ASSESSMENT OF THE TELECOMMUNICATIONS SECTOR IN CARICOM

Peter A. Stern ps associates, Montreal, Canada

Port of Spain, 7 September 2007 Outline  Basic requirements for the development of an information-based industry  The situation in the in 2005 and today  How does the Caribbean measure up in terms of access?  How does the Caribbean measure up in terms of prices?  Regulatory barriers to investment  Recommended action

22 The Importance of ICTs for Economic Growth

• According to a 2003 study by the OECD ICTs impact economic growth in 3 ways: 1. Help raise labour productivity through the capital stock (tools) that is made available to workers 2. Through ICT producing activities from data entry to software development and in support of rapid technological progress 3. Help firms enhance performance through efficiency improvements in combining labour and capital (i.e. raise overall productivity), lowering transaction costs, increasing the pace of innovation, expand their product range, customize their service offerings, make procurement more efficient, reduce inventories, etc.

33 The Importance of ICTs for Economic Growth (cont.)

• A 2003 study by Jorgenson, Ho and Stiroh provided strong empirical evidence that ICTs contribute to economic growth at least when the USA and Europe were compared: – Between 1995 and 2000 total productivity grew by 2.25% in the USA where ICTs represented 86% of the total and by 1.42% in Europe where ICTs represented 63% of total

44 The Effect of ICT Use on Enterprise Performance in Developing Countries

Enterprises that do Enterprises that Indicator Difference not use ICTs use ICTs Sales growth (%) 0.4 3.8 3.4 Employment 4.5 5.6 1.2 growth (%) Profitability (%) 4.2 9.3 5.1

Labour productivity (value added per 5,288 8,712 3,423 worker US$) Total factor 78.2 79.2 1.0 productivity (%)

Source: World Bank

55 Basic requirements for the development of an information-based industry

 The availability of physical infrastructure which allows people, businesses and governments to communicate

 Ease of accessibility to all who have or want to communicate at affordable prices and adequate quality of service

66 The situation in the Caribbean today

 Telecommunications markets have been almost completely liberalized in most countries and territories

 There is competition in the cellular market in most countries (current exceptions: The Bahamas, Suriname). The situation is changing in Trinidad & Tobago, BVI, Turks & Caicos

 Most counties and territories have at least 3 operators. Some have up to 7 (eg. St. Martin, Puerto Rico)

77 The situation in the Caribbean today (cont.)

 International calling rates are starting to decline in some countries but are still very high by North American and European standards  International leased circuit prices and consequently the costs for business and Internet users are high in a large part due to limited access to submarine fibre optic cable systems. The situation is changing.

88 The situation in the Caribbean today (cont.)

 Revenues from incoming international traffic are declining due to falling settlement rates; Resulting negative impact on prices for local calls.  Former monopolies continue to dominate especially in the fixed network.

 New entrants, especially local investors are disadvantaged with respect to well organized and resourced multinationals including the incumbent.

99 The situation in the Caribbean today (cont.)

 Many regulators currently do not have sufficient resources and professional staff to regulate adequately in this situation.

1010 How does the Caribbean measure up in terms of access to communications facilities ?  fixed and mobile penetration  Internet use and number of hosts  fibre optic backbone and  satellite access

1111 In terms of access  Fixed penetration rates are stable; mobile penetration rates are growing exponentially; wide discrepancies remain across the Caribbean

 Wide discrepancies in Internet access and use

 Large number of submarine fibre optic cable systems; however, access to them remains a problem. This is changing.

 Good satellite coverage but this is an expensive solution.

1212 In terms of access (cont.)

 Limited deployment of wireless access technologies; FWA in , Jamaica and Trinidad & Tobago; MMDS in Jamaica; LMDS in Barbados; WiFi

 Cable modem in Dominican Republic, The Bahamas, Trinidad & Tobago

1313 Growth of fixed and mobile: comparison with North America (ITU) 80% Canada/USA Fixed 70% 60% 50% Canada/USA 40% Mobile 30%

Penetration % % Penetration Penetration CARICOM Mobile 20% 10% CARICOM Fixed 0% 94 95 6 00 01 2 1990 1991 1992 1993 19 19 199 1997 1998 1999 20 20 200 2003 2004

1414 Fixed line penetration (ITU 2004)

100 90 80 70 60 50 40 30 20

Penetration % % Penetration Penetration 10 0 ) . s . s is a s a a a o o a e s a a ti d .S o v d a i d c c g c e n ze ep b i n d e u c a i i a i m in a li u a a (U a N b m u n in R b a a d y e R H sl b r a L e o m in a u n C I s r d a h t r m to T a r n B a n d a n B a in G o r J u e G c a n B a d B a D e d S r i la s n S u n G in m Is tt a P a e y i d h m a in K a a t o C g t u id d D ir in ig n n V a t i a S n r t A T n ce in V t. S

1515 Fixed line penetration (ITU 2006)

60.0% 50.1% 50.0% 43.5% 38.0% 40.0%

30.0% 24.8% 18.9% 18.0% 20.0% 14.7% 12.7% 12.0% 10.1% Penetration % Penetration 10.0% 7.6% 0.0%

. s a o a e a p a g me n iz ic e b do uda rub a a a el u a b b in ma C A adines uy B a n R arb n G J a B Sur and To and Bar Dominic igua nd the Gre a Ant Trinidad

St. Vincent

1616 Mobile penetration (ITU 2004) 100 90 80 70 60 50 40 30 20

Penetration % % Penetration Penetration 10

0 s a o e . s es e e d o a a a g n p a i a i ll u a p s u c i c s n a e i a e e l v n it a ti ic u o b i c i a ia m d d iz R a e a a b iq a o d r R u in m u b a a a l m N y u n n l a a L a o n n n e n e H C A ti m e rb B to t m h G T ri e re B a t d u s r a ad a r in o a h d u r ic a an G d a J B d e a D B c n S G G n u n M u n u S n a e i G ts a G a P e d h m it rl a r a t o e u F d d K h g i n D t t ti in a in e n r t a N A T n S e c in V t. S

1717 Mobile penetration (ITU 2006)

160% 140% 135%

120% 106% 106% 100% 77% 80% 61% 59% 52% 60% 44% 41% 37%

Penetration % Penetration 40%

20% 1% 0%

a s es e a a ic o n n b a ame a n y Cu Aruba ri Beliz n Rep. u Jam u a G Barbad d Tobagorenadi S ic G in an d e a h om id D nd t rin a Antigua and BarbudaT t n

t. Vince S

1818 Internet hosts per 100,000 population (2004)

30 27.4 25 20 14.2 15 9.3 9.7 10 7.5 5 0.0 0.0 0.0 0.1 0.2 0.2 0.3 0.3 0.5 0.8 0.8 0.8 0.9 1.0 0 Internet Hosts/1000 Population Population Hosts/1000 Hosts/1000 Internet Internet ti o s a ia s e s e c e d c o u pe ica z ana n uba d q ana u n li Hai i C i y Rep. i riname ba u hama n m Be u Jamaica r G a enadi Grena aint Lu S Ba artin Ba d Tobago Do r S M n Puerto G Ri inic e Guadelo French Gu Dom nd th inidad a a r T Antigua and Barbuda cent in V St.

1919 Estimated number of Internet users per 100 population (ITU 2004)

60 55.4

50 39.9 40 36.7 29.3 30 26.0 26.1 27.1 22.1 18.9 20.8 20 17.8 12.2 13.4 9.1 10 5.9 6.6 6.8 7.8 1.3 0 Internet Users/100 Population Population Users/100 Users/100 Internet Internet

iti e a a o ize e na ica c os es ep. l a na uci ai Cuba Ha am R ia n ique ad n in Be loup L m r Guy adi an rto Rico Ja n Su c d Tobag ade h Gu e Domi Bahamas Barb ini n c Martin Saint Gu Pu e Gre ren h Dom F idad a n tigua and Barbuda nd t n a Tri A

St. Vincent

2020 Estimated number of Internet users per 100 population (ITU 2006)

70%

59.5% 60%

50%

40% 35.6% 31.9% 32.8% 30% 21.3% 22.5% 19.0% 20% 16.8% 14.1%

7.0% 7.1% 8.4% Internet users/ 100 population population 100 100 users/ users/ Internet Internet 10% 1.7% 0% s a a ti e ne e p. a e b i m i iz e n u a l R iana qu bud C Ha n loupe amas r rin Be e uya Gu tini d G h r Ba Su a c Bah d Barbados u n Ma G e an the Grenad a d Fr u n a t Antig en c Vin . St

2121 Fibre optic cable networks: situation in 2005  21 international systems; 15 of which primarily serve the region  Combined total capacity at construction = 70 Gbps; combined potential capacity > 3 Tbps  Of 25 countries and territories in the Caribbean more than half have access to only one cable system; in many of these countries and territories all cables landing are controlled by the same operator, generally Cable & Wireless  Taino Caribe (1991), TCS-1 (1991), and ECFS (1995) are older systems approaching the end of their design life

2222 2323 Access to fibre optic cable systems in the Caribbean (2005) No. of Country/Territory Cable systems landing in country or territory cables 1 ECFS Antigua & Barbuda 1 ECFS Aruba 2 Pan American, Alfonso de Ojeda Bahamas 3 Arcos-1, Bahamas II, Bahamas Internet Cable System (BICS) Barbados 1 ECFS Belize 1 Arcos-1 (Tortola) 2 CARAC, Taino Cayman Islands (BOT) 2 CJFS, MAC Curacao (incl. Bonaire) 3 Amerigo Vespucci, Americas-2, Alfonso de Quejeda Dominican Republic 3 Antillas-1, Arcos-1, TCS-1 French Guyana 1 Americas -2 Grenada (OECS) 1 ECFS Guyana 1 Americas-2 via French Guyana and Suriname Jamaica 2 CJFS, TCS-1 / 2 Americas-2, ECFS (BOT) 1 ECFS Puerto Rico 6 Americas-2, Antillas-1, Arcos-1, Emergia, Taino, TCS-1 St. Kitts & Nevis 1 ECFS St. Lucia (OECS) 1 ECFS St. Martin/St. Maarten 2 ECFS, SMPR-1 St. Vincent (OECS) 1 ECFS Suriname 1 Americas-2 via French Guyana Trinidad & Tobago 3 Americas-1, Americas-2, ECFS Turcs & Caicos (BOT) 1 Arcos-1 Americas-1, Americas-2, Pan American, PAC, MAC, SAC-1, US Virgin Islands (St. Croix, St. Thomas) 7 Taino

2424 New Caribbean fibre optic cable systems

 Fibralink (Columbus Networks): Montego Bay, Ocho Rios, Bull Bay, Jamaica; Puerto Plata, Dominican Republic. Put into service on 31 March 2006  Current capacity = 40 Gigabits/sec (design capacity = 320 Gigabits/sec)  Capacity of other two cables landing in Jamaica = 10 Gigabits/sec.

2525 Fibralink

2626 New Caribbean fibre optic cable systems (cont.)

 Antilles Crossing Fibre Optic Cable System

Phase 1: Barbados, St. Lucia and St. Croix Phase 2: Trinidad, Tobago, Grenada, St. Vincent Phase 3 Martinique, Dominica, Guadeloupe and St. Kitts

2727 Antilles Crossing

2828 New Caribbean fibre optic cable systems (cont.)

 Global Caribbean Network (GCN), an initiative of Region Guadeloupe, the regional government of Guadeloupe and some private investors. “Guadeloupe Numerique” connects Guadeloupe (Baie Mahault, Bailif) with St. Croix, Puerto Rico, St. Kitts (branch), St. Martin and St. Barthelemy Capacity = 1 Tbps IP Transit prices ~ US$ 500/Mbps

2929 Global Caribbean Network (GCN)

3030 New Caribbean fibre optic cable systems (cont.)

 Extensions to Global Caribbean Network (GCN)

 Middle Caribbean Network (MCN)  Southern Caribbean Fibre (SCF)

3131 Middle Caribbean Network (MCN)

3232 Southern Caribbean Fibre (SCF)

3333 New Caribbean fibre optic cable systems (cont.)

 Columbus Networks

 Trinidad - Curacao Route  1000 km  RFS: Q4 2007

 USA – Colombia Express Route  2500 km  Initial capacity = 980 Gbps (exp. 2 Tbps)  RFS: Q1 2008

3434 Trinidad - Curacao Route

3535 USA – Colombia Express Route

3636 In terms of prices ● At retail level • Rebalancing is taking place; international calling charges are decreasing but are still high with respect to other regions • Internet access charges are higher than in other regions ● At wholesale level • Leased circuit prices are excessively high • Interconnection charges appear to be in line with international benchmarks

3737 International telephone calling charges

Destination of call Country from Caribbean North America Rest of World where call Service provider St. originates Anguilla Jamaica T&T USA Canada UK France Brazil Lucia Skype (computer to computer) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Any Skype (computer to telephone) 0.18 0.13 0.26 0.16 0.02 0.02 0.02 0.02 0.06 Vonage 0.18 0.12 0.22 0.14 0.00 0.00 0.03 0.03 0.09 Canada Goldline (anytime) 0.23 0.14 0.21 0.16 0.02 0.02 0.02 0.04 0.09 USA MCI (anytime) 0.61 0.52 0.41 0.35 0.05 0.05 0.07 0.08 0.15 Anguilla Cable & Wireless (Anytime) 0.67 0.67 0.67 0.67 0.67 0.67 0.89 0.89 BTC (reduced) 0.70 0.66 0.70 0.70 0.51 0.54 0.89 0.89 0.89 The Bahamas BTC (regular) 2.25 2.25 2.25 2.25 0.99 1.25 2.75 2.75 2.75 C&W (daytime) 0.40 0.40 0.40 0.40 0.65 0.65 0.65 0.75 1.00 Barbados C&W (evening) 0.23 0.23 0.23 0.23 0.50 0.50 0.50 0.60 0.75 GT&T (peak) 0.51 0.73 0.51 0.40 0.56 0.75 0.76 1.91 1.51 Guyana GT&T (off peak) 0.36 0.51 0.36 0.28 0.50 0.52 0.69 1.33 1.06 Digicel 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 Jamaica Cable & Wireless (Anytime) 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 St. Lucia Cable & Wireless 0.25 0.25 0.25 0.47 0.47 0.47 0.49 0.49 Telesur 0.44 0.44 0.44 0.44 0.44 0.44 0.44 0.44 0.44 Suriname Greentone 0.33 0.34 0.36 0.29 0.15 0.18 0.22 0.22 0.22 Trinidad and TSTT (daytime) 0.33 0.33 0.17 0.32 0.32 0.32 0.48 0.80 Tobago TSTT (night saver) 0.27 0.27 0.14 0.27 0.27 0.27 0.41 0.68

3838 Prices for high speed Internet access Service Speed (Kbps) US Country Service Techn. Provider Down Up $/m Argentina Ciudad Flash Cable 512 128 15 Argentina Ciudad Flash ADSL 1,200 256 23 France FT Internet 512 ADSL 512 128 30 Barbados C&W ADSL 256 ADSL 256 64 31 Canada Videotron Haut Vitesse Cable 3,000 820 32 Bahamas Coralwave Lite Cable 2000 512 37 Canada Bell Canada Sympatico ADSL 3,000 800 38 Jamaica C&W Ultra ADSL 128 64 40 Jamaica C&W Premium ADSL 768 256 40 Bahamas Coralwave Groove Cable 3,000 768 55 Jamaica N5 Wireless MMDS 256 128 55 Dominican Republic Tricom Turbo Plan 1 ADSL 128 128 60 Bahamas Coralwave Rock Cable 4,000 1,000 70 Trinidad & Tobago TSTT High Speed ADSL 128 64 74 Jamaica Kasnet Res. Silver MMDS 256 128 75 Barbados C&W ADSL 768 ADSL 768 128 86 Barbados C&W ADSL 1544 ADSL 1,544 256 108 Trinidad & Tobago TSTT Business 1 ADSL 128 64 184 Dominican Republic Tricom Turbo Plan 7 ADSL 1,536 768 259 Trinidad & Tobago TSTT Business 2 ADSL 256 64 286 Trinidad & Tobago TSTT Business 7 ADSL 1,544 256 693

3939 Comparison of T1/E1 lease circuits prices

Capacity/Speed Avg. price/month (US $) Distance* Route per Mbps (km) Type Mbps per circuit per Mbps per km Sydney – Los Angeles 12,049 E1 2.048 5,117 2,499 0.21 Hong Kong – Los Angeles 11,640 E1 2.048 2,595 1,267 0.11 Hong Kong – London 9,740 E1 2.048 4,267 2,083 0.21 Tokyo – Los Angeles 8,815 E1 2.048 2,334 1,140 0.13 New York – London 5,585 E1 2.048 945 461 0.08 Amsterdam – Madrid 1,477 E1 2.048 1,152 563 0.38 Frankfurt - Madrid 1,434 E1 2.048 1,047 511 0.36 London - Madrid 1,261 E1 2.048 966 472 0.37 Frankfurt – London 634 E1 2.048 721 352 0.56 Trinidad & Tobago – Miami 2,602 T1 1.544 11,000 7,124 2.74 Barbados – Miami 2,584 T1 1.544 10,000 6,477 2.51 Kingston - Miami 932 T1 1.544 10,000 6,477 6.95

4040 Actual (spot) settlement rates (US $): Fixed termination

Sprint Canada Diff. w.r.t Termination Country Spot Canada Discount discount Anguilla 0.33 0.23 0.14 0.087 Barbados 0.34 0.21 0.13 0.084 Dominica 0.44 0.20 0.15 0.056 Dominican Republic 0.14 0.11 0.05 0.059 Guyana 0.38 0.42 0.22 0.200 Jamaica 0.25 0.14 0.10 0.040 Suriname 0.60 0.34 0.20 0.133 Trinidad and Tobago 0.25 0.16 0.10 0.061 Japan 0.07 0.05 0.024 0.027 United Kingdom 0.04 0.03 0.012 0.022

4141 Actual (spot) settlement rates (US $): Mobile termination Sprint Canada Diff. w.r.t Termination Country Spot Canada Discount discount Anguilla 0.33 0.23 0.14 0.087 Barbados 0.34 0.24 0.13 0.111 Dominica 0.44 0.26 0.15 0.112 Dominican Republic 0.14 0.23 0.05 0.181 Guyana 0.38 0.42 0.22 0.201 Jamaica 0.25 0.30 0.15 0.152 Suriname 0.60 0.34 0.20 0.133 Trinidad and Tobago 0.50 0.17 0.10 0.062 Japan 0.33 0.23 0.125 0.110 United Kingdom 0.33 0.29 0.113 0.177

4242 Regulatory, administrative and other barriers to investment

4343 Barriers which relate to regulatory institutions

 A newly established competitive environment where one operator continues to dominate  Real or perceived political interference in the functioning of the regulator  Lack of experience and training in dispute resolution  A lack of sufficient expert resources within the regulatory body.

4444 Barriers which result from deficiencies in the legal and regulatory framework

 Unpredictable and sometime unstable regulatory environments  Absence of harmonized regulations and policies in the region  Inadequate licencing, interconnection and facilities sharing arrangements  Absence of well defined publicly known timetables and conditions for liberalization

4545 Barriers which result from deficiencies in the legal and regulatory framework (cont)

 Inconsistency in legislation creates confusion and gridlock  Conflicting mandates among different institutions responsible for setting policy and for regulating the sector  Deficiencies in the legal structure and organization of the regulatory body (e.g. conflict of interest, lack of transparency,..)  Absence of a well defined, well structured, transparent policy setting process

4646 CARICOM’s fragmented ICT policy environment

 Several institutions all created by Conference of Heads of Government each with responsibility over some aspect of telecommunications and ICTs  Complex structure where mandates sometimes intersect leading to fragmentation and sometimes competing approaches  Work of committees and sub-committees of these institutions is sometimes at variance with that of the Secretariat  Complicates by fragmentation at national level where responsibility for ICT and telecommunications is shared among several ministries and other government bodies

4747

CARICOM Regional Institutions Involved in ICT and Telecommunications Development and Policy Making

• The Conference of Heads of Government

• Institutions established by The Conference of Heads of Government

- CARICOM Secretariat, - CARICOM Sub-Group on Telecommunications - Caribbean Telecommunications Union (CTU) - Caribb ean Knowledge and Learning Network (CKLN) - CARICOM Centre for Development Administration (CARICAD).

• Other institutions not all created under the impulse of the Conference of Heads of Government.

- Caribbean Regional Negotiating Machinery (CRNM) - Eastern Caribbean Telecommunications Authority (ECTEL) - Organization of Caribbean Utility Regulators (OOCUR) - Caribbean Association of National Telecommunication Organizations (CANTO), a non-governmental trade association

4848 Recommended Action Plan

4949 Two pronged approach 1. Establish a more rational regional structure for policy setting and harmonizing laws, regulations and administrative rules for ICTs and telecommunications. 2. Use this same structure to harmonize telecommunications and ICT policies, laws, regulations and administrative rules in CARICOM, to empower private sector leadership and academia to help shape policies on integration and trade, and design a market access legal platform for electronic commerce and cross border trade.

5050 1. Establish a new regional structure for policy setting and harmonizing

i. A more rational and efficient institutional and political structure for policy setting and harmonizing laws, regulations and administrative rules for ICTs and telecommunications in CARICOM

5151 1.i) Proposed new institutional and political structure for policy setting and harmonization

Conference of Heads of Government

Minister Responsible for ICTs and Telecommunications

One person in each administration assigned responsibility for CARICOM ICT and telecommunications matters

CARICOM Secretariat Caribbean (Telecommunications Telecommunications Union and ICTs)

Other private Regulators Other CARICOM Civil Society sector CRNM CANTO Academia (OOCUR) Organizations organizations Organizations

5252 1. Establish a new regional structure for policy setting and harmonizing

ii. A permanent framework for regional collaboration among telecommunications regulators in the region

5353 1. ii) Establish a comprehensive regional program of resource sharing, training, and information exchange among regulators and policy makers  Pool of experts (law, economics, technical regulation, spectrum management)  Comprehensive regional program of training (focused ad-hoc courses, on-the-job training, longer term courses (MRP), regional seminars and workshops)  Ad-hoc consultations and information exchange among staff of regulators on specific issues  Comprehensive data base and source of information (statistics, documents, studies, precedents

5454 1 iii) Establish a virtual network of academics and experts in policy and regulation  Use University of the West Indies (campuses at St. Augustine, Mona and Barbados) as a platform  Example: in USA (PURC at University of Florida, CITI at Colombia University, Institute of Public Utilities, Michigan State University, ….)  Academics and outside experts are independent, have the necessary analytical capabilities, have the time and can teach  Functions: analyze complex issues and give opinions; train; organize conferences, seminars, courses; be a sounding board; give independent advice

5555 1 iv) Establish a regional forum for consensus building and dispute resolution  Seek consensus for agreement on business and commercial issues (e.g. interconnection, pricing, use of rights of way, local loop unbundling, site sharing and collocation) – industry players

 Develop proposals for new policies, legislation, regulations and procedures and suggest modifications to existing instruments – industry players along with government officials and regulators

5656 2. Actions to be undertaken under the new structure i. Harmonize policies, laws, regulations and rules for ICT and telecommunications in CARICOM in order to diminish uncertainty and simplify procedures for investors ii. Empower the private sector leadership to shape and influence policy on regional integration and trade as it relates to ICTs and telecommunications. iii. Establish a market access platform for local commerce and cross-border trade

5757 5858