Introduction
For many years, developing countries had to grapple with
the inefficiencies and cost prohibitiveness of telecommunications infrastructure
run by government and private monopolies. In a landmark pact by the
WTO, 68 countries, which control 95% of the worlds telecommunications market,
agreed to completely liberalize their telecommunications, breaking down
market barriers and lowering costs to consumers through increased competition.
(1)
However, as markets in the developing world liberalize and increase the
number of services they offer and decrease the costs to consumers,
they face numerous challenges.
According to the ITU,
world growth depends on the telecommunications sector. The telecommunication's
market is highly concentrated in the developed world. However, developing
countries are experiencing double digit growth and at the same time,
those that are not experiencing this are realizing that information technology
and telecommunications are vital to their economic growth and well-being.
The present environment of telecommunications characterized by global trends
in telecom, major advances in technology, increasingly globalization (i.e.
MCI/Sprint), pending collapse of the accounting rate system, and the trend
of liberalization, as well as the focus on developing countries,
have influenced the examination of the prospects of deregulation and trade
liberalization in the telecommunications sector in many of these developing
countries. This is the case for St. Vincent and the Grenadines.
Background
The British transnational, Cable & Wireless, has
been the major provider of telecommunications services since the mid 19th
century. However, in the 1960s, during the first decade of political independence
in the region, the governments of the larger countries began to strengthen
national control over the existing telecommunications resources and took
over the management equity of the Cable & Wireless-operated companies.
In Jamaica and Trinidad & Tobago, government shareholdings in the external
telecommunications provider exceeded 51% and in Barbados 40%, with the
appointment of local managers.
Although such acquisitions were feasible propositions
in the 1960s and early '70s, inability by the state-owned companies to
service debt investment and to access state-of-the-art technology rendered
the tasks of management, financing and control of the national telecom
systems more complex. This led to a reversal in ownership throughout the
English-speaking Caribbean. Early in 1995, Cable & Wireless received
exclusive licenses and mostly uncontested markets in 15 countries of the
English Speaking Caribbean. In nine of these, C&W is a monopoly operator
of both domestic and overseas services, including SVG. The company
also controls the international cable and satellite gateway facilities
linking the region with the rest of the world. At the time of privatization,
many governments did not impose conditions on setting standards or technology
transfer; nor was extending service to rural areas a requirement.(2)
The Road to Liberalization for SVG
On June 4, 1998, the World Bank approved financing totaling
US $6 million to help telecommunications reform in five countries of the
OECS, Dominica, Grenada, St. Kitts & Nevis, St. Lucia and St. Vincent
& the Grenadines. The objective of the project, the
OECS Telecommunications Reform Project, was and continues to be, the
introduction of pro-competition reforms in the telecom sector as
well as enhance informatics-related skills in the five countries. The countries
of the OECS have long been dependent on tourism and agricultural products
for their export driven economies. For most of these small island
states, bananas are the key export commodity. Until recently, the
banana exports were supported through preferential pricing agreements allowing
the OECS to compete with other more efficient export countries. However,
this preferential access has been disputed by the WTO and these islands
are feeling extreme pressures on the foreign exchange earned by this commodity.
Hence, they are faced with building new jobs and looking at alternative
ways of diversifying their economies. A major component of this project
focuses on enhancing the offshore informatics sector in these countries.
(3)
Like many other emerging economies, the Caribbean is
competing for outsourced information processing and knowledge based services
in this global market. The Caribbean does have some advantages in
this area to compete for these services such as:
-
Countries have a strong affinity for North America
-
They share a common language and time zones
-
Tradition of democratic and stable government and
political systems
-
Relatively easy airline access
-
High literacy rates (4)
The project addresses the telecommunications sector regulation
by promoting liberalization of the sector and encouraging a competitive
telecommunications environment, from which all sectors of the economy will
benefit. The project will also increase the capacity for regulation and
enforcement required under the new environment, both in terms of new national
legislation and new regional telecommunications sector regulations.
The OECS countries currently lag behind other countries
in telecommunications development. High costs of telecommunications hinder
competitiveness of firms such as larger manufacturing exporters and the
tourism industry. Further, the legal and institutional aspects of the telecommunications
sector present several deficiencies, with minimal regulatory powers held
by governments and ambiguous and outdated telecommunications legislation.
According to Donald Austin, General Manager, Cable &
Wireless SVG, the New Telecoms Act will be presented by parliament in the
first quarter of 2000, although this was originally supposed to have been
presented by January 1, 2000. (5
) Certain services will be liberalized as soon as the legislation
is enacted, with full liberalization to occur within 18 months. C&W
is working with the government to reform the telecom sector, but they stress
that this reform needs to be seriously managed. The New Telecom Act
will follow some of the provisions outlined by the World Bank Project,
such as the institution of a regional regulatory body in the OECS along
with national commissions in each of the member countries. This information
was confirmed by Apollo Knights, who works for the Ministry of Communication
and Works, Government of St. Vincent & the Grenadines.
Cable & Wireless' Perspective and Position
Cable & Wireless believes that it has been instrumental
in increasing the telecommunications capabilities of OECS countries
over the past five years. They say OECS countries are above the global
trend line with respect to teledensity and GDP, and C&W attributes
this to some of its own actions and accomplishments in the recent past:
-
C&W invested EC$400 million in the last five years
-
telephone lines have tripled in the last ten years (44,000
to 138,000)
-
paid EC$87 million to governments in royalties and fees in
1999
-
C&W employs over 1000 people in the region (6)
Furthermore, between 1995 and today C&W has introduced
to these countries the Internet, VSAT, Voicemail, automated credit card,
prepaid calling card, frame relay, Internet e-commerce and internet global
roaming. However, they do see the need for decreased rates in an
effort to increase teledensity even further by making telecommunications
more affordable for consumers. But they argue against shock liberalization,
and support carefully managed reform. Colin Little, Director of Sales
and Marketing for C&W, quoted the World
Telecommunications Advisory Council of the ITU
in his presentation to the CAIC (Caribbean Association of Industry and
Commerce) in Trinidad and Tobago, on March 31st 1999, to warn against
this possibility:
"Within
a country, the competitive environment will tend to produce "islands" of
high telecommunication capability where profitable customer segments
exist and "desert" of telecommunications capability where profitable returns
cannot be achieved. With the removal or introduction of internal
cross-subsidies, the ongoing dilemma is how to find the necessary investment
capital for such desert areas in order that they can ultimately enjoy the
economic growth which requires, as a prerequisite, a sophisticated telecommunications
platform."(7)
Conclusion
At the beginning of the twenty-first century, the
communications revolution continues to impact in much the same manner that
the PC did back in the 80's. OECS countries must offer leading edge communications
if the region is to stay abreast of its competitors. Governments must take
the initiative to deregulate the industry. Bermuda could be a great example
to follow; by using multiple international carriers to introduce a competitive
environment, the incumbent carrier in Bermuda was not disadvantaged but,
instead, the country is beginning to emerge as a transatlantic telecommunications
hub that will ultimately link North America, Europe, Latin America and
the Caribbean. OECS countries must take the first step towards deregulation,
by introducing competition in value added services such as the Internet,
cellular phones and paging, and then following with multiple telephone
serivce providers to accelerate competition and provide advanced cost effective
services. There seems to be an important link between telecommunications
industry deregulation and competition with overall IT activity, which has
a subsequent impact on industry competitiveness. Countries that procrastinate
over these issues will impose unnecessary burdens on business and hinder
overall IT industry development. Furhtermore, they will seriously
hamper their ability to compete effectively in the global marketplace.
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