TATT: 3rd mobile operator to spur lower prices, better service
Sunday, August 25 2013 @ 12:00 PM AST
Contributed by: AleemKhan
In a statement sent to the Business Guardian last Wednesday (on August 14), TATT said it has "undertaken an economic analysis of the potential entry of a third player into the mobile market. Based on this analysis, it was identified that there is potential for the successful entry of a third mobile player." Two days earlier, TATT had advertised that it "initiated an open competitive process for the selection of a third public mobile telecommunications operator." (See Guardian of August 12.) The successful bidder will operate on the 700 megahertz (MHz) band.
TATT said its opening up to a third provider is in adherence to "free market principles." The authority said that one of the primary objects of the legislation governing it, the Telecommunications Act of 2001, is “to establish the conditions for an open market for telecommunications services, including conditions for fair competition."
Given this objective, TATT said, the country "has adopted a market-based approach to the development of the telecommunications sector, consistent with its obligations under the World Trade Organisation’s (WTO) General Agreement on Trade in Services (GATS). Ultimately, it is the free market that would dictate the viability and profitability of any new entrant into the mobile market."
Far from signaling market saturation, TATT believes the proliferation of mobile telephones and the fact that many own more than one unit proves that the mobile market's profitability. TATT said that amongst the various markets which comprise the local telecommunications sector, the mobile market "has perhaps been the most prevalent in the public consciousness. As of December 2012, the mobile telecommunications market earned approximately $2.2 billion in revenue with a total subscription base of 1.88 million." The population of T&T is 1.2 million, according to the July 2012 estimate by the Central Statistical Office (CSO).
Change operator, keep old number in 2014
The authority said: "Currently, T&T has one of the highest levels of mobile penetration in the region, at 142.2 (per cent) as of December 2012. However, rather than implying that this means that there is no further room for competition, it should be taken as evidence of the profitability of the mobile market. Despite this high level of penetration, TATT is currently in the process of implementing Local Number Portability (LNP). LNP would allow consumers to switch service providers, while retaining their subscriber identification (telephone number), and is proposed to be implemented during 2014. The introduction of LNP in the local market would therefore significantly increase the scope for competition and hence the viability of another mobile operator."
TATT said the extent of existing competition in the mobile market is mainly conducted through promotional activities and advertising for mobile voice call services and texts (SMS).
"A third mobile operator may, therefore, likely benefit consumers through the introduction of various value-added services, such as mobile broadcasting, content streaming, and third-party applications. In particular, TATT believes that there is significant potential for competition in the mobile broadband market, which would ultimately increase T&T’s international ratings in Internet usage and penetration. This is a critical issue, given the government’s current focus on information and communications technology-based development," the document said.
No cherry-picking for 3rd operator
To support its case, TATT also quoted one of its former consultants, Robert Hall, who in a paper he co-authored in March 2009 said "the optimal number of mobile network operators in any country is likely to be no more than four.” In interpreting the potential applicability of Hall's findings, TATT said that "although the local market is small in geographic and population size, it is high in terms of its gross domestic product (GDP) per capita, relative to other markets of similar size.
"However, the authority recognises that it has a role in ensuring that (an) inefficient entry does not occur. In this regard, the authority’s authorisation framework for telecommunication and broadcasting services provides that mobile concessions (authorisation to provide services to the public) are granted on a national basis. This means that any new entrant would be required to provide service to the entire geographical and population base of T&T, therefore eliminating any possibly inefficient entry based on 'cream-skimming' or 'cherry-picking' behaviour, where service provision is only targeted to the most profitable sub-markets."
Among the benefits TATT envisages the introduction of a third operator would bring to the T&T market are "more advanced and efficient" mobile telecommunications services, "improved coverage" and improved "availability of high speed broadband internet services" as well as "increased competition in the telecommunications environment to the benefit of the consumer, as service providers will have to maintain their competitive edge, (by) constantly improving on their services."
The modern telecommunications industry is characterised by rapid technological progress and the development of increasingly efficient platforms for service delivery, TATT said. "A new entrant would thus be able to take advantage of these developments, and invest in new technologies for service delivery. Ultimately, such new technologies would translate into lower prices for consumers, and a move towards even greater coverage and the goal of universal access to basic telecommunications services. Additionally, the resulting competition would give existing operators an increased incentive to reinvest their profits into upgrading their networks and move towards upgraded technological platforms."
TATT said that any successful new entrant will have the opportunity to access (the) 700 MHz spectrum which is currently being deployed in other markets "for the delivery of advanced mobile data services." TATT said Digicel and bmobile will also have the opportunity to access the 700 MHz spectrum.
"While the mobile voice market may be interpreted as close to reaching maturity, the market for value added mobile services and mobile internet has not yet been fully realized," TATT said. "As such, TATT does not believe that there is any evidence or grounds to suggest that the introduction of a third mobile provider would reduce total revenues in the mobile market. What is likely to happen, however, is the redistribution of revenues due to increased competition. Again, TATT wishes to reiterate that the potential benefits of entry will be gained by consumers through increased service, quality and variety, and lower prices," the statement said.
The authority said the market right now is a duopoly (two service providers) in both major market segments: fixed voice and mobile. "Generally, a duopoly is not conducive to a high level of sustained price-based competition. The introduction of a third mobile provider would increase the scope for competition, both in terms of price and quality of service, by dismantling the current duopolistic structure of the mobile market. This would also reduce any scope for possible anti-competitive behaviour, such as possible collusive agreements or predatory pricing," TATT said.
International calls cheaper than local
Still on the issue of prices, TATT said there are currently rates being offered for international calls "which are ironically less than the rates being offered for local (off-network) calls." This means, TATT said, that in certain circumstances, it is cheaper (on a per minute basis) for consumers to call their friends and family abroad, as opposed to their local counterparts.
"The authority sees this as representing the need for more competitive rates for local calls, where there is a great divergence between existing levels of competition in the markets for local calls, and that for international calls," the statement said.
However, "any incidence of cross-subsidies, or any other anti-competitive" will not be tolerated, TATT said, and proceeded to explain that it plans to implement a long run average incremental cost (LRAIC) model, which would determine the unit costs of services, and assist in setting regulated prices where applicable. These tools will assist the authority in determining any incidence of cross-subsidies, or any other anti-competitive act, the statement said. "Furthermore, the authority has developed a price regulation framework, which outlines the conditions under which regulatory intervention may be necessary, and the pricing remedies to address any potential failure of the free market mechanism in particular market segments. Any new entrant would be subject to these regulatory requirements, hence, the negative effects of a possible price war would be adequately addressed by the existing regulatory framework," the document said.
As for quality of service, TATT said: "The assertion that increased competition may paradoxically lead to decreased quality of service is completely unfounded." All telecommunication service providers are bound by the terms and conditions of their concession agreement, which includes provision regarding minimum quality of service (QoS) parameters, TATT said. The authority said it has drafted a Network QoS Policy, as well as a consumer QoS policy, which both outline further QoS indicators and minimum service standards.
The authority, chaired by former finance minister Selby Wilson (white beard in front row in photo above) and led by Chief Executive Officer Cris Seecheran (white beard in back row), assured that "as an independent regulator, it will continue to work with the government, concessionaires and consumers, to ensure the orderly development of the local telecommunications sectors towards the economic, social and cultural development of T&T. As more developments take place regarding the matter of a third mobile operator, TATT shall inform the public accordingly."
Asked for a reaction on the prospect of a third mobile operator, Trevor Deane, a TSTT executive vice president, said he thinks the market here may not be large enough for a third operator.
Asked the same question, Digicel said in an e-mailed statement: "Digicel welcomes competition in the market. We feel confident that we offer the best value in the market, and we are committed to the best service and best network experience for our customers."