Transcript PRESENTATION NAME
Harmonized Policies, Legislation and Regulations in the OECS
Presented by: Apollo Knights Director of Telecommunications - NTRC St. Vincent and the Grenadines
Origin & Mission of the O.E.C.S.
• The Organisation of Eastern Caribbean States (OECS) came into being on June 18th 1981, when seven Eastern Caribbean countries signed a treaty agreeing to cooperate with each other and promote unity and solidarity among the member states. • The mission is to be a major regional institution contributing to the sustainable development of the members by helping them to maximise the benefits from their collective space, by facilitating their integration with the global economy; by contributing to policy formulation and execution both locally and internationally.
O.E.C.S. Member States
The OECS is a nine member grouping comprising of: •Antigua & Barbuda •Dominica •Grenada •Montserrat •St Kitts and Nevis •St. Lucia •St Vincent and the Grenadines. •Anguilla and the British Virgin Islands are associate members.
Structure of the O.E.C.S.
• The OECS is administered by a Central Secretariat located in St Lucia. • The Islands share a single currency, the Eastern Caribbean Dollar ($2.70 ECD = 1 USD). The operation of the currency is overseen by the Eastern Caribbean Central Bank.
• The Islands also share a common Supreme Court: The Eastern Caribbean Supreme Court with its two divisions, the High Court and the Court of Appeal.
The Authority:
The OECS Authority is the highest decision-making body of the Organisation, comprising of the Heads of Government (Prime Ministers and Chief Ministers) whose decisions direct the work of the organization as required.
The OECS Secretariat:
The functions of the Organisation are set out in the Treaty of Basseterre and are coordinated by the Secretariat under the management of the Director. It is the purpose of the Organisation to assist its Members to respond to various challenges by identifying scope for joint or coordinated action towards the economic and social advancement of their countries. More info about the O.E.C.S is available at
www.oecs.org
Statistics
Country
St. Lucia St. Vincent & Grenadines Grenada Dominica Antigua & Barbuda St. Kitts British V.I.
Anguilla
Size (sq km) Population
616 389 344 754 443 261 153 102 170,649 118,149 89,971 72,386 69,481 39,349 23,552 13,677 Montserrat 102 9,538 Source: United Nations of World Information
GDP per capita
1998 $5,408 $4,860 $6,038 $5,366 $9,467 $10,958 -- -- -- 2006 $7,499 $7,007 $8,536 $6,996 $14,251 $14,486 $38,500* $8,800* $3,400* * 2004 Estimates
Can Harmonisation of the Regulatory Framework among independent states facilitate increased connectivity?
In 1998, the OECS launched the “OECS Telecommunications Reform Project”. The broad objective was to reform the telecommunications sector in five OECS countries that agreed to be part of the project:
Dominica
and
Grenada , St. Kitts & Nevis.
St. Vincent , St. Lucia ,
At that time, the telecom sectors of the five countries were typified by the following characteristics: i. Outdated laws, licenses and agreements compared to many other countries throughout the world.
ii. These laws, licences and agreements were highly restrictive.
iii. Main services, such as fixed line and cellular, were provided by a wholly or partially owned subsidiary of Cable and Wireless or by a joint venture with Government and Cable and Wireless.
iv. Tariffs were unbalanced and not cost-based, allowing operators to make large profits on certain calls or services.
By 1999, the member Governments of the project decided that they were ready to move from their current positions to a situation which was in line with developments worldwide, i.e. liberalisation, for overall economic, social and cultural benefits.
The members co-operated regionally to achieve their aims, and adopted the following statement of overall policy:
The member Governments aim to ensure that the demand for existing telecommunications services is met in order to support economic growth and diversification, provide a suitable environment for tourism, informatics and financial sectors, and satisfy the educational and social needs of the community. The Governments would endeavour to further develop the telecom infrastructure and services by providing a liberalised and competitive environment with open entry to stimulate the introduction of an increased range of services using state of the art technology. The Governments will encourage investment in the sector from all appropriate sources by developing, adopting and enabling legal and regulatory framework, to enable the public and business users to obtain telecom services at fair prices that reflect economic cost and efficiency.
From this point of a common policy, everything else followed in a logical fashion: •
1
. A Treaty was established to put the legislative mechanisms in place to allow a harmonized approach to regulating the telecom sector. It was called the ECTEL treaty, signed on May 4, 2000 in St. Georges, Grenada, and it allowed for the establishment of a regional regulatory advisory body, ECTEL, that would work along with national regulatory bodies (NTRCs).
•
2
. Harmonized telecommunications Acts were developed and passed in all of the five countries during the period 2000-2001. This new telecom act, among other things, established the NTRCs as the national regulators and provided the legislative framework to liberalize the telecom sectors.
•
3
. Another important phase that had to be accomplished was the ending of the exclusive telecom licences held by C&W on terms that were agreeable by all parties. This was not formally part of the telecom reform project, however, the project could not have been successful unless this phase was accomplished. Through lengthy negotiations held between a special team established by the member Governments and C&W, an MOU was signed on April 7, 2001 whereby C&W agreed to surrender their exclusive licences in consideration of the member states undertaking certain obligations.
4.
This MOU was followed by a formal agreement between all parties on the 20 May, 2002 that enabled the full liberalization of the Telecommunications sector to proceed in the sub region by April 1, 2002. The main components of this agreement were what services would be regulated under the new regime and the rates that these services would be set at until a Price Cap Plan was implemented by the regulator.
• 5. Various sets of regulations were enacted in the period 2002-2003 under the Telecom Act in each member state, to further strengthen and clarify the regulatory framework. These regulations were all harmonized among the member states and were in the following areas: • Spectrum management • Fees • Numbering • Interconnection • Confidentiality in networks • Terminal Equipment • Tariffs • Licencing and Authorisation • Private Networks
One regulation of specific importance was Dispute Resolution, which was not completed and enacted until 2007. This is an important point that will be addressed later.
6
. The first licences to be granted to new entrants under the new telecom acts were private networks and ISPs. This brought about the first form of competition whereby the cable TV providers in SVG and Dominica started offering Internet Access. Dominica actually granted a fixed network licence to the existing cable TV provider before the new act was established. This issue caused litigation that would have had some influence on the whole liberalization process.
7.
International connectivity was done via VSAT, which limited access speeds.
8.
Competition also came from the existing cable TV operator in Dominica, which not only offered internet access, but also brought competition in the fixed voice market using the existing cable network. This local company was the first to establish an interconnection agreement with the incumbent in July 2002.
9.
Later in 2002, mobile and other licences were granted to applicants throughout the five countries. Digicel and AT&T were the first companies to construct mobile networks, with Digicel being the first to launch service after coming to a 5 year interconnection agreement in March 2003.
10.
The agreement took a long time, and led to litigation between the regulator and incumbent in one of the member states.
11.
Among the main provisions of the legislative framework was the harmonized approach to regulating the sector: There now exists: i. Standardized forms for licence applications in all five countries; ii. Standardized licences with similar terms and conditions; iii. Harmonized regulatory fees for licences and spectrum. iv. A regulatory system that is funded directly from regulatory fees collected as compared to annual contributions from member Governments. v. A regional agency (ECTEL) to allow the pooling of scarce human resource in specific regulatory areas, thereby reducing the cost of regulating the sector as compared to having full fledged regulatory bodies in each country.
12.
The May 2002 agreement required that a PCP plan be implemented within a certain timeframe. This was not done, and led to litigation between both parties.
13.
A PCP was finally implemented in Dec 2004 for C&W in all 5 countries. The plan regulated most fixed line services excluding international calls. More focus was placed on the rates of residential PSTN services rather than services such as leased lines and internet.
•
14.
A regional spectrum plan was formally implemented by ECTEL in 2006 as part of their mandate. However, the countries have been working with a draft harmonized plan since 2002. This has resulted in harmonized allocation of spectrum to existing licencees and new entrants. • 8. A regional numbering plan was implemented by ECTEL in 2006 followed by national numbering plans by the NTRCs in each member state.
We are now at a position where five years have passed since large scale competition has entered the market in the five OECS countries, and 10 years since the reform process started. This is an ideal time to review what was occurred in the sector and assess the success and/or effectiveness of each. Penetration of fixed, mobile and Internet services over last 5 years.
Telecom sector Investment.
Sources: ECTEL/NTRC/Operators
The following graphs show Fixed Line and Mobile Subscribers over the past 5 years.
Fixed Line Subscribers: Source: ECTEL/NTRC/Operators Mobile Subscribers:
• Fixed Line Rates:
EC ($) March 03 Range of Monthly Rental
17-54
Local fixed to Fixed (peak) Local Fixed to Mobile (peak)
0.09
0.81
March 04
20.40-26.40 20.40-26.40 20.40-26.40 20.40-26.40
0.09
0.81
March 05
0.07
0.76
March 06
0.07
0.71
March 07
0.07
0.71
Source: ECTEL/NTRC/Operators
From the graphs, the biggest impact was on mobile penetration. Mobile phones are not a secondary means of communication, but actually the preferred form of communication for the greater part of the population in most of the states.
However, the cost of usage for this new sector of the population is consistently higher than the fixed line market, despite there being fiercer competition in the mobile market.
Essentially, the cost of domestic communication per minute is higher for the majority of telecom customers since competition has arrived. -What is the real cost of originating or terminating a mobile call, and are the current rates inline with these costs?
Type of Call
Fixed to Fixed Mobile to Mobile (On Network)
Rate
3 min $0.21
$1.62 C&W $2.25 Digi -Do we have a competitive mobile market with two players? Mobile to Mobile (Off Network) $2.55 C&W $2.55 Digi Mobile to Fixed $2.55
Fixed to Mobile $2.13
Source: NTRC/Operators
Fixed line penetration has shown a slight decrease over the period, which has been attributed to some customers giving up their home phones for mobiles. One of the first noticeable impacts of competition in the sector is the initial drop in international rates, which has now stabilized.
International Rates to the USA
CWCC C&W Fixed Digicel Wireless Ventures 8 6 4 2 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
International rates to the USA from SVG Source: NTRC/Operators
Internet Statistics:
An important statistic that needs to be analysed over the period is that of Internet subscribers. In order to reap the full potential of a connected society and achieve some of the goals as outlined in the 1999 regional policy, our consumers need to be connected via data connections.
The region has benefited from the liberalization of the sector from being connected via the voice medium but has not done as well with data.
Why has the growth of internet subscribers been so small over the period? Source: ECTEL/NTRC/Operators
We have been able to attain mobile penetration levels comparable with the developed world, but cannot come close when comparing broadband penetration. The reason seems not to be an issue of whether there is a demand for such services in the region, but rather a situation of consumers not being able to afford the service. It is the exact reason why mobile penetration was at the level it was right up to when competition was around the corner. The service was not affordable to the majority of consumers until effective competition was implemented.
With competition in the mobile sector, mobile services became affordable, and the barrier of entry became lower. The initial barriers in the market were the cost of the handset (CPE) and the fixed monthly fee for post-paid accounts. The barrier started getting lower with the introduction of the pre-paid platform (no monthly fees) then went much lower when handsets started to be subsidized.
The issue of increased coverage may also have played a part in the development of the mobile sector, as coverage was very limited prior to competition.
The problem which exists in the broadband arena is the barrier of the high cost of computers, and the monthly internet fee. The above problem has always been recognized by regulators and policy makers, but is taking time to be addressed. There are obstacles that prevent the growth of broadband access following that of voice access in the region. The following slides would outline the perceived problems, and what is being done to address them. The end result would be a connected sub region (in its fullest sense) that would then form part of a connected region and a connected world, which is the main reason we are gathered here this week.
Challenges to Broadband penetration
1. Noting the relative small sizes of all five countries, our situations may differ in a number of areas when compared to other developing countries. Our low penetration rates of fixed lines were not due to network build out issues, but to affordability and capacity availability in some areas.
2. It is generally agreed that a mobile network is more easily established than a fixed network, and it was no surprise that mobile networks were the first to be deployed. Voice services also did not require much bandwidth for international traffic, and new entrants could rely on satellite solutions from the incumbent operator if desired.
3. Competition came into the mobile market which led directly to overall increased penetration levels of the incumbent and one of the new entrants (Digicel), AT&T/Cingular never took off and was subsequently acquired by Digicel .
4. Although it was evident that internet access was important to all sectors, competition in this area was still very limited. The data speeds available on the 2-2.5 G mobile networks were not a viable option for internet access; the only option that would be able to provide efficient service in this area would be through fixed networks. ISP licences were granted to a few companies, but the only ones that actually started service had established cable TV networks that could be easily modified to offer internet service.
Although some competition came in this manner and had some effect on the prices of internet services, it was not effective competition, since internet service depends heavily on international bandwidth.
5. Although a satellite solution was available, it was not practical to effectively compete with the incumbent. There was no competition at this time in any of the member countries for international capacity via submarine cable, and as such, the effect that competition has on rates and delivery of service was not seen in this area. Another important issue is that while it is norm for telcos to provide CPE equipment to deliver of voice services, this is not the case with internet service. Computer cost and availability are still very problematic.
6. While the computer is the main obstacle, work is also needed on the actual internet rates. In 2006, the first submarine cable was landed in St. Lucia. This corresponded to a lowering of internet rates which was further lowered in 2007 when another cable was landed in the other states. There was then an immediate lowering of rates and increase in speeds.
Entry Level Internet rates over the past 4 years: “Entry Level” refers to the minimum speed offered by the provider for a given year.
2005 2006 2007 2008
Speed
64kbps 256kbps 512kbps 1Mbps
Monthly Rate
$79 $99 $79 $79
Entry Level Internet Rates per 1kps
1.4
1.2
1 0.8
0.6
0.4
0.2
0 2005 (64k) 2006 (256k) 2007 (512k) 2008 (1M)
Year
Source: NTRC/Operator
7. Despite these developments, the growth in internet subscribers remains low. The incumbent has occasionally offered promotional packages to new customers that involved computers, which should be commended and encouraged as it is the only way to achieve growth in this sector. While we have seen a lowering of internet rates and increased speeds by the incumbent and corresponding rates from competitors, the entry level for broadband access is not being lowered. Existing users are benefiting from higher speeds and lower rates, but the barrier to entry for new customer still remains high. Until we see the rate for the entry level package reduce to an affordable package with appealing initiatives to procure computers, we will not see much growth in the internet subscriber base. A model T computer is required for the masses.
Current Computer Prices in St. Vincent and the Grenadines: Store 1 Store 2 Store 3 Store 4 Store 5 19” Flat Panel 1GB RAM 160GB* Hard Drive Dual Core 2.2GHz
DVD-RW 10/100Mbps NIC $2,999 $2,900 $3,000 Notes: Store 4 has a 320GB Hard Drive Store 5 has a 250GB Hard Drive Stores 1 to 4 are all branded computers (Dell, HP) Store 5 is a clone (a mix of various manufacturers’ parts) Source: NTRC/Retailers $3,199 $2,375
8. Over the past few years, the relevant policy decisions were made to try to have some regulatory interventions to spur growth and not rely solely on providers to facilitate the growth that is needed. Our telecom legislation required the establishment of USFs in each member state managed by the regulator. Noting the market situation, it was agreed that these funds be targeted to facilitate broadband access initially to public institutions. A feasibility study was done in 2005 by the World bank which confirmed our initial views, and was followed with a new project jointly funded by the world bank and member governments TICT in 2006.
The project was aimed at developing national ICT plans for all states, implementing ICT pilot projects, reviewing all existing telecommunications legislation, and developing USF regulations and guidelines that would be used to operationalise and govern the use of the USFs.
9. Presently, draft USF regulations have been developed with input from all stakeholders, especially the providers. Regulations are now with member states for enactment, with St. Lucia already enacting their regulations. The USF would be funded from a percentage of annual revenues collected from providers and also allow for funds to be received from external funding agencies and donors. The OECS states may be the first to operationalise USFs in the Caribbean region (subject to correction).
What could have been done differently?
There are matters that could have been dealt with differently: 1. Certain regulatory instruments should have been implemented prior to liberalizing the sector, such as (1) dispute resolution regulations, and (2) costing studies. Practical regulatory mechanisms should be the only means of achieving the relevant objectives. 2. In moving from a monopoly environment, it must be recognized that disputes would arise between new entrants and the incumbent and that the relevant regulatory provisions should be in place to allow for these to be resolved in a systematic and transparent manner instead of a lengthy court system as the only option.
3. Having access to costing studies specific to the region would have been helpful during the approval process of the interconnection agreements. Costing studies have since been done and would be used when the existing interconnection agreements are renewed later this year. Mobile telephony is the only form of communication for the majority of the populace in the member countries, however the rates being charged are approximately ten times that of the fixed line service. It is important that the regulators ensure that these rates are cost oriented. It makes no sense in trying to regulate the rates of the fixed line service of the incumbent (via the PCP) that affects 25% of the population (and 25% of telecom consumers) but not the rates of the mobile service that are 10 times higher and affects 90% of the population.
4. A lot of time and resources from the regulator and the incumbent were spent to implement the PCP , but at this time, it is not certain if the implemented PCP is serving its regulatory purpose.
Of specific interest is the rates of leased lines and Internet services. Although these have been reduced during the duration of the PCP, it was not as a result of the mechanisms of the PCP; it was instead due to the voluntary decisions of the incumbent at specific times. Was the PCP required or is this just a case of following international best practice? Was it implemented effectively, or could other means of rate stabilization be used instead?
These issues need to be addressed when the plan is up for renewal later this year. Maybe it was envisioned that these services would have had more effective competition in the early stages of liberalization, and not require too much of a regulatory oversight. However, it took a very long time for effective competition to arrive for these services.
5. It is believed that liberalization followed by competition would still have occurred in our member states without there being a harmonised regulatory framework in place, which has already occurred in most other Caribbean countries since. However, it is doubtful that it would have came at the same time and in all of the countries simultaneously as was done.
6. The harmonised framework has allowed for us to have a regulatory framework that costs less to operate as compared to if all five states had established stand alone regulatory bodies, which is especially important noting the sizes of the countries in question.
The cost of regulating is covered directly from fees collected from providers, therefore all savings obtained from having a common regulatory structure is enjoyed by the providers who in turn can pass these back to the consumers.
7. Apart from the savings in direct regulatory fees, the providers can save on the administrative cost associated with their regulatory responsibilities. For example, the incumbent has one price cap plan for all five countries instead of five plans.
The development of regulations and other instruments that govern the sector are prepared in a single format and is subject the consultation for the same periods in all five countries. Consultations are held in each state, but the companies usually prepare one response that is submitted in each country, saving time and resources. The countries are still five independent nations and all legislation and regulations has to be enacted within each jurisdiction.
The CTU has been working on establishing a harmonised spectrum policy and plan for the Caribbean region since 2006, which was one of the first tasks dealt with in the OECS. The member states have been deeply involved with the CTU task force.
We are part of the CTU task force on the matter and were able to contribute our experiences with a harmonised scheme involving five countries. The CTU is now attempting a similar approach, this time using around 14 Caribbean countries. This is not an easy task, and we have been able to share our experiences, as well as receiving new ideas to improve our current system. We are already putting the advice and ideas to use by incorporating them in our revised legislation that is currently been worked on.
Here is a good example of how a harmonized spectrum plan directly affects providers and consumers: When spectrum plans are not harmonized, it leads to the same service being allocated to different bands in different countries, which is the reason that dualband, triband and quad band mobile phones exist. The more bands, the more expensive the phone. Below are costs for different band phones in one OECS state.
Cable and Wireless Digicel Dual Band
$99 $149
Tri-Band
$199 $209
Quad-Band
$580 $649 An operator may use a single band in one country, allowing all customers to use a single or dual band phone. However, due to non harmonized plans around the world, this phone will not work in some other countries. Also, visitors with different band phones cannot roam, forcing the operators to install additional transmitters to cater for different bands, leading to higher CAPEX which would have been used for lowered rates, new services, increased coverage, etc.
Can Harmonisation of the Regulatory Framework among small independent states facilitate increased connectivity?
Based on the previous information, harmonization will likely lead to reduced regulatory cost and resources which will directly benefit regulators and providers. These benefits will impact directly on both entities from a financial and human resource standpoint, which can then be utilized in rolling out new services faster and to larger numbers of the population, resulting in increased connectivity.
The OECS region seems to be at the right point to partner with all stakeholders in an effort to facilitate notable growth in broadband penetration and the ICT sector on a whole. The harmonised regulatory framework allows simultaneous developments in multiple countries, thus utilizing less resources.
We are aware of the work Canto is doing with the OLPC project and are willing to work with them in preparing a pilot project for the region that could be proposed for funding from our USFs. To achieve the goals of a connected Caribbean in the shortest timeframe the two major parties (providers, regulators) would have to work closely together to bring reality to the ideas that are in the minds of the people of this great Caribbean Civilization.