By Chris Halsall, with contribution by Douglas Skeete
IT is reasonable to observe that before one can control something, one must understand it.
Cable and Wireless (C&W) is, arguably, simple to understand. It is an example of the organism known as the Company. Dogs have a tendency to bark. Barracuda have a tendency to bite. Companies have a tendency to work to maximize their financial returns using every means at their disposal.
This metaphor is not used in jest, but instead as a serious model. Companies exist in ecosystems like any other organism, and will behave in predictable ways towards the furtherance of their own self interests. They are what are known as “autonomous agents”, or “Actors”, within a system. It is worth noting that, legally, a Company is a Person.
Publicly traded companies (those listed on one or more stock markets) tend to act particularly aggressively, as they are dependent upon ever greater profits in order to raise their share price. Their executives’ renumeration packages are invariably tied to this, and often current (and ex-) employees hold a number of shares as well.
The stock market is a harsh mistress. Therefore a public company’s primary concern is about “making the numbers” for the next quarter — everything else is secondary. Stock prices have even been known to fall when a Company does manage to make their numbers, but do not “exceed analysis’s expectations”.
There’s nothing wrong with this, of course. To the contrary — it is raw capitalism at its purest; the most effective form of wealth creation ever devised by humans. But it must be appreciated and understood: capitalism is heartless, and companies feed upon their markets.
It is therefore important that in any marketplace rules and enforcement exist which prevent companies from making unreasonable and unfair profits, as they will not by nature constrain themselves. Companies should be symbiotic with their marketplaces (their ecosystems), rather than being parasitic. This is where the law, and the enforcement of same, come in.
So, using the above as a lens, let us take a quick look at Cable and Wireless here in Barbados, starting with some history…
C&W have had a long-time presence in Barbados and the Caribbean, and have aggressively acquired units of telecommunications companies throughout the region. In 1991 C&W purchased the remaining government owned shares in BET and BARTEL, the international and domestic telephone service companies, respectively, and received an exclusive license to operate these services until 2011. A legal (if not natural) monopoly.
However, because of the pressures of globalization, and being signatories to WTO, CARICOM, GATS, et al, the Government of Barbados renegotiated its license with C&W to introduce liberalization (read: competition) early. A Memorandum Of Understanding (MOU) was signed in 2001 which defined a three phase timetable for “Full liberalization” in exchange for concessions. The final phase, International Voice, was supposed to have been completed by 2003, but in fact was delayed until 2005.
So here we are, now in 2008, and really, not much has happened. Yes, we now have competition in mobile telephony, but after the initial excitement of a marketplace with a total of three competing providers, one has now left our market leaving a duopoly situation with prices for almost all services still much higher than they could and should be.
A consumer still cannot pick up the phone and make an international call using a competitive carrier of their choice. And while consumer-grade “high-speed” internet is much more widely deployed, because C&W continue to have control of the “last mile copper” they remain the dominate provider — other providers have to use wireless (an inherently limited means of transport) or rent service from C&W at an uncompetitive rate.
Why? Because C&W have been successful in creating road-blocks and other barriers to entry within the new framework which is slowing down real competition. And again, this should come as no surprise — C&W are simply doing their jobs. They know they cannot delay things forever, but every month they do, the more money is made for their shareholders, and the greater number of customers they can sign up for alternative services.
And, let’s face it — change is rarely welcomed in any environment. Add what is known as “Fear, Uncertainty and Doubt” (FUD) being communicated by the effected company, and it becomes easier for the powers that be to sit back and “let the market decide”. However, when there isn’t really market forces at work, taking this position is at best naive and at worst incompetent.
So, while C&W may point out that our domestic residential land-line service is low compared to other regions, they for some reason fail to reveal how much it costs them to deliver the service. And when they talk about the rates we pay for long distance calling they no longer compare to international standards, but instead talk about how much the rates have dropped as a percentage over the last few years. No matter that we’re still paying $1.30 a minute for a call which should cost $0.10.
Anger about this situation should not be directed at C&W — it should be leveled squarely upon the government and its regulatory and enforcement functions. The question is not why C&W are doing what they’re doing, but on why they continue to be allowed to get away with it.
Fundamentally, Barbados and the entire Caribbean, is being held back from developing as quickly as we could. In today’s connected world, telecommunications are as critical to development as access to any traditional infrastructure. Money is flowing out of the pockets of our people, and into the coffers of C&W which is 81% owned by C&W (West Indies) which is in turn owned by C&W PLC. Fifty two (52) million dollars flowed out of Barbados to England this way last year alone simply in dividends, not to mention various consulting fees and other service charges.
Because of all of the above, your author hopes that this new government will take the progress of true liberalization appropriately seriously. Some hard questions need to be asked as to why things have been allowed to progress so slowly. Is the Telecommunications Unit and Fair Trading Commission understaffed? Why are the laws and policies which exist not being enforced? One might even go so far as to ask for a forensic review.
Your author also feels that any individual in a position of oversight should be asked if they hold shares in C&W, and if so, that they either divest themselves of these or recuse themselves from the role. This is not meant to be accusatory against any individual — it is simply a fair and reasonable question to ask anyone who might be in a conflict of interest in a critically important process.
Barbados must liberalize — it is part of our obligation as signatories of the WTO, among other agreements. It has been demonstrated elsewhere that it is in fact better for the marketplace as a whole. And the quicker this happens, the more competitive we and our people will be.
Here and now, business as usual is not appropriate.