The May 2010 edition of Islands Business features an opinion piece written by me. I wanted to thank Laisa Taga, Editor at Islands Business, for including my writings in the region’s most important magazine. It means a great deal for me to be a part of this publication. I am trying to put together a series of articles for inclusion in upcoming editions of the magazine.
The piece is intended to inform policymakers and industry stakeholders of the importance of working concertedly toward lower telecommunication costs as well as thoughts and reflections on how other countries in the world are dealing with the fast pace of change in the industry.
You can read the full text after the jump.
Telecom Liberalisation in Fiji: Lessons from our global neighbors
Will the current round of liberalisation bring about the desired outcome of lowered-costs and improved service for broadband Internet and other telecommunication services in Fiji? Every country presents a different scenario and it is extremely difficult to make accurate predictions. However, Fiji benefits from being able to learn from the experiences of other nations who have gone through the process of liberalising their telecommunications sector.
For example, the Caribbean island nations have over a decade of experience in these matters that they can offer to Fiji and Pacific island nations, which are just starting the process. For regulatory bodies in our islands, a key for achieving desired outcomes is learning from the examples offered by the Caribbean nations and not attempt to reinvent the wheel again in key policy areas.
The experience of the Caribbean nations offers directly applicable models for our region in such areas as price regulation, licensing, interconnection, and spectrum management.
The Pacific islands region would also stand to benefit from a closer examination of the model offered by the Eastern Caribbean Telecommunications Authority (ECTEL). ECTEL is a multi-state telecommunications regulator that assists the national regulatory bodies of Dominica, Grenada, St. Kitts and Nevis, Saint Lucia, and St. Vincent and the Grenadines.
Regulation should be approached from a multi-state and regional level in order to produce significant benefits. Telecommunications is increasingly a highly complex field for regulation. Pursuing a regional strategy allows for hiring of specialized staff who are capable of carrying out the complex research functions required of a fully-capable regulatory agency.
Governments around the world are advancing their ability to deal with the telecommunications sector, it is imperative that the Pacific region begin to develop their own capacity to deal with the challenging issues faced by this sector.
Although Caribbean nations offer more than 10 years of rulings and regulatory action that can serve as a road map for Fiji and offer a model for concerted regional action, there is an emerging area of concern where they have little advice to offer Fiji.
With the advancement of technology, the old switch-based networks that were the underpinning of the global telecommunications infrastructure have given way to modern IP-based networks. This innovation has been a key driving force leading to the proliferation of technologies that have advanced telecommunications in recent years.
Concurrently with technological progress, has come increased government scrutiny of incumbent telecom operators’ control of this vital piece of network infrastructure which makes up the physical backbone of the Internet.
We are at a watershed moment where governments across the globe view these networks as vital national infrastructure and are no longer willing to sit on the sidelines when it comes to determining access and fair use.
Under old facilities-based approach to regulation, governments sought to create a competitive market environment by spurring investment in additional backhaul network capacity. This approach is being abandoned for a new approach centered on the sharing of these network facilities.
There are two primary reasons for this shift in approach. First, it has become a commonly accepted fact that incumbent operators who roll out a network benefit from first-mover status and competitors are hard-pressed to gain traction on getting investment in competing networks. Also, the present global financial crisis has had a chilling effect on investment in additional network capacity worldwide.
Faced with these issues affecting competition, the result has been governments contemplating regulatory measures that could provide fair access to existing network infrastructure. Thus far, the United Kingdom and New Zealand have been the only countries to enact far-reaching industry reforms aimed at more strictly regulating how incumbent operators control access to network infrastructure. Following closely in their footsteps is Australia.
In 2004, UK regulator Ofcom and incumbent operator BT Group reached an agreement with respect to a set of legally binding undertakings. Provisions of the agreement include the establishment of a new division Openreach, which would provide wholesale service to all of BT’s retail competitors.
The regulatory aims pursued by Ofcom were the first-of-its-kind anywhere on the globe and are more commonly referred to as ‘functional separation’ and ‘equivalence’ in industry parlance today. The basic idea is to spur competition and realize lowered-costs for consumers by better utilizing existing networks.
Under these regulations, incumbent operators are required to create two units, one that maintains network operations and another that oversees retail operations. The purpose of the firewall between the two is to ensure the incumbent operator treats its own retail division the same as it does its competitors. The regulation requires the incumbent to provide wholesale bandwidth with the same service terms, conditions, and pricing as it would to its own retail division.
The successful implementation of these reforms in the UK that saw in increase in competition, a decrease in prices for consumers, dramatically higher broadband penetration rates, and increased profitability for BT.
With an eye to this success, New Zealand became only the second country to enact this legislation, beginning the process of enforcing functional separation on Telecom New Zealand in 2005. Most recent accounts from Telecom NZ indicate increased profitability and greater competition—thereby meeting most regulatory aims of the reforms.
If Fiji wants to see a model of how things will shape up in its newly liberalised telecommunications market, then it has to look no further than what is presently unfolding in Australia. There, the incumbent operator Telstra, finds itself in the sights of government regulators after repeatedly being accused of anti-competitive practices.
Most recently, Telstra was found guilty in a court action brought against it by retail competitor Optus. Representatives of Optus successfully persuaded the court that Telstra’s network operations division had handed Optus customer information to its own retail division.
This court ruling combined with Telstra’s confrontational stance toward Australian government plans for the rollout of the next-generation broadband network has provided impetus for current plans by policymakers to pursue functional separation.
If Australia forges ahead, it would become only the third country to implement such reforms. Still, the success of such reforms is widely recognized. Both the BT Group and Telecom NZ are on record as saying the process has been worthwhile, as by undergoing the process they have discovered new efficiencies in their operating strategies. European Union countries are next in line to consider such reforms for their own telecom sectors.
What is a certainty is that governments around the globe are no longer willing to sit back when it comes to determining policy toward broadband Internet access.
What’s at stake for Fiji? Broadband Internet access can no longer be considered a luxury. It is clear that broadband Internet is a vital part of national infrastructure and will play a significant role in helping populations improve with respect to key measures of social and economic development.
Distance education, telemedicine, and mobile banking are just three important areas where the delivery of services through the Internet will inspire tremendous innovation. This will result in improved access to services for rural and outer-island populations, helping Fiji meet its target of greater inclusiveness for all its citizens.
Cheap and ubiquitous Internet access is also central to Fiji’s plans to become an investment destination for call center and business process outsourcing ventures. Attracting this kind of investment is critical to creating the desperately needed employment opportunities that can sustain economic growth.
The changes that advances in telecommunications will bring will be nothing short of revolutionary. Consider the delivery of financial and banking services. In Kenya, mobile operator, Safaricom, launched a mobile banking service that has in a short span of time revolutionized banking in that country, creating possibilities for their economy that were unimaginable just a short time ago. In less than a year, Safaricom has opened more bank accounts for users than all the existing banks combined and its revenues now exceed USD 300 million.
Affordable telecommunications underpins progress in many different areas and countries in the region can ill afford to neglect it as an urgent priority.