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What a Major Telecom Merger Means for the Caribbean

What a Major Telecom Merger Means for the Caribbean

Marcia Forbes PhD

Mergers the New Mantra

Implications of the merger between Cable & Wireless and Columbus Communications are fraught with many nuances that only the most astute and those with a keen understanding of where the future lies can fully appreciate. Most of us do not fall into either of those two categories, far less into both.

Watching this merger unfold reminds me of the dismantling of AT&T in the mid-1980s. All kinds of good things were meant to flow from that exercise. Decades later, mergers and mega-mergers are back in full force and AT&T is busy making overtures to sundry companies; the latest being its 2014 merger with Direc TV (satellite TV), a $67Billion deal, supposedly designed to rival cable TV.

During the early 1990s, the emergence of cable operators led to epic battles with free-to-air TV and saw FCC interventions via various ownership caps, even while allowing media cross-ownership. These culminated in the Telecommunications Act of 1996. Emerson College in Boston, USA during the mid-1990s gave me a sort of front row seat as former FCC Commissioner, Professor Hilliard, gave his views on mergers and mega-mergers and we argued out their merits/demerits.

The proposed merger of Comcast and Time Warner, first announced in February 2014 and still awaiting final approval from the Federal Communications Commission (FCC) in the US, is billed to “create a world class technology and media company”. Garfield Sinclair, CEO LIME, Jamaica, a fully owned subsidiary of British-based Cable & Wireless (C&W), makes a similar but less sweeping argument for the C&W/Columbus merger.

CARICOM Concerns

Addressing the Private Sector Organization of Jamaica (PSOJ) days ago, Sinclair noted that this “transaction will positively shift the telecommunications paradigm in the Caribbean and parts of Latin America as the combined entities will now be able to provide a wider range of products/services to more countries, each with their unique technology and innovation needs.” But the CARICOM Competition Committee (CCC) does not agree.

In a January 28th communiqué, the CCC noted that,

“…regarding the agreement by Cable and Wireless Communications Plc (“CWC”) to acquire Columbus International Inc. (“Columbus”).

The indicative conclusions of the internal assessment have given the Commission ‘reason to believe’ pursuant to Article 176.1 of the Revised Treaty of Chaguaramas, that the announced agreement between CWC and Columbus has the potential to prejudice trade and prevent, restricts or distorts competition within the CSME  with the possibility of cross-border effects.

Accordingly, the Commission has written to the National Competition Authorities (NCAs) of Member States pursuant to Article 176.1 to “request the national competition authority to undertake a preliminary examination of the business conduct of the enterprise.”

Minister Paulwell’s Speed

Some in the Caribbean region, and perhaps none moreso than Digicel, question the speed with which the telecoms minister in Jamaica, Phillip Paulwell, announced approval of the C&W/Columbus merger. The deal was announced on November 6, 2014 and Ministerial approval announced on January 15, 2015, a mere two months which included the Christmas season when little real work usually gets done.

Minister Paulwell was quick to defend his legacy of having brought competition to the telecoms industry in this country and not now seeking to create a new C&W monopoly. He has mentioned market opening for a third telecoms player in Jamaica. But this island has been down that road before with Claro which was later gobbled up by Digicel. In that August 2011 merger, certain stipulations were required of Digicel after its five months wait for Government’s approval.

It is said that in the USA the FCC has an informal timeline of 180 days for arriving at a decision regarding applications for telecoms transactions. By many measures the C&W/Columbus merger has been approved in lightning time and apparently without written regulations as to how this merger must proceed in order to protect consumers and not stifle competition.

The Internet Changes Everything

The importance of telecommunications in all facets of our lives is now easily recognized by most ‘ordinary citizens’ throughout the Caribbean. Studies on the take-up and use of cell phones, even before they became smart, point to the region’s deep ‘love affair’ with this technology as a means of not only communicating with family and friends but also entertaining themselves and for many as well, maintaining their livelihood.

Convergence and consolidation seem to be modern day mantras among companies but importantly also among technologies. Today’s smartphones are digital devices with mobile internet that allows access to data services, social media networks and much more. Sinclair acknowledged this in his PSOJ presentation and stressed the need for “the most robust and cost efficient ICT infrastructure money can buy.”

He sees the C&W/Columbus merger as being able to leverage their converged platforms to achieve ‘Internet-efficiency premium’ and provide customers with a “seamless integration of mobile, internet, TV and fixed voice services from a single provider.” Further he noted that “by making connectivity faster, more affordable and more reliable than ever before, we are empowering ventures that, up to very recently, were a figment (sic) of our imaginations.”

Devil in the Details

One can hardly disagree with Garfield Sinclair on the bright potential that the C&W/Columbus merger offers Jamaica and the Caribbean region. But as always, ‘the devil is in the details’. And ‘therein lies the rub’ because we simply do not know the details of this approved merger in terms of its impact on competition with Digicel or any other player in the rest of the region, as well as on consumers in terms of pricing strategies to come. Will the bright potentials be realized?

With the CARICOM Competition Commission breathing down the neck of the Fair Trading Commission in Jamaica to examine how this merger will do business, we await ‘further and better particulars’.

CTU Expresses Concerns

Meanwhile, the December 2014 concerns raised by The Caribbean Telecommunications Union (CTU) Regulatory Forum as it relates to a near-monopoly on undersea fiber ownership/control that this merger has/will effect requires deep thinking and transparent discussions. For general information, undersea fibre cables are regarded as “the primary economic input to all communications markets.” That, though, has to be the subject of another article.

Stand Guard

Those who best understand the nuances of this merger and how it can impact the people and progress of the Caribbean owe it to the rest of us to stand guard and to inform us in timey ways via relevant routes.

These are new times and the ways of the old monopoly C&W are not likely to be the ways of the C&W in these new times of social media and citizen journalists. We therefore look forward to the growth and opportunities promised by Garfield Sinclair.

January 30, 2015