The ink has dried on the decision of the Fair Trading Commission on the proposed merger of CWC and Columbus, aka LIME and Flow, and so too has the ink been no doubt hastily applied to the merger agreement between the two entities.
A fair share of doubt, disdain and sceptism has now crept back into the minds of consumers who deem this decision a return of the market to a state of monopoly and the right of choice being removed from them. To my mind, it is inevitable, as alluded to by me before, and again raises the question of market size and required investment, but somehow being able to address this without being at the expense of consumers.
It is therefore a thin line to be walked in a small developing and open economy like ours is.
The FTC decision here and the decision of the regulator in Trinidad have both called for a divestment of certain assets as conditions of approval, which is clearly an issue or methodology employed in competition law and regulatory activity. However, I am challenged as to the need for divestment as outlined within the FTC decision
when there are no other players in the local cable, fixed Internet or fixed voice market, and by virtue of the merger there will be natural attrition of duplicated services between the companies in favour of the best from both of the merging entities.
A further part of my challenge relates to the future use of the divested assets by their purchaser and whether they can or will be deployed back in the market place as a competitor to the merged entity. And, if so, are we not back
to an issue of sustainability and creating a new entity to be “gobbled up”?
For me a harsh reality is that in an economy our size, monopolies or partial monopolies are inevitable and unavoidable, but control through regulation towards development of infrastructure and the country must be the aim of those responsible.
That being said, we are somewhat back to a monopolistic environment, which now brings to the fore the need for vigilance on the part of the regulator to be of utmost importance for the protection of the consumer. Interestingly, I have never thought that we were totally out of the monopolistic environment, as the incumbent was still a player in the conduct of telecommunications transactions, whether directly or indirectly. Additionally, we had new entrants into the mobile market, primarily with limited forays into fixed and wireless Internet and other modes. However, Karib Cable and ultimately Flow became somewhat a game changer, especially in the deployment
of an alternative fixed network.
The FTC is the regulator of utilities locally and also responsible for fair competition, and it will therefore fall to it through its actions to allay the fears and sceptism that has returned to the market as a result of this merger. It is my opinion that all we needed was strong regulation and oversight in the utility sector and not deregulation, as the full benefits of deregulation are simply lost on an economy as small as ours.
At this stage, we cannot afford to have a weak regulator –– the FTC has a good track record, but in the eyes of the public, this is now going to be put to the ultimate test.
I am of the opinion that Barbados has benefited from the deregulation process initiated many years ago and further that the FTC has done a noble job in keeping the players, especially the incumbent “honest”; and this has been the challenge of Caribbean regulators of utility services. A deregulated telecommunication sector, however, is not sustainable in the Barbadian market with multiple players; and I would hazard a guess that the cycle is not yet complete –– there will be further new entrants, and further mergers, and even the demise of some entities.
I am equally prepared, however, to accept a higher priced service by virtue of market size, but I will not accept mediocre service regardless of size of the entity or market in which the service is provided.
So what can the customer expect?
I believe the main advantages from the merger will be as follows:
1. Improved customer service as cultures merge;
2. Better access to advanced technology platforms;
3. Reduced prices on services.
The FTC and the resulting entity of the LIME/Flow marriage must commit themselves to not only ensuring profits and returns on investment, but also superior customer service and protection of the consumer.
(David Simpson is managing director of Prestige Accounting Inc. and a director of the Barbados Entrepreneurial Foundation.)