Home' Trinidad and Tobago Guardian : August 22nd 2013 Contents Telecom Authority on competition
to lower prices
BG4 | COVER STORY
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2013 • WEEK FOUR
Approximately five years after the last failed
attempt to lure and introduce a third mobile
telecommunications operator to T&T, the
Telecommunications Authority of T&T (TATT)
has said its analysis now shows a new attempt
this year could be successful, bringing lower prices and better
service for consumers.
On the other side of the spectrum, existing operator Digicel
plans to welcome the competition while TSTT thinks the
market may be too small.
In a statement sent to the Business Guardian 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."
The successful bidder will operate on the 700 megahertz
TATT said the opening up of the provision of mobile services
to a third company is in adherence to "free market principles."
The authority said 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 telecommu-
nications services, including conditions for fair competition."
Given this objective, TATT said, the country adopted a mar-
ket-based approach to 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 via-
bility and profitability of any new entrant into the mobile
Far from signalling market saturation, TATT believes the
proliferation of mobile telephones and the fact that many own
more than one unit proves the profitability of the local mobile
market. TATT said among the various markets comprising
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 sub-
scription 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).
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, "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
"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 telecom-
munication 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 targetted to the most profitable
Among the benefits TATT envisages the introduction of a
third operator would
bring to the T&T market
are "more advanced and
ices, "improved coverage" and
improved "availability of high speed
broadband internet services" as well
as "increased competition in the telecom-
munications environment to the benefit of the
consumer, as service providers will have to maintain
their competitive edge, (by) constantly improving on
modern telecommunications industry is characterised by rapid
technological progress and the development of increasingly
efficient platforms for service delivery, TATT said.
According to TATT, a new entrant would be able to leverage
these developments, and invest in new technologies for service
delivery, which 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 tech-
nological platforms," said TATT.
TATT said that any successful new entrant will have the
opportunity to access (the) 700 MHz spectrum which is cur-
rently 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 spec-
"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 realised," TATT
"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 rev-
enues 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. Duopolies are not conducive to a high level of
sustained price-based competition and 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,ß TATT
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 counter-
"The authority sees this as representing the need for more
competitive rates for local calls, where there is a great divergence
els of competi-
tion 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 pro-
ceeded 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
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 devel-
oped 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."
The authority, chaired by former finance minister Selby
Wilson and led by chief executive officer Cris Seecheran,
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 telecommu-
nications sectors towards the economic, social and cultural
development of T&T. As more developments take place regard-
ing 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
Asked the same question, Digicel said in an e-mailed state-
ment: "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."
The authority said: "Currently, T&T has one of the highest
levels of mobile penetration in the region, at 142.2 (per cent)
Continued on page 5
Links Archive August 21st 2013 August 23rd 2013 Navigation Previous Page Next Page