Government To Blame For C&W Stranglehold

By Chris Halsall with contributions from Douglas Skeete

IN any jurisdiction, companies operate ultimately under the legislation created by a central authority, i.e. the Government. Therefore, the argument can easily be made that this authority must seek to devise, and more importantly enforce, legislation preventing companies from inhibiting the development of liberalization and fair competition.

Publicly traded companies (those listed on one or more stock markets) tend to act particularly aggressively, as they are dependent upon ever greater profits in order to raise their share price. Their executives’ remuneration packages are invariably tied to this, and often current (and ex-) employees hold a number of shares as well.

The stock market is a harsh mistress. Therefore a public company’s primary concern is about “making the numbers” for the next quarter – everything else is secondary. Stock prices have even been known to fall when a Company does manage to make their numbers, but do not “exceed analysis’ expectations”.

There’s nothing wrong with this, of course. To the contrary – it is raw capitalism at its purest; the most effective form of wealth creation ever devised by humans. But it must be appreciated and understood: capitalism is heartless, and companies feed upon their markets.

It is therefore important that in any marketplace rules and enforcement exist which prevent companies from making unreasonable and unfair profits, as they will not by nature constrain themselves. Companies should be symbiotic with their marketplaces (their ecosystems), rather than being parasitic. This is where the law and the enforcement of same come in.

Cable & Wireless (C&W) has had a long-time presence in Barbados and the Caribbean, and have aggressively acquired units of telecommunications companies throughout the region. In 1991 they purchased the remaining government owned shares in BET and BARTEL, the international and domestic telephone service companies respectively, and received an exclusive license to operate these services until 2011, creating a legal (if not natural) monopoly.

However, because of the pressures of globalization, and being signatories to WTO, CARICOM, GATS, et al, the Government of Barbados renegotiated its license with C&W to introduce liberalization early. A Memorandum of Understanding (MOU) was signed in 2001 which defined a three phase timetable for “Full liberalization” in exchange for concessions. The final phase, International Voice, was supposed to have been completed by 2003, but in fact was delayed until 2005.

So here we are now in 2008, and really not much has happened. Yes, we now have competition in mobile telephony, but after the initial excitement of a marketplace with a total of three competing providers, one has now left our market leaving a duopoly situation with prices for almost all services still much higher than they could and should be.

A consumer still cannot pick up the phone and make an international call using a competitive carrier of their choice. And while consumer-grade “high-speed” internet is much more widely deployed, because C&W continue to have control of the “last mile copper” they remain the dominate provider, other providers have to use wireless (an inherently limited means of transport) or rent service from C&W at an uncompetitive rate.

Anger about this situation should not be directed at C&W, it should be leveled squarely upon the government and its regulatory and enforcement functions. The question is not why C&W are doing what they’re doing, but why they are allowed to get away with it.

Fundamentally, Barbados and the entire Caribbean, is being held back from developing as quickly as we could. In today’s connected world, telecommunications are as critical to development as access to any traditional infrastructure.

Money is flowing out of the pockets of our people, and into the coffers of C&W which is 81 per cent owned by C&W (West Indies) which is in turn owned by C&W PLC.

Fifty two (52) million dollars flowed out of Barbados to England last year alone simply in dividends, not to mention various other consulting fees and service charges.

It is therefore hoped that this new government will take the progress of true liberalization appropriately seriously. Some hard questions need to be asked as to why things have been allowed to progress so slowly.

Are the Telecommunications Unit and Fair Trading Commission understaffed? Why are the laws and policies which exist not being enforced? One might even go so far as to ask for a forensic review.

Barbados must liberalize – it is part of our obligation as signatories of the WTO, among other agreements. It has been demonstrated elsewhere that it is in fact better for the marketplace as a whole. And the quicker this happens, the more competitive we and our people will be.

Please note that this article was to have been published in the Barbados Advocate Business Monday 2008.03.17, and while it was edited by a writer from the same publication to be more palatable, it did not actually find itself in said publication.  Something about the fear of being sued.  Or, perhaps, the risk of losing advertising revenue…

Here is the link to Chris’s blog on this and other telecommunications matters.