Or a Scenario 2 where. Lets look at some scenarios. Scenario 1
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1 Redefining Telecommunication Legislation and Regulatory Environment in Fiji for Improved Economic Growth and Social Development Presentation by USP/JICA Research Team 16 June 24 Suva, Fiji Islands A NOTE: This presentation will provide only background to the research, methodology and findings up to now as the complete report will have to be presented to stakeholders first, government and then made public later in July. Imagine for a moment, a time in 3-5 years from now, the shrinking world continues to be more globally competitive in everything as it is now and as it will be even more so in future. We don t take heed of telecommunication trends today. Not ever realizing what is at our doorstep (I.E, the power from harnessing particularly telecommunications as a sector for ) we do little or nothing to change the present situation. In vain, we attempt to stay in touch with the rest of the world Lets look at some scenarios Scenario 1 A new ICT business has just started and employing 8 school leavers Spends 2/3rds of its budget on dial-up connections Because of high costs finds difficulty paying Or a Scenario 2 where A new telecentre in Yaqara supposedly with good broadband connectivity which cannot be delivered Disconnects and folds up or move to Tonga 1
2 And yet another scenario 3. The country s bank backroom operations are connected via VSAT-based telephone Network with other banks in Fiji and other countries in the world Makes real time connections Communication costs >3% of branch overheads! Cannot compete now thinking of outsourcing to India and closing down backroom operations scenario 5 Primary health care in Lomaloma, Vanuabalavu with Solar power, sonar, digital camera and arrangement with CWM Hospital and/or international health institute to assist in diagnostics. After 1 dial-up attempts, life saving remote diagnosis is abandoned Patient is still not diagnosed and may die Scenario 6 New film company plans to film and edit in two locations simultaneously: say, Fiji and Los Angeles using broadband Allowed to use Southern Cross cable but blows the budget Will have to rethink plans to shoot other movies in Fiji as no gains made and informs his industry. Fiji is mysteriously avoided fledgling high potential film industry suffers And finally a Scenario 7.. Weather Met Office in Nadi follows the build up of a cyclone to give timely warning to citizens, finds task not possible as it only has slow speed connection Warning not timely enough Major disaster happens Millions of dollars cost of relief and rehabilitation to the nation But imagine for a moment Various backbone solutions and broadbands are available and affordable Southern X cable excess capacity is accessible and affordable Intelsat and PanAmSat satellites with footprints over Fiji are made available Suddenly, it s a different ballgame If items in the previous slides were made available at Hawaii affordable prices.. Papua New Guinea Solomon Islands Nauru Marshall Islands Vanuatu Kiribati Tuvalu Fiji Tokelau Tonga Samoa Niue Cook Islands Australia Suddenly FIJI can be THE Tele and ICT HUB OF THE PACIFIC Other And it is imminently do-able New Zealand 2
3 Not only will Fiji be a (if not the) hub if ICT were optimised, empirical research data shows the following: Increased business opportunities More Rural More Poverty reduction Increase Job creation Increase Income generation More Global trade GDP increase due to ICT is 2% Then why is this not happening? Falling behind Fiji s telecommunication penetration ranking in telephone density Overall TD is 3.2pts less than the world average 22 the gap has risen to 14.3pts Complacency? Trailing behind Mauritius, Maldives, Cape Verde Background to the Research The USP Vice Chancellor s Office had received a request from the Fiji PM s Office to conduct a research on ICT for in Fiji looking specifically at the telecommunications industry. The USP responded by establishing a research team under the JICA/USP ICT Capacity Building Project at the USP to undertake this task. Team Members Mr Savenaca Siwatibau Dr Esther Williams Ms Maki Kato Professor Kosuge Mr Neesh Chand Professor Takahashi Mr Joe Mar replaced Mr Siwatibau in late 23 and Mr Jo Turaganivalu served as advisor to the team This research team attempted to examine the following : 1. Despite infrastructure and policies, it has been argued that the existing monopolistic position of the telecommunications industry and associated limited bandwidth have placed constraints on the economic and social of Fiji. 3
4 2. That while there is major concern on the need to introduce and maintain competition in the industry to handle convergence, little attention is being placed on the impact of monopolistic telecommunication environment in small economies. Research Questions: 1. Should the telecommunications market be opened? 2. Is the current legislation really dragging Fiji s economic growth? 3. If so, should we open the market and create a win-win situation that would be acceptable to all parties? 4. Will liberal telecommunications environment attract new investments? Research Questions: 5. How will opening up the Southern Cross cable impact on Fiji and the region? 6. How good is the government s social responsibility in telecommunications? 7. Which models are applicable to Fiji? Methodology Literature review Collected legislation of other countries Collected baseline data from telecommunication providers in Fiji Collected data from other countries Learning from other country s experiences Simulation and consideration Sought legal and economic opinion where necessary Visits to centres around Fiji The Report Structure of presentation 1. ICT and telecommunications - The Concept 2. Telecommunications and A global view 3. Telecommunications policy and regulatory environment Pacific and Fiji 4. Socio-economic and telecommunications in Fiji 5. Monopoly and telecommunications the trends 6. Competitive profile of the telecommunication sector 7. The role of government in promoting 8. Options for government The Report Structure of presentation 1. ICT and telecommunications - The Concept 2. Telecommunications and A global view 3. Telecommunications policy and regulatory environment Pacific and Fiji 4. Socio-economic and telecommunications in Fiji 5. Monopoly and telecommunications the trends 6. Competitive profile of the telecommunication sector 7. The role of government in promoting 8. Options for government 4
5 In Fiji. Each major facet of telecommunication is controlled by a monopoly: TFL-local land lines FINTEL- international access Vodafone mobile Connect ISP - internet In Fiji. Fiji has International connection through Intelsat And the Southern Cross fibre optic since November 2 FINTEL s investment 45 million FJD Total bandwidth used by Fiji on Southern Cross is 2Mbps including private and business Internet bandwidth is 1Mbps Southern Cross Cable Fiji International bandwidth, Mbps ITU data Ownership of Fiji Telecom Sector. In Fiji. Cable & National Government 34.6% 7.2% Wireless Provident of Fiji (UK) Fund Others 58.2% ATH Vodafone (UK) 49% 51%* 1% FINTEL Telecom 51% Vodafone Fiji Fiji 49% International operator Domestic operator Mobile operator Govt shares managed by ATH International Internet bandwidth, Mbps 9 8 Nov. '94: Nov. 95: Telecom Nov. ': USP Fiji begins trial with FINTEL 7 establishes 64 kbps satellite connects 6 first direct connection to New to connection Zealand. Southern 5 to Internet Commercial service Cross 4 via satellite; launched May 96. fibre optic 24 bps cable. 3 leased line to Australia Southern Cross Cable Fiji International bandwidth, Mbps ITU data Regulatory environment In Fiji Posts and Telecommunications Decree Draft Telecommunication Bill Licence: Exclusive Minister provide FINTEL the exclusive right to provide telephone, telex, fax and data transmission on the International level, and telecom Fiji on the local regional level Duration up to 31 December 214 Regulatory environment In Fiji Grounds on which the licence provides for the early termination of the exclusive right none Grounds upon which the decree provides for early termination none Termination of the ER will require modification of the Licence Who can modify only the Minister Termination on public interest If FINTEL and Telecom FJ refuse its consent and only the Minister can modify the Licence But this is politically sensitive 5
6 Landline infrastructure: Limitation has given rise to a Mobile revolution In 15 years, cellular phones have overtaken landlines in countries all over the world. In Fiji, mobiles already 3% overtaken landlines: 12, as 2% against 12,23 in 23. 1% % Universal telephone service in Fiji: lines per 1 population Households with a fixed telephone, % 1% 9% Forecast 8% 7% 6% 5% 4% 35% At current growth rates, it will take almost 3 years for Fiji to reach universal service Households with fixed telephone - ITU Mobiles , subscribers ,-2% increase 22 16% increase over ,583subscribers Fiji Mobile market Mobile subscribers in Fiji, s Pre-paid Post-paid Fixed density Mobile density Forecast Source: ITU Fiji Mobile market: Selected countries where vodafone operates Prepaid prices, per minute, US$, August '3 Fiji New Zealand UK Australia Malta South Africa Kenya Egypt India Average Off-Peak Peak World Main telephone lines (millions) Mobile cellular subscribers (millions) Internet users (millions) World state $- $.2 Source: ITU $.4 $.6 $.8 $1. $
7 What of other Pacific countries Most moving towards opening up or phased Most progressive are Samoa, Tonga, Papua New Guinea, Micronesian countries Telecommunication Policy and regulatory Environment Some issues S/X cable provides vital unlimited bandwidth but only 4 % utilized in Fiji. The rest of PIC use competitive satellites which favours consumers in prices and choices Landline infrastructure does not always provide broadband facilities essential for today s business practices Use of alternative technologies to provide backbone infrastructure lagging because of pedestrianism in current monopolies and discouragement of competitive alternatives. Policy liberalization happening in other Pacific islands but lagging in Fiji Some Key Infrastructure Barriers Lack of high-speed broadband Lack of liberal policies Low access Affordability - High costs of international calls and high costs of mobile Exclusive license do not allow alternative VoIP, wireless, etc Draft national policy not owned by the people Limited trained human resources The Report Structure of presentation 1. ICT and telecommunications - The Concept 2. Telecommunications and A global view 3. Telecommunications policy and regulatory environment Pacific and Fiji 4. Socio-economic and telecommunications in Fiji 5. Monopoly and telecommunications the trends 6. Competitive profile of the telecommunication sector 7. The role of government in promoting 8. Options for government Population indicators Total population 83 (23) Urban population 51%(23) Population Density (per/km2) 5 (23 est) Age distribution, 1996, %: Below 15 years years 6 Above 6 5 Fiji s economy hange earnings, 21 Other 53% Sugar 1% Garments 14% Tourism 23% GDP grew by 3.8% in 22; 4% in 23 Foreign Exchange Earnings 1 Percentage change 3 GDP 2 Tourist arrivals Fij Fiji Islands Statistics Bureau -4 Tourist arrivals % change 7
8 Fiji Human Development Indicators Rank Indicator Value 81 Overall 95 Life 69.3 expectancy 51 Literacy School 76 enrolment 92 GDP per 4 85 capita Ranking Fijian Human Development UNDP 23 HDI 21 Data Contribution of communication sector to GDP, % 4.3% 4.2% 4.1% 4.% 3.9% 3.8% 3.7% 3.6% 3.5% 3.4% 3.3% 3.2% Telecoms and the economy Contribution of the communication sector to GDP Telecoms and the economy Telecom revenue as % of GDP, 21 Kiribati Maldives Jamaica Fiji Vanuatu Micronesia Samoa % 2% 4% 6% 8% 1% 12% Fiji and telecom revenues as a percentage of GDP, selected ECONOMIES 21 -ITU The Report Structure of presentation 1. ICT and telecommunications - The Concept 2. Telecommunications and A global view 3. Telecommunications policy and regulatory environment Pacific and Fiji 4. Socio-economic and telecommunications in Fiji 5. Monopoly and telecommunications the trends 6. Competitive profile of the telecommunication sector 7. The role of government in promoting 8. Options for government Monopolies and telecommunication No monopoly is good Monopolies and telecommunication Of the total number of countries 231, more than half have monopoly telecommunication environment The best kind of business is an unregulated monopoly, second best is a regulated monopoly and the worse is an unregulated competitor James Glassman,American Enterprise Institute 8
9 Monopoly infrastructure: a barrier to economic growth Big movement globally towards opening up because linked to economic growth If monopolies have to stay then need to be benchmarked internationally and monitored by independent 3 rd party Current Monopoly mindset obstructs use of new technologies and potential industry growth and hence retard employment opportunities and other flow on effects Indisputable, competition grows the market, educates population through new technology usage While monopolies may not be good need to note: Small businesses close after only a short period difficult to get a market share when competing with a company been a round for a long time Mergers happening more and more and we may be back to one or two companies For some companies competition may not be so joyful The Report Structure of presentation 1. ICT and telecommunications - The Concept 2. Telecommunications and A global view 3. Telecommunications policy and regulatory environment Pacific and Fiji 4. Socio-economic and telecommunications in Fiji 5. Monopoly and telecommunications the trends 6. Competitive profile of the telecommunication sector 7. The role of government in promoting 8. Options for government ICT and Development Indisputable causal relationship between the levels of ICT deregulation and economic activity? Evidence shows that in countries where there is: Deregulation and open access Policy change Phased liberalisation Privatisation Government commitment Economic gains to the country have resulted Competition in small countries Competition in small countries Countries with competitive telecom markets, population less than one million, developing nations, August 23 Coun try St. Kitts & Nevis Domin ica Pop ulat ion ' 78' GNI per capi ta 2 2 (US 6 37 $) 3 18 Comp etitio n from Sep. 21 Sep. 21 Note OECS agreement with Cable & Wireless introducing full competition. Two new licenses issued. OECS agreement with Cable & Wireless introducing full competition. Marpin Telecoms subsequently awarded mobile, ISP d fi d li Countries with competitive telecom markets, population less than one million, developing nations, August 23 Seych elles 83' Tonga 99' Grena da 16' 6 53 Dec Aug Sep. 21 Second mobile operator launched in December Shoreline Communications launched as second mobile operator. OECS agreement with Cable & Wireless introducing full competition. Two new mobile licenses awarded. 9
10 Competition in small countries Countries with competitive telecom markets, population less than one million, developing nations, August 23 St. Vince nt St. Lucia 117' 16' 2 74 Sep Sep. 21 OECS agreement with Cable & Wireless introducing full competition. Two new mobile licenses awarded. OECS agreement with Cable & Wireless introducing full competition. Two new mobile operators launched in 23. Competition in small countries Countries with competitive telecom markets, population less than one million, developing nations, August 23 Surin ame Guya na 446' 879' Fiji Feb ICMS granted an overall concession to provide public services as second operator. 214? Cel*Star awarded mobile license. Presently monopoly 214. until Source: ITU adapted from ECTEL, World Bank, GSM World and country reports. Note: OECS = Organization of East Caribbean States. Examples of robust and vibrant economies as a result of opening up: Ireland in less than 5 years now the largest software provider in the world Samoa Now moving fast to become the hub in the Pacific and drawing in new players with new policy Tonga opened up 2 years ago and now benefiting from affordable and efficient services Mauritius the hub in the Indian Ocean. In less than 1 years now GDP/capita grown to over $6,; unemployment almost zero; new companies established; lowest telephone and mobile charges in the world. Singapore the ICT and business hub in Asia. Opened up in April 2 in response to electorate demand. High GDP and living standards. The Report Structure of presentation 1. ICT and telecommunications - The Concept 2. Telecommunications and A global view 3. Telecommunications policy and regulatory environment Pacific and Fiji 4. Socio-economic and telecommunications in Fiji 5. Monopoly and telecommunications the trends 6. Competitive profile of the telecommunication sector 7. The role of government in promoting 8. Options for government Role of government Provide leadership in ICT Political will to make changes Support enabling & pro-competition policies where necessary, esp. schools, health centres and urban poor areas All services to be accessible and affordable for good of citizens 1
11 Challenges Understanding ICT for Universal access esp Internet for schools & telehealth for rural areas Availability of appropriate skills National Coordination Sustainability Government commitment Policy changes The Report Structure of presentation 1. ICT and telecommunications - The Concept 2. Telecommunications and A global view 3. Telecommunications policy and regulatory environment Pacific and Fiji 4. Socio-economic and telecommunications in Fiji 5. Monopoly and telecommunications the trends 6. Competitive profile of the telecommunication sector 7. The role of government in promoting 8. Options for government The options for government 3 recognised: 1. Blue Sky 2. Phased opening up of the market 3. As Is and monopoly continues Option 1. Blue sky option Exclusivity removed According to legal opinion, the Minister of Telecommunications has the power to do this. Ensure competition in the telecommunication industry Option 1. Blue sky option Rationale for opening up: To foster competition to provide better, affordable and more efficient telecommunication services for users business and residential users and encourage innovation Option 1. Blue sky option Impact on Fiji Critical to Fiji s economy due to its role in supporting other sectors of the economy Telecommunication and technology changes impact profoundly on related sectors 11
12 Option 1. Blue sky option Global in policy regulation and competition WTO requirements Consolidation of operations Exclusivity since 1989 is sufficient time to derive benefits from the monopoly customers, brand name, network infrastructure, billing system, large employees Option 1. Blue sky option-policy Impact on industry means need to have industry policy objectives. These should include: Develop an information and telecommunication industry structure that makes greater contribution to the economy as a whole Fosters job creation Flow-on effect on new opportunities Option 1. Blue sky option-policy Ensure growth and sustainable telecommunications industry to support economic and social goals Widest range of services to be available to the community at reasonable costs Telecommunication services to be provided in most economic and efficient manner Option 1. Blue sky option-policy Policy and regulation directly contribute to: Business Confidence Greater business Employment creation More local and overseas investment Stability and growth in the economy Option 1. Blue sky option-policy Policy and regulation would remove barriers to competition and introduce new competition as supported by the market Option 1. Blue sky option-some Asia-Pacific Countries opened up Papua New Guinea Samoa Tonga Palau FSM Singapore Malaysia India Indonesia Philippines 12
13 Option 1. Blue sky option-impact of opening up in these countries New industries established Jobs created in telecommunications and related industry New investment such as call centres in India and Philippines Economic growth annually over 2%-4% GDP More people can communicate worldwide Option 2: Open up the market in phases for the benefit of consumers and their own backbone and last mile facilities Legal opinion obtained indicate that the Minister of Telecommunications has the power to open up the market and vary the conditions of the exclusivity. He may decide to open up in phases. Option 2: Open up the market in phases Let s look at India as an example process is useful. 198s monopoly 1986 Mahanagar Telephone Nigar Ltd - MTNL - Internal services 1986 VSNL Videsh Sanchar Nigar Ltd to provide international services 1989 Telecommunication Commission 1991 DoT managed other services 1991 Process of liberalisation commenced bids for licenses for mobiles 2 given 1999 DoT established 2 departments: service-dts and license and policy-dot 2 DTS corporatised as new entity 21 4 th cellular license operator 22 VSNL privatised April 22 International long distance opened up without restricting number of operators Roll-out obligations: Intend to prevent cherry picking by new entrants, for instance: New licensees to cover progressively costs by 15, 4, 8, 1% of the license National long distance also cover costs progressively 15,4,8,1% International long distance services Option 2: Open up the market in phases in Fiji Phases: Immediate 1. A second Cellular provider to be introduced 2. Related industries such as cabling, equipment handsets, headphones, mobiles, can be opened up 3. Phone cards services can be opened up immediately 4. Different charges for different categories of customers to be introduced both local and international 5. Internet services to be opened up and greater bandwidth given to ISPs 13
14 Option 2: Open up the market in phases Phases: Middle phase Voice over IP Landline services local and international Videoconferencing These are suggestions only Option 3: Continue as is with exclusivity Perhaps the most unpopular option However, if monopoly promises better services, prices and efficiency this would be good. Unfortunately, from findings, this is not so. No monopoly is good. This option does not bring about efficient services, reduced prices, innovation, and new technologies Provider builds up defensive attitude Limited new businesses Access new businesses to only a few Closed market Stifles and productivity Some Recommendations Government to take leadership role in this Support enabling infrastructures Recommendations Support those organisations able to provide their own backbone and last mile facilities Insist on efficient and affordable telecommunications services for consumers Support pro-competition policies for greater access and affordable prices Support policies for broadband Recommendations Immediate actions that can be taken 1. Provide subsidised/free Internet services to schools in rural and urban poor areas 2. Support service providers who can provide these services at lower costs 3. No restriction on ISP licenses and provide level playing field 4. Provide another cellular service provider asap 14
15 New Telecommunication Policy - issues New Policy - issues Objectives: Available and affordable to all A balance between provision of universal service including rural areas and high level service Have a greater competitive environment providing equal opportunity and level playing field Remote areas and islands Convergence Targets: Provide telephone on demand and improve on teledensity to 15 by 25 Increase rural teledensity Provide Internet access to all rural districts offices by 26 Provide access to broadband and high speed data and multimedia capabilities Convergence is important and need a convergence bill by say 26 Thank You Vinaka 15
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