Cable & Wireless (C&W), the UK-based telecoms group, has seldom been out of the Caribbean news of late, more often than not because of its monopoly in the region and the ongoing battle between the telecommunications giant and its rivals. C&W is not in as secure a position as it once was, and is beginning to feel the heat from Caribbean liberalisation, as its regional monopoly is threatened by deregulation in the sector. As if its position was not vulnerable enough, C&W has not done itself any favours this week with the announcement that it has begun blocking Internet subscribers on the Cayman Islands, on which it has a definite monopoly, from using the US-based Net2Phone long distance phone service, which charges a fraction of what C&W charges Cayman customers.
This latest move on the part of C&W came after the company sent an e-mail to its Internet subscribers on the Cayman Islands advising them that they were breaking their contract with C&W by using the Internet for phone services. Net2Phone uses the Internet to make long distance calls, by-passing the traditional telephone service and charging far less. Undoubtedly C&W is concerned about its revenues. The company, confirming the Caymans blockage this week, said that it had made clear last year that it would not block Net2Phone as long as usage did not seriously affect C&W revenues. Even though C&W's annual net profits in the Caymans alone amount to about US$50 million, its revenues have been declining, as Net2Phone usage has increased.
The Cayman Islands have a population of about 45,000 people and more than 40,000 registered companies, including nearly 600 banks and trusts and nearly 500 captive insurance companies. In 1991 C&W signed an exclusive 25-year contract with the Cayman government to be the sole provider of telecommunications services to the Cayman Islands. In return, C&W pays six per cent to its gross revenues to the government annually.
Nevertheless, times are changing and the days of C&W's monopoly across the Caribbean region look to be numbered. Jurisdictions including Jamaica and Bermuda and others around the world, such as Hong Kong, have put an end to the C&W domination of telecommunications by introducing competition. Businessman William Peguero is hoping the same thing will happen in the Caymans and he has vowed to fight the company in the courts. As the owner of a company that sells devices enabling Internet telephone communication, he has already obtained more than 1,000 signatures on a petition calling for an end to the C&W monopoly in the Caymans and the opening up to competition at lower rates. He also claims that C&W has no legal right to block access to any Internet service.
C&W has indicated that it is willing to accept competition in the Caribbean, as long as it is in a "structured" and "regulated" environment and that change is orderly and progressive. A spokesperson said that the company will soon offer further price reductions on Internet services to various business customers but could not sustain a trend of lowering prices if "prohibited usage" - such as the Net2Phone case - continued.
C&W's admission that it is not against competition must surely be due to the fact that its monopoly is under threat in several countries, where it is progressively being dismantled by governments in the region, who say that C&W's exclusive licences are hindering economic development and are inconsistent with agreements with the World Trade Organisation. The deregulation of C&W's regional monopoly started with the Jamaican government's award of licences to two companies that will compete for cellular services. The company is also involved in negotiations to allow competition in Barbados, Trinidad and Tobago and the Windward and Leeward Islands.
Caribbean governments contend that the terms of the company's operations should be changed to allow competition for a range of services and interconnection by other providers. Selby Wilson, secretary general of the Caribbean Association of National Telecommunications Orgainsations commented: 'Many regional governments have signed commitments with the WTO promising to open their markets to competition over varying periods from 10 years to 15 years. In many cases this commitment includes a move to cost-based, non-discriminatory and unbundled interconnection under an independent regulator.' Government officials in the region say they are not bringing undue pressure on C&W, but that the company can still do profitable business against competition.
Trevor Clarke, C&W's executive vice-president for Barbados and the Winward Islands, had this to say of the move towards liberalisation: 'There is a need for managed transition to open competition. We are pleased that the governments have come to us and said that they want to discuss the liberalisation of the market. But it is irresponsible of any government or company to ignore legal responsibilities under the exclusive licences which were granted. The proper process is a discussion of recommendations for terminating these licences.'
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