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The decision by Cable & Wireless to purchase Columbus International for approximately US$3 billion poses a major threat to competition in the Barbados and throughout the Caribbean region, Professor Avinash Persaud of the Washington-based Peterson Institute for International Economics said in reaction to the news this morning.
"The Barbados Government and others around the region should block the deal until it has secured guarantees open to public scrutiny and monitoring," he said.
Persaud said the deal will be "a major blow to attempts to improve quality and access to telecommunication connectivity, a critical factor in the regions economic future."
Broadband connectivity has become the critical factor in economic production around the world in recent years, an opportunity for the region to leap frog the obstacles of small local markets and distant international ones, Persaud said.
He said: "Broadband has reduced the previously overriding roles played by land, labour and capital, factors the region has in short supply. Despite the region's need for economic salvation and its importance to the region’s economic future, broadband in the region is more expensive, less broad and less reliable than in markets the region needs to be competitive with. This deal will widen the gap with those competitors, not close it.
"The enormous price that Cable & Wireless is paying - US$$1.9 billion for the Barbados-based Flow, plus assuming US$1.2 billion in net debt from Flow's balance sheet, is a clear measure of the super-profits Lime expects to make from the region. A more competitive business with concern that regulators would scrutinise and limit future profits would fetch a far lower price. But another measure of the super-profits expected is that at no point were the two companies at all bothered about the reaction of governments in the region.
"In their announcement to shareholders Cable & Wireless did not warn that the deal would be subject to regulatory scrutiny and approval. They took the sad, but perhaps correct view, that the region's Governments were irrelevant to this decision, even though the value in this deal to shareholders comes directly from how the market for telecoms is regulated.
"Just a few years ago, Barbadian residential customers could choose between Lime, and TeleBarbados for broadband and with the prospect of a newcomer, Flow, helping to expand choice and lower costs. Then Flow took over TeleBarbados and Lime has now taken over Flow, effectively leaving Barbadians with no choice but to use a provider where service frequently drops, responsiveness to customers is weak and costs are internationally uncompetitive. The same could be said in most other countries in the region.
"If such a deal was merely proposed in the US or Europe it would attract the attention of the competition authorities who would have placed a stay on the deal until they were sure it would not compromise quality and price or until they had received guarantees on both issues from the company. Governments in the region often reasonably complain about the difficulties of operating with limited tax revenues and high social costs, but many of the critical decisions for out economic future - such as the structure of the market for broad band that lowers costs, improves access and reliability - does not require any funding from Government.
"It does require a Government that is wise to the issues, has a vision as to what is critical and the courage to get the critical done, and is vigilant and active in the protection of the citizen’s interests. Monopolists protect their monopolistic profits by being cozy with regulators, sponsoring major charities and socially progressive initiatives and a few politicians. A measure of whether the region's economic funk is irretrievable will be how much Governments in the region willingly, or evenly after some public cajoling, stand up for the future interests of their citizens and the capacity for economic development."
EFFECTIC DESIGNS wrote:^ the problem is the service will become so bad that the technology go end up looking like first class dialup. If they don't have to worry about a customer switching to another provider why should they really care about service? you could run it to the dogs and still make a killing.
What would most likely happen is they could end up setting a bandwidth cap.
Like for the month you are only allowed a certain amount of GB of download and after that you will be disconnected. This is usually how a monopoly ISP runs high speed internet.
It may end up being a good thing for us down here aswell as it will provide us with good service and we will still have a fast connection just limited on how much we can download. This will also be good for the government as we would not be able to use PSN, XBOX live and STEAM on PC to download our Games as it would be more feasible to buy it on disks and just download the updates. This way the government will get their tax from disk based games as opposed to buying online where they cannot get vat and duty.
Only thing is some people use stuff like Netflix and like to watch youtube in HD so all of that will be out of the question. Direct TV will get a chance to make some more money aswell.
so lets try to look at it on the bright side, killing the broadband market in Trinidad is actually beneficial to the economy and our people. We could go back to supporting the movie pirates on the streets as they too can eat a food, sure we will be going back to the stone age but we will be helping out everyone just like the communists like to do.
EFFECTIC DESIGNS wrote:I am fine by this move as long as C&W gives up their 49% of TSTT
Most likely flow has been making a loss on internet at the cheap rates they were offering. I highly doubt they were making a loss on cable tv.
But can I ask something what would happen if C&W refuses to give up their 49% of TSTT?
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