C&W Cracks Down in theCayman Islands ...as Telecoms Liberalisation Closes In
by Robert Lee Tax-news.com, London
Cable & Wireless (C&W), the UK-basedtelecoms group, has seldom been out of the Caribbean news of late,more often than not because of its monopoly in the region andthe ongoing battle between the telecommunications giant and itsrivals.
C&W is not in as secure a position as it once was, and isbeginning to feel the heat from Caribbean liberalisation, as itsregional monopoly is threatened by deregulation in the sector.
As if its position was not vulnerable enough, C&W has notdone itself any favours this week with the announcement that ithas begun blocking Internet subscribers on the Cayman Islands,on which it has a definite monopoly, from using the US-based Net2Phonelong distance phone service, which charges a fraction of whatC&W charges Cayman customers.
This latest move on the part of C&W came after the companysent an e-mail to its Internet subscribers on the Cayman Islandsadvising them that they were breaking their contract with C&Wby using the Internet for phone services. Net2Phone uses the Internetto make long distance calls, by-passing the traditional telephoneservice and charging far less.
Undoubtedly C&W is concerned about its revenues. The company,confirming the Cayman Islands blockage during the week of 25 August,said that it had made clear last year that it would not blockNet2Phone as long as usage did not seriously affect C&W revenues.Even though C&W's annual net profits in the Caymans aloneamount to about US$50 million, its revenues have been declining,as Net2Phone usage has increased.
The Cayman Islands has a population of about 45,000 people andmore than 40,000 registered companies, including nearly 600 banksand trusts and nearly 500 captive insurance companies. In1991C&W signed an exclusive 25-year contract with the Cayman governmentto be the sole provider of telecommunications services to theCayman Islands. In return, C&W pays six per cent of its grossrevenues to the Government annually.
Nevertheless, times are changing and the days of C&W's monopolyacross the Caribbean region look to be numbered. Jurisdictionsincluding Jamaica and Bermuda and others around the world, suchas Hong Kong, have put an end to the C&W domination of telecommunicationsby introducing competition.
Businessman William Peguero is hoping the same thing will happenin the Caymans and he has vowed to fight the company in the courts.As the owner of a company that sells devices enabling Internettelephone communication, he has already obtained more than 2,000signatures on a petition calling for an end to the C&W monopolyin the Caymans and the opening up to competition at lower rates.He also claims that C&W has no legal right to block accessto any Internet service.
C&W has indicated that it is willing to accept competitionin the Caribbean, as long as it is in a "structured"and "regulated" environment and that change is orderlyand progressive. A spokesperson said that the company will soonoffer further price reductions on Internet services to variousbusiness customers but could not sustain a trend of lowering pricesif "prohibited usage" - such as the Net2Phone case -continued.
C&W's admission that it is not against competition must surelybe due to the fact that its monopoly is under threat in severalcountries, where it is progressively being dismantled by governmentsin the region, who say that C&W's exclusive licences are hinderingeconomic development and are inconsistent with agreements withthe World Trade Organisation.
The deregulation of C&W's regional monopoly started with theJamaican government's award of licences to two companies thatwill compete for cellular services. The company is also involvedin negotiations to allow competition in Barbados, Trinidad andTobago and the Windward and Leeward Islands.
Caribbean governments contend that the terms of the company'soperations should be changed to allow competition for a rangeof services and interconnection by other providers.
Selby Wilson, secretary general of the Caribbean Association ofNational Telecommunications Orgainsations commented: 'Many regionalgovernments have signed commitments with the WTO promising toopen their markets to competition over varying periods from 10years to 15 years.
In many cases this commitment includes a move to cost-based, non-discriminatoryand unbundled interconnection under an independent regulator.'Government officials in the region say they are not bringing unduepressure on C&W, but that the company can still do profitablebusiness against competition.
Trevor Clarke, C&W's executive vice-president for Barbadosand the Winward Islands, had this to say of the move towards liberalisation:'There is a need for managed transition to open competition. Weare pleased that the governments have come to us and said thatthey want to discuss the liberalisation of the market. But itis irresponsible of any government or company to ignore legalresponsibilities under the exclusive licences which were granted.The proper process is a discussion of recommendations for terminatingthese licences."