ATH companies report on annual earnings

The ATH group of companies reported their earnings for the year ending March 31, 2009. Profits were reported at $52 million, nearly a 20% decline from reported income for the previous year.

The arrival of competition to the mobile sector in October 2008 is responsible for the decline in sales margins. Group sales revenues did show an increase from the previous year by 5.4%, from $269.5 million to $284.2 million.

Interview with Digicel Pacific CEO

This is the transcript of a phone interview conducted recently with Digicel Pacific CEO, Vanessa Slowey. I want to take this opportunity to thank the Digicel leadership for the genuine spirit of cooperation which they extended to me. Their openness and willingness to answer difficult questions is a good indicator of how they view their committment to the Pacific Islands.

1. In which Pacific countries does Digicel operate in at the moment? What countries are next in line for Digicel service?

Digicel currently operates in five countries in the Pacific: Papua New Guinea, Samoa, Tonga, Vanuatu and Fiji, covering a total population of 7.5 million people, and directly employing more than 1100 people across the region.

Digicel began its Pan‐Pacific roll‐out when it launched Samoa’s first GSM network on November 1^st 2006. The incumbent provider there was operating a mobile service over nine towers on a second‐hand switch. Needless to say, Digicel’s arrival to market has transformed the telecommunications industry in Samoa with an increase of 150% in mobile usage.

On July 24^th 2007, Digicel’s launch in Papua New Guinea marked the end of a fifty year monopoly in the telecommunications market. To date, Digicel has invested US$150 million in Papua New Guinea with plans to invest a further US$340 million over the next three years. The Minister for Finance has directly attributed a growth of 0.07% in Gross Domestic Product (GDP) to Digicel’s launch in Papua New Guinea.

Digicel has invested US$150 million in Fiji with ongoing investment throughout and across 300 islands in the group. Prior to Digicel’s launch, the incumbent operators scrambled to get organised as even the threat of Digicel coming to the market scared them. We have witnessed a revolution in Fiji with Digicel’s arrival here, as prices have been driven down and now customers are experiencing real competition for the first time.

Do monopolies have an interest in thwarting broadband plans?

In recent weeks, this site has focused a great deal on the situation with Telstra in Australia. It’s because this drama has so many dimensions worth analyzing. A key development was the court ruling against Telstra on the improper use of Optus client information. Telstra used information it had access to as wholesale service provider to assist its own retail unit in targetting Optus customers.

These smaller developments are contributing to what is going to be a very dramatic overhaul of telecommunications policy down under.

Optus Chief Paul O’Sullivan on why he thinks Telstra will try to delay roll-out of the new broadband network proposed by the Government:

“The incentives for Telstra to delay a roll-out of a new high-speed broadband network or to try to re-monopolise a high-speed broadband network remains,” he said.

“The fundamental drivers of most companies’ behaviour lie in their underlying economics and in their competitive position. In Telstra’s case that drives them to very notable characteristics.

“First of all, they have a very strong incentive to delay the roll-out of any competitive infrastructure which levels the playing field in services to the home.”

The news from Australia should only make us wary of FINTEL. Is the upcoming announcement in July merely rhetoric of change from their part, when all that’s really being done is securing FINTEL’s competitive position? As wholesale provider of bandwidth to Vodafone, Digicel, Kidanet, etc. they say that market forces and competition will drive down prices. But, looking at what the Optus CEO is saying and the court ruling on the improper use of customer information, it is becoming harder and harder to believe FINTEL.

As developments in Australia prove, without competition in the operation of the underlying network, pricing of services will remain high.

It’s a beautiful day in the neighborhood: Unwired Fiji’s WiMAX move and news from Asia-Pac

Unwired Fiji has selected Motorola to deploy its next-generation WiMAX network in Fiji. A very positive development. Coming in front of the July 17th announcement, it’s proof that operators are willing to invest in considerable upgrades that expand network coverage and increase performance.

From Communications Direct:

Motorola announced today that it has been selected by Uniwired Fiji to design and deploy an end-to-end 8012.16e-based WiMAX network to upgrade and provide increased capacity to the operator’s existing network for expansion of network coverage and capacity.

In the Philippines, The National Telecommunications Commission (NTC) has allowed Globe Telecom to ‘make permanent its mobile internet service for post-paid subscribers’. The company offers monthly subscriptions starting at PHP149 (USD3.1), giving ten hours of mobile internet. A low-priced introductory service option is critical for expanding Internet usage in the population.

Governments are reassessing regulations toward telecommunications as they look for investment in next-generation wireless networks. In Vietnam, significant reforms are being put in place, including provisions for foreign-ownership of network infrastructure. According to a  Telegeography update:

… the country’s draft Bill of Law on Telecommunication has been put forward for discussion at the National Assembly Steering Committee. If passed, the bill will allow private companies to build network infrastructure for the first time and will open up the telecoms market to foreign investors, as part of Vietnam’s commitment to the World Trade Organisation (WTO).

In the Asia-Pacific region, there’s a great deal of activity that impacts the deployment of wireless networks and services. Again we see governments taking steps to change policies and increase investment in next-generation networks.  A nation like Vietnam opening itself up to outside investment in telecom infrastructure is a sign of how old attitudes  are making way for new pragmatism.

VOIP traffic increase and planning for future demand

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.

Tailoring liberalization to fit the Pacific Islands

The Feb/March edition of the journal Telecommunications Policy contains an article titled “Does smallness affect the success of liberalization? The case of Cyprus“.  The article is very insightful in outlining why we have to pay attention to regulation.  The liberalization process is complex and attempting to merely duplicate solutions from other countries without careful consideration of local conditions, will not result in desired outcomes:

The examination of liberalization in Cyprus shows that despite the NRA enforcing all regulatory measures recommended by the EU model, a very strong incumbent provider dominates in all markets. The progress of competition has been sluggish and new entrants, struggling for survival, have acquired small market shares.

The following table, from the same paper illustrates just what is meant by trying to avoid ‘one-size-fits-all’ types of policies.  It’s packed with information, so you should try to take a moment to understand it.  Key facts contained are the year in which liberalization started in a particular country, penetration rates for Internet under monopoly and then under competition, the number of operators in a country, and the incumbent operators share of the market 4 years after the start of the liberalization process.

(If above information is difficult to read, please click to open larger image)

The author is drawing comparison between large economies and small ones.  The data reveals that small countries, under competition, did not manage to achieve high levels of internet penetration and incumbent operators managed to hold onto a large portion of the market share.

Just some things to think about as we get underway with our own efforts at liberalizing the telecommunications sector.

Creating a policy toolkit for S. Pacific Regulators

For several weeks now, I have been parsing through websites and academic papers trying to understand the available literature on telecommunication policy.   An earlier post on O3b referenced the International Telecommunication Union meeting in Tonga.

One of the outcomes from this meeting was a direction for ‘officials to work toward establishing a shared regulator resource centre at the earliest possible date.’

From its founding, this has been exactly the goal for this blog, to be a resource for everyone in the region to better understand how ICT  and telecommunications liberalization impacts the lives of those living in the Pacific.

In true Pacific fashion, island nations have shown up late for the telecommunications liberalization party.  This is regrettable, but it presents us with the opportunity to study how liberalization has fared in other countries in the world.  In the literature on development, this is referred to as the benefit of being a latecomer.

Of course, it’s only a benefit if we learn the right lessons, make the appropriate comparisons, and take the necessary steps to avoid pitfalls faced by other nations who attempted to bring about change to their telecommunications sector.

Read about telecommunications policy and failures of liberalization in South Africa, as well as challenges faced by small economies, particularly relevant for the small island states of the Pacific.

There is an overwhelming amount of information that is available on this topic from online sources.

Click above image to view table of contents for ITU's ICT Regulation Toolkit

The plan is to have this become the first in a series of posts that will examine issues of telecommunications policy pertaining to liberalization and regulation.

To get a better understanding, it’s helpful  for us to develop a  road map to better put into perspective the many issues of concern.  For our needs, the framework of analysis is offered in Section 2.4 of the ICT Regulation Toolkit, which outlines responsibilities of a good regulatory body:

• implementating the authorization framework that provides opportunities for new companies and investors to establish ICT businesses. Simple authorization procedures tend to maximize new entry (see Module 3);
• regulating competition (including tariffs) involving the effective enforcement of fair and equitable competitive market principles, restraining the power of dominant suppliers and leveling the playing field for new entrants (see Module 2);
• interconnecting networks and facilities. Normally transparent rules are established for interconnecting all types of traditional and new communications networks and associated cost-based payments (see Module 2)
• implementing universal service/access mechanisms to ensure the widespread (and affordable) diffusion of ICT (see Module 4);
• managing the radio spectrum effectively to facilitate new entrants and new technologies, which is particularly relevant to new broadband wireless opportunities such as Wi-Fi and WiMAX (see Module 5); and
• minimizing the burden and costs of regulation and contract enforcement (see Module 7)

Future posts on policy will be oriented around these modules.  You can also expect more emphasis on academic articles that focus on small economies, since that is where the most apt comparisons to Pacific nations can be made.

O3b announces pricing structure for Pacific Islands

Start-up satellite broadband provider O3b Networks expects to unveil an initial pricing plan for Pacific islands next week.  Greg Wyler, CEO, plans to announce a megabit-per-second pricing structure for Pacific Island countries at a meeting of the International Telecommunication Union from Feb 17-20, in Tonga:

Mr Wyler said the company’s preliminary assessment is that an island would pay around US$600 per megabit per second of throughput, plus an initial activation fee for the ground equipment of about US$350,000, for orders placed by May 2009. (Source: Pacnews)

I had the good fortune to see Greg Wyler, CEO of O3b, speak at PTC ‘09.  He described O3b’s plan for the Pacific Islands and it sounded pretty awesome as anyone addressing the needs of the Pacific Islands, is instantly my hero.

Greg Wyler at PTC '09 in Honolulu

O3b arrives on the scene just as other satellite companies like Intelsat are raising prices in the Pacific claiming the only alternative is stopping service to the islands.

Any news from O3b is good news for the Pacific islands.  Here’s some details on the satellites and the scheduled 2010 launch:

… based in the British tax haven Jersey Channel Islands, has contracted with manufacturer Thales Alenia Space of France and Italy to build an initial eight 700-kilogram O3b satellites to be launched together in late 2010 aboard a Sea Launch Co. rocket.

Launching satellites is no small task and there have been several quite prominent failures at what O3b is attempting to accomplish.  With the way technology is becoming so widespread in the world, the timing could be right for O3b.

We can only hold our breath in anticipation of the launch of the satellites in the latter half of 2010. On behalf of everyone who recognizes that O3b’s success means real competition for internet services in Fiji, we wish them well!

Digicel Fiji Launch set for Oct 1st

According to reports from Pacific Magazine, Digicel officials have indicated they will be ready for the launch of their service in Fiji on Oct. 1st.  They point to their business in Samoa:

“We offer a first world mobile network with all the bells and whistles,” Slowey added. In Samoa, for example, the government-run telecom company had 18 cell broadcast sites. Digicel opened with 43 and has continued to add more over the past two years, bringing up the coverage now to about 95 percent of the country, with plans to increase that to 98 percent of the nation by Christmas, she said.
 
“We promised the government of Samoa that we’d provide a minimum of 75 percent coverage (on launch),” she said. “But we came in with 85 percent coverage. We put our money where our mouth is — we deliver.”

Their approach to customer service:

In Samoa and in Papua New Guinea, as in Marshall Islands, the government telecoms didn’t offer 24-hour customer care, she said. The government’s SamoaTel has responded to Digicel by now offering 24-hour customer service, she said.
 
“In PNG, our 24-hour customer care was unprecedented. People call just to see if someone will actually answer.”

 

Future plans:

Speaking from her Fiji base, Slowey said the company is operating in four south Pacific nations, plans to launch service in Fiji after October 1, and is talking with other island governments, including the Marshall Islands, about starting mobile phone services.
“We’re knocking on everyone’s door (in the Pacific),” she said.

We’ve come a long way, baby!

Digicel Press ReleaseDigicel Press ReleaseDigicel’s Press ReleaseDigicel Press ReleaseFor decades, Fiji was deemed too far and too small to be a viable telecommunications market.  All that changed last week with the announcement of Digicel’s entry into the mobile market in Fiji.  For a country that suffered through a bloody colonization process and instability in the short years of independence, this signals momentous change.  The high prices and poor service that have historically shackled communications in Fiji will hopefully become a thing of the past.   If we can use Digicel’s track record in other countries as an indicator, they just might be.

Fiji takes a tremendous leap toward competition and economic liberalization with the granting of a operator’s license to Digicel, a Caribbean-based operator with presence in 20+ countries with similar profile to Fiji.

Contrary to prior reports, the government auction process did not hand out two licenses for mobile operators. Digicel pays the government US$10.25 million for the right to be the only mobile operator to go up against Vodafone.

Fijilive says that Digicel has already put in place pieces of an estimated FJ$120 million cellular communications network. According to their own press release, the company also intends to make Fiji the headquarters of its regional operations, eventually employing as many as 250 full-time and an equal number of part-time employees.  You can find the press release attached to this post (Thanks to D).

With much of its infrastructure already in place, the company plans to roll out services in 2009.  Consumers can expect prices to drop sharply and competition for services to increase as Digicel puts on the pressure to become the operator of choice for all of Fiji.  Enough cannot be said about Digicel’s track record in other countries in the South Pacific.

The high cost of cell phone usage under the Vodafone monopoly will soon be a part of Fiji’s past. Vodafone and ATH’s large profits have come at the expense of high prices, zero competition, and stifled economic growth.  For modern economies, communication is by far the most important business tool. With lowered costs for communication in Fiji, the hope is that technology will become accessible to those who may have not been able to afford it before.  Costs to businesses should decrease, increasing overall productivity.

The liberalization in the telecommunications sector bring a wide range of benefit.  Where Vodafone was slow to release anything but the most basic services and features, competition from Digicel will bring to users in Fiji services that they have not seen thus far.  Expect new services in mobile internet, video streaming, and other high-end data services as Vodafone can no longer take your recharge card dollars for granted.

It was not long ago that few strands of cable were what connected Fiji to the outside world.  Satellite communications and fiber-optic cables have brought Fiji a long way since those early days (which were not too long ago).  

There are some serious questions that remain about this move toward economic liberalization and competition. 

How much of the US$10.25 million will go toward the establisment of universal accesss schemes for mobile and internet?  If you have read earlier posts on this site, then you know that universal access is something that is very important to the authors of this site.  We urge Mr. Ricketts to come forward and outline how service will be expanded to rural areas.  Widening access to technology should be a key benchmark by which this current round of liberalization should be measured. 

Additionally, what are the details and specifics of the Telecommunications Authority of Fiji, the new regulatory body being set up to oversee the industry?  More to come, so the only thing we can all do is stay tuned as the developments come in.