How can Liberalization maximize How can Liberalization maximize the Benefits from the the Benefits from the

Telecommunications Sector to the Telecommunications Sector to the CaribbeanCaribbean

Lisa AgardLisa AgardVP Legal Regulatory and Carrier ServicesVP Legal Regulatory and Carrier Services

TSTTTSTT

CANTO June 2005CANTO June 2005

Objectives of Caribbean Objectives of Caribbean CountriesCountries

• Development of a knowledge-based society

• Increased access to information for all

• Regional objectives: Caribbean Single Market & Economy (CSME)• Facilitate free flow of goods, services,

people and capital across the Caribbean• Improved standards of work and living• Accelerated, coordinated and sustained

economic development

Definition of Telecom. LiberalizationDefinition of Telecom. Liberalization

• The opening of telecommunications markets to additional operators and service providers for the provision of public telecommunications services• Typically under the purview of a regulator

• Initiated by governments to satisfy their World Trade Organization commitments under the GATS, and to reap the related benefits to their economies

Contribution of Liberalization - 1Contribution of Liberalization - 1

• Reduction in prices for services due to the availability of choice for the consumer• Increased availability and affordability for members

of the general public

• Enhances competitiveness of Caribbean industries in a global environment

• Improvement in quality of service provided by operators and service providers• Corresponding positive impact on the standard of

living of members of the public

• Encourages increased take-up by public

Contribution of Liberalization - 2Contribution of Liberalization - 2

• Availability of new and innovative services that:• Promote commercial opportunities and ultimately

economic development• Facilitate regional movement of goods, services and

people

• Facilitates access to markets across Caribbean boundaries• Supports the free flow and exchange of goods and

services across the Caribbean• Promotes coordinated region-wide development

• Recovery by Governments of economic value of market opportunities and resources• Governments collecting proceeds of spectrum and rights-

of-way bid processes and auctions, and revised fees

Overall market impact of liberalizationOverall market impact of liberalization

• Increasing total telecommunications revenues

• Higher penetration rates of services• Mobile penetration rates in Caribbean have increased

significantly since the introduction of competition• Trinidad and Tobago serves as an anomaly, as the increase

in penetration comparable to those of countries with competition

• Governments turning attention to increasing penetration rates of Internet access, particularly broadband

• Increased usage by high-usage customer segments, due to lower prices and wider range of services• Mobile data e.g. GPRS, EDGE• VoIP• Wired and wireless Broadband

Penetration Rates in the CaribbeanPenetration Rates in the Caribbean

Penetration Rates in the Caribbean

0

10

20

30

40

50

60

70

80

90

100

1999 2000 2001 2002 2003 2004

% o

f P

op

ula

tio

n JamaicaArubaBarbadosCayman IslandsDominican RepPuerto Rico

Source: Pyramid Research

Liberalization is not a threat to the incumbentLiberalization is not a threat to the incumbent

• Incumbents across the Caribbean have continued to see a steady increase throughout the liberalization process in:• Revenues

• Subscriber numbers

• Incumbents have responded to the entrance of competition by streamlining operations, driving innovative new services, and improving quality of service

• End result – EVERYONE WINS

Challenges to realizing full benefits of Challenges to realizing full benefits of liberalizationliberalization

• Artificial increase in penetration rates due to the grenade phenomenon• A single user having multiple subscriptions distorts

perceived penetration rates; it is estimated that 30% of user base in Jamaica have at least two subscriptions

• Caused by disparity between on-net and off-net rates• Need for multiple subscriptions reduces the affordability of

services

• Persistence of subsidies across markets• Reduces the incentives for competition in subsidized

markets• Problematic in the absence of universal service and/or

access deficit funding mechanisms

Penetration rates – the grenade effectPenetration rates – the grenade effect

Source: Pyramid Research

Mobile users vs subscriptions in Jamaica

0

500

1,000

1,500

2,000

2,500

1999 2000 2001 2002 2003 2004

Use

rs/S

up

scri

pti

on

s, 0

00s

Mobile users (000s) Mobile subscriptions (000s)

RemediesRemedies

• Need for mobile termination rates to be reasonable, to reduce the on-net/off-net disparity• Difference between termination rates and wholesale (retail

– volume discount) rates should only be due to necessary costs related to interconnection facilities and systems

• Incentives to promote this outcome should be developed

• Governments/regulators should develop and implement comprehensive universal service strategies and frameworks• Elimination of subsidization of markets, possibly via a

phased approach• Creation and operation of universal service/access deficit

funds