Bidders will have to pay at least US$40 million to get one of two new cable licences to be auctioned in Jamaica next month, according to an article in today’s edition of the Jamaica Observer, diametrically different from the opaque process of the Jagdeo administration that handed two licences to persons deemed to be close to the government.
Unlike what has occurred here with the allocation of cable frequencies in Guyana, the Government of Jamaica has outlined a process and has set the US$40M figure as the reserve price for the cheaper of the two 700-megahertz (MHz) band licences. The article said it is hoped that this will significantly deepen broadband Internet penetration in Jamaica. The reserve price underlines the value of such licences to the state, something which critics of the Jagdeo administration had pointed out.
The Jamaica Observer article said that bids for the 15-year licences will have to include a business plan, which details the percentage population coverage after each year of expected rollout as well as the anticipated capital expenditure.
According to the article, the Spectrum Management Authority in Jamaica – whose counterpart here would be the National Frequency Management Unit – is managing the auction of the two licences, which carry a minimum price of US$40 million and US$45 million for the pricier one.
“What’s more, potential [bidders] will have to make a deposit of US$2.7 million to US$3 million (depending on the band they are going after) just to be considered for the bid, which requires a bank guarantee or bond in the amount of 50 per cent of the proposed purchase price,” the article said.
It noted that the more expensive licence will cost at least US$5 million more, “but that’s assuming competition won’t drive up the price even further.”
The article said that the prices were set so that it would be low enough to encourage multiple players in the market, while securing a “reasonable” payment for the licence, according to the information memorandum published by the Spectrum Management Authority on Monday.
“Aside from the US$85 million it hopes to get from the sale this year, the Government also wants to see spending on ICT infrastructure increased from the US$80 million spent annually now, while boosting commercial activity and education through information technology,” the article said.
“Together with the potential of 4G through WiMAX and LTE, the mobile broadband sector is likely to become a major revenue driver in coming years,” said the information document seen by the Observer. “The reallocation of the band will provide enhanced flexibility and network-rollout efficiency, whilst promoting the growth and rapid development of communications technologies and services. This is in keeping with global trends and is consistent with the policy objectives of the Government to promote increased competition and also to provide all Jamaicans with access to ubiquitous communications connections,” said the Observer article quoting from the information document.
According to the article, the country’s ICT exports include value-added products, such as computer-assisted designs at the high end to call centres at the low end but noted that Internet penetration is very low.
The article said the Telecoms Amendment Act allows for an infrastructure sharing obligation on all licensees, “which should allow new players in the sector to roll out without taking on heavy costs of infrastructure and facilities such as cell sites and towers, landing stations and cables.”
It said that winners of the spectrum licence will be required to launch commercial services within 18 months, if they already operate in Jamaica, or no later than 24 months for new entrants. It said that they will have to commit to 50 per cent population coverage within the first year-and-a-half and 90 per cent with four years, while newcomers will have to reach 30 per cent of the population by the end of its second year after getting the licence.
“Not meeting those requirements, means losing the licence,” the article pointed out.
In Guyana, the recent award of premium services cable licences in 2010 to two operators – ahead of others – has raised the question of favouritism and lack of transparency. Brian Yong and Vishok Persaud were granted licences while veteran broadcaster Anthony Vieira was snubbed even though his proposal entailed revenue to the city of Georgetown.
Interestingly, in the year prior to the granting of the licence, both Yong and Persaud were connected in different ways to the campaign to have former President Bharrat Jagdeo re-elected to a third term. Yong had been linked to a group supporting Jagdeo’s re-election to another term. But in an interview with Stabroek News he distanced himself from the effort while giving a ringing endorsement to Jagdeo.
Persaud’s father, the late Reepu Daman Persaud, had endorsed Jagdeo for a third term.
It is still unclear how it was that these two businessmen came to obtain their licence ahead of others and the criteria utilised. There was no public auction or any information released on the process. What is also not known is what Persaud and Yong were required to pay for the valuable licences and whether they have been tied to specific commitments under the licence. Also not known is the duration of the licences.
Former President Jagdeo in meetings with cable operators in 2007 and in 2010 had admonished them about unauthorised operations. Following that, the next major development was when the Government revealed recently, following a question in Parliament, that Yong and Persaud received their licence to commence operating in December 2010.
Hinds said that all other cable operators received their licences at an earlier date. He said that Linden Cable Network received its permission in 2007, as had Infinity Telecommunications Inc. in Linden, Linden Cable Network, Bartica Communications Network, Carib Atlantic Cable Network in Mahaicony and E3 Communications in Corriverton.
Speaking to Stabroek News, Hinds explained why it was that the Government allowed the companies to operate outside of regulations. “We were in a start-up situation…we are still to get the new Telecommunications legislation which will address this,” he had told this newspaper.
He said that there had been a lot of convergence happening in the sector and said that in a start-up situation “you have to see what happens…at the beginning you have to not do things too early and see how things might be.”