Sunday, 24 June 2012

Capitalism on Parade: Digicel, LIME, Government, Consumers and Competition

By Mario Raphael Boothe

The recent events surrounding the Telecom sector involving the two remaining giants on the Island has brought flash the spotlight on the arguments concerning ‘Competition and its Benefits’ and ‘Governments involvement in the Private Sector”.

I’m sorry – not really – that I have to rain on ‘Big Business’ and Jamaica’s fledging capitalist population parade, but when the entire episode started I had a funny feeling that the Claro clowns would be bouncing around in the streets of New Kingston along with the fan fare associated with the respected camps of Digicel and LIME then it hit that Claro no longer operates within the confines of Jamaica – good times, competitive times.

The Circus came to town after The Office of Utilities Regulation (Governments regulatory right arm), on the command of Government, confirmed that the interim mobile termination rate will be five dollars per minute for incoming domestic and international telephone calls. This follows the amendments to the Telecommunications Act passed in Parliament earlier this year. Digicel - ever bashful on regulations – had some concerns with the OUR setting rates and stated that they had “grave concerns with the overarching powers which the Government is seeking to grant the OUR”. This comes after the ruckus with the Tax Administration.

LIME - been the true ringmaster - of the Jamaican telecom sector and along with the Minister Paulwell - patting himself on the back for job well done – were jumping in absolute Joy to the news of the OUR, this meant controlled competition and maybe a closer race, LIME reduced call charges on its network from $8 to $2.99 cents per minutes for prepaid, with post-paid ones being charged $1.99. A call from LIME to its competitor was 6.99, cheaper than the $8.99 Digicel charged for calls on its own network; LIME wasted no time in challenging its Competitor to drop its own rate for the good of the Jamaican consumer. LIME – playing the clown with egg on his face – trying to fight a lost battle.

Digicel refused to take on the challenge and walk the tight rope of balanced business, having to lower rates and still make a profit. After going behind closed doors and huddling its most paid executives and smartest financial gurus, Digicel took the path that many American Giant Corporations took before it, fight the Regulation instead of complying; shamelessly challenging the OUR in court for setting artificially low prices that wouldn’t have helped consumers in any way as the price would have been transferred elsewhere, after the companies begin losing too much to take on the cost. Digicel playing the sad clown

This was none more so true in Digicel’s, reply to LIME’s low rate after challenging the OUR , – let’s not be the bad guy, just look as the bad guy – with a dramatic cut to 2.89 with lesser benefits we all loved, including

Digicel's will now bill customers on a per minute basis bill customers on a per minute basis, which means The same call on the Digicel network will cost 5 dollars 78 cents, a full 29 cents more.
Digicel reduced the number of minutes customers get free. Customers would normally get 25 minutes free after the first 5 minutes on a call, but that has now been cut to just 10 minutes.
Those who would normally depend on free nights to talk after topping up with 200 dollars each day will find that the benefit has been reduced to one hour free at nights.
While has remained unchanged, continuing:

Billing on a per second basis; which for example will make a 1 and a half minute call on LIME's network cost 4 dollars 49 cents.
LIME customers talk after the first three minutes on the call gets 27 minutes free.
LIME customers are, after topping up with 100 dollars; talk free after 9pm until 

We will be expecting these to change in the near as the losses begin to rack up even more than the normal levels for LIME, in March LIME loss Ja. $20 billion.
The Jamaican population may not understand, Artificial Price setting, Price ceiling or capping, setting Maximum and Minimum Prices but what they should know is that due to lack of real competition within the market Digicel the highest supplier will soon shrink into non-existence after failed attempts to push around its expenses trying balance out its books and eventually leave the – Circus – market for good as a result of inability to supply the growing market and maintain low profits then we are back to the ‘Ringmaster” and a Circus with only a “Ringmaster” is Mono-tonous.

To end on a sarcastically unhappy note, what else does the Telecoms Act has under its- Big Tent of Contention- that might actually be helpful to competitions.

The Telecoms Act, gives power to the OUR and the Spectrum Management Authority ability to impose sanctions for breaches of the act. Technology Minister Phillip Paulwell said the agencies will be empowered to demand certain information from telecoms licensees. 

The legislation will now require mobile companies to share cell towers instead of the current practice of each having their own. Paulwell said this is aimed at bringing order to the system. 

The amendments could also see mobile phone users having the ability to switch networks while retaining their telephone number.