Small telecoms blame OUR, C&W for their collapse

BY Camilo Thame: thamec@jamaicaobserver.com
Wednesday, August 10, 2005

When the deregulation of Jamaica's telecoms market took off in earnest at the start of decade, scores of aggressive entrepreneurs lined up for what they hoped to be a share of a market that was for decades the preserve of a private monopoly.

Now, with millions of dollars down the drain, many of these companies are out of business, blaming a weak regulatory environment and cosiness between the big players and the regulators for their demise. "Of the 72 ISP licensees only seven are operational and 14 of 17 companies that received international voice providers licences in March 2003 are out of business," said Steve Twomey, CEO of Reliant Enterprise, one of the several companies that terminate international telephone calls in Jamaica by the wholesale purchase of minutes from companies and retail it to their customers.

He is also spokesman for Jamaica Competitive Telecoms Association (JCTA), a group that represents the smaller firms in the industry. According to Twomey, who headed C&W's mobile phone service at the time when Digicel was entering the market, there have been substantial failures in telecoms deregulation in Jamaica. "There have been failures in specific parts of the Telecoms Act such as separation of accounts, competitive safeguards, outgoing competition and so on," he said at a press conference three weeks ago.
Among their complaints is that at the time of deregulation, the incumbent monopoly was not broken up, so Cable & Wireless maintained its fixed line and mobile telephone services while continuing to be a long-distance carrier.

The upshot, he claims, is that Cable and Wireless is able to operate both as a wholesaler and retailer in the telecoms market, giving it the ability to wholesale telephone time to competitors at rates that make it difficult for them to easily swipe market share. Moreover, he argues, regulators have failed to enforce safeguards against uncompetitive pricing. But deputy director of the Office of Utilities Regulations (OUR) Courtney Jackson, says that the regulatory agency has worked within the ambit of the Telecommunications Act, though he admits there are areas that could be strengthened through parliamentary legislation.

"We (the OUR) do our work according to the prescription of the law but there are lots of outstanding issues as to what the form and structure of the policy, regulatory and the institutional framework for the industry ought to be," Jackson told the Business Observer last week. "We have identified about seventeen areas of the act that require rules promulgated in parliament and which would be desireable. However, one of the reasons why this has not happened is that the time and expertise required to produce the massive number of rules is just not available at the OUR." Twomey's position was embraced two weeks ago by Paul Siska, vice-president of Touchpoint Centres International Corporation, the Miami-based company that had a flirtation with the Jamaican market.

In late 2002 Touchpoint spent US$4.25 million to buy NetServe, one of the IT start-ups that had received huge loans from the government's INTEC fund but went belly-up in a major scandal that exposed failure to conduct due diligence by Jamaican officials, and scams by the original NetServe owners.

"Touchpoint Telecom ceased to operate since January of this year," Siska said. "The tariff games played between the regulator and the incumbent was designed to shake out the market and the competition. We took the decision because there wasn't a level playing field and there probably would never be one. Cable and Wireless and the regulator have too close a relationship."

Added Siska: "The regulators kept changing the rules and you end up not making money by losing it. We paid about US$250,000 ($15 million) on the telecom part of the business plus another US$50,000 ($3 million) was used for additional equipment so that calls would terminate properly."

Cable and Wireless insists that the regulator has been particularly tough with the former monopoly, and rejects the claim that it has been too close to the regulator over the years.

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