopoly license on the sole internet gateway (Southern Cross Cable) has not been challenged. And more importantly, FINTEL seems to have been able to hold off efforts to deregulate in this area because it is on the hook to the network owner C&W, soon to be acquired by AT&T.
FINTEL is well aware that to challenge their dominant status, govt. would have to pry control of the gateway from them–at an estimated price tag of $300 million, that is out of reach of Fiji Govt. finances.
Additionally, investing in a competing new cable running to say American Samoa, Hawaii, or New Caledonia would come at a price of about $100 million, which is also out of reach.
Annnouncement this week of Google’s investment in a new satellite business venture that seeks to provide broadband internet access at low and reduced rates to Africa, Latin American, and Asian countries offers a great deal of promise to Pacific Island countries.
While the O3B website does not list the Pacific as an area where they will operate, we can only cross our fingers that when they launch their satellites in 2010, the Pacific will be part of the coverage. The concept of satellite-based 3G wireless internet backhaul to get ISPs up and running in developing countries is extremely exciting and offers hope to the 3 billion people who still do not have internet access.
See also my previous post on how regulators can enforce ‘functional separation’, which would have to be done in Fiji to pry loose Fintel’s grip on internet backhaul in Fiji.
Next post: How mobile usage might affect the move toward expanding internet infrastructure in Fiji.
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