Conclusion

Introduction

Last week I began a review of the Telecommunications Bill which is currently being considered by a Special Select Committee of the National Assembly before it is returned to the main body for passage and certain assent by the President before the Parliament is prorogued no later than September 28, 2011.

By implication, the Bill will bring to an end the exclusivity licence which Guyana Telephone and Telegraph Company Limited currently enjoys. The basis for the exclusivity is an agreement signed between GT&T’s parent company ATN and the Hoyte administration which, despite a sometimes stormy relationship, successive the PPP/C governments have honoured. An initial 20-year licence came to an end earlier this year and under the agreement, should have been extended for another twenty years at the option of the company.

My information is that when the company approached the government earlier this year for what it might have hoped would be the 20-year extension it was granted only a temporary one-year extension. That should have sent the clearest signal yet that the days of the exclusivity for the company were fast coming to an end. The Telecommunications Bill, once it is assented to will be the final confirmation, barring some court intervention.

A field day for lawyers

Of course the company has never been shy of approaching the courts. With so much hanging on the licence, some form of court action may yet be possible. The issues will not be simple, nor will the resolution be particularly speedy. Whatever its faults, our legal profession and our judicial system still produce some fine minds and the issues will be hotly contested. The company – or rather its parent company – will insist that it has a valid enforceable contract with a sovereign state. It will seek to argue that it was only the promise of an exclusivity agreement over an extended period that justified its commitment and investment over the past two decades. The government on the other hand would assert Parliament’s sovereignty to make laws including the amendment and repeal of any existing laws.

The unambiguous proscription on monopolies in the 1916 Civil Law Act referred to last week did not prevent the passage in 1990 of the Telecommunications Act which expressly empowered the minister to issue exclusive licences for the running of any telecommunication system covering the whole or parts of Guyana. While that Act was passed to provide the statutory framework under which the ATN (GT&T) agreement would operate, the few persons who might argue that that Act was somehow unlawful certainly does not include the government.

What is equally certain is that there is a valid subsisting contract, and if one party unilaterally brings it to an end the other party can seek redress in the courts. The new Bill intends to draw a line in the sand and to invite the aggrieved party to move to the courts. That will be a ding-dong battle which while it will not bear the name ‘Jagdeo‘ as a current libel case does, it will still be one of the most epic contract cases ever initiated in this country. With so much at stake it is doubtful that this will be resolved by a court of first instance, but more likely that it will go all the way to the Caribbean Court of Justice.

All that glitters

The stated objective of the Bill is to liberalise the telecommunications sector, make it more competitive, easy to enter and importantly, to help bring down prices which will work to the benefit of the consumers. The effect of competition among service providers, as demonstrated by the advent of Digicel in the market for the provision of cellular services in 2005, is beyond dispute. But the one question to which GT&T has been drawing attention is the impact on the rates for the provision of local services other than cellular services.

The few who take the time to read the several information pages in the Telephone Directory will notice the attempt by GT&T to “put [its] monopoly service in perspective.” The company points out that GT&T’s operating licence is designed to have the international business subsidise the local service and claims that Guyanese consumers enjoy local rates – for both rentals and calls – which are easily the lowest in the Caribbean and which have not been increased for several years.

Hard hit

That it will hurt the company is hardly in doubt. With the wide availability of such bypass services as Yap Jack, increasingly Skype and other internet services, GT&T has seen a significant loss of revenue with incoming international traffic falling from 160 million minutes in 2008 to 97 million minutes in 2010 with a fall in revenue from $7 billion to $4 billion. As a result the company has been experiencing a slide in its profits which will probably be exacerbated by the effect of the Bill.

The company is in the unenviable situation where it is involved in a segment of the business where no one wants to go – landline service which is hugely capital intensive and is vulnerable to vandalism. Describing itself as the only operator with a carrier-of-last-resort obligation to promote universal access to telephone, GT&T has drawn attention to the “precipitous declines” in termination rates and the difficulties it has experienced in securing rate rebalancing. It also reminds the public that it has the sole obligation to provide free of cost telephone directories to all end-users, including non-GT&T consumers.

Competing views  

The proposed law settles the question of interconnection and the battles which such operators as Caribbean Telecommunications Limited and Cel*Star had in order to get access to GT&T’s network are things of the past. The new battles will revolve around the rates for such interconnection and the Public Utilities Commission (PUC) will once again become busy with such issues.

The debate on the Bill has placed the company in conflict not only with the government but in direct and opposing views on the effect of the Bill. GT&T claims that consumers will have to finance the exorbitant costs of the new legislative regime through higher rates and a stand-still in further infrastructure investment. Not surprisingly GT&T’s main competitor Digicel is excited about the passage of the Bill and its impact on the sector and the economy (and no doubt on its own financial performance). No doubt there is some element of self-interest in both these positions and the debate requires some serious analysis.

The downside

The Bill it seems assumes a significant infrastructure and bureaucracy with the establishment of a Telecommunications Agency which will incorporate the current National Frequency Management Unit. This agency will be responsible largely for regulating the technical aspects of the sector while the PUC will retain responsibility as the economic regulator for the sector. In passing it is probably worth noting that the government does not show any interest in regulating the electricity sector.

There seems nothing that this government will do without some nodding gift to its friends. Accordingly some entities such as Nexlink Communications Inc, Quark Communications Inc and E-Networks Inc are guaranteed individual licences and frequency authorisations without the need for any applications.

From a national perspective the most serious consequence of the Bill is the casual manner in which the government is abrogating a contract with an international investor. Of late, the government has shown a far greater interest in investors from China and India than from western countries and the US. Still, it must also realise that the US, for all its problems, is still arguably the most influential country in the world. For President Jagdeo, it might be a personal matter to settle the ‘GT&T‘ problem before he leaves office. After more that fifteen years in the most powerful position in this country, the President has shown no willingness, aptitude or competence in negotiations and regards any loss as an affront to his ego. The President’s style does not allow him to square with GT&T by negotiation but rather to try the approach of the bully to get others to accept his wishes.

One wonders what his cabinet colleagues, his army of consultants and the leaders of the private sector would be telling him about the way he is seeking to resolve a major issue involving a company whose CEO is a senior member of the Private Sector Commission. In another few months Jagdeo will cease to be President. His hubristic attitude in relation to GT&T will leave us with a ton of problems and with financial consequences that are at this stage unquantifiable and as an investment destination further tarnished. That too I suppose does not bother him.

Conclusion

Competition is desirable, beneficial and just. No one should be allowed to enjoy such a position of power as to hold sway over society. Not that all of those apply to GT&T since its exclusivity is limited to certain if significant services. But apart from these obvious benefits, the government has not indicated to the populace – perhaps because it is itself unclear – what all of this will mean. If as expected competition leads to lower rates, then unless there are additional revenues from new or existing services, profits will fall and so will taxes.

Perhaps the government hopes that cheaper rates will attract investors seeking new hosts for their call centre business. Perhaps it thinks that the demand from individuals and businesses will increase and the sector will boom. But then it must understand that this is one sector that is moving too fast to predict. It has spent more than US$15 million on a fibre optic cable and seems to have no clue on where that is going. The truth is no one can predict this industry.