Mobile Competition: A Case
Study of Jamaica
Franklin Brown
fbrown1@our.org.jm
Regional Seminar on Costs and Tariffs of the TAL Group
Paramaribo, Suriname
May 10-13, 2004
Background to Reform
• Incumbent commenced mobile services in 1991 using
TDMA technology
• Signatory to WTO GATS in 1996
• Licenses issued to ISPs allowing them to transmit
data using VSATs.
• New Telecommunications Policy tabled in
Parliament, 1998
• GoJ and C&WJ commenced negotiations on
liberalization, July 1999
• Signing of Heads of Agreement, September 1999
2
Cont’d
• First auction for GSM/CDMA mobile licenses
– 8 bids received – winning bid of US$45
million
• Second auction for GSM and CDMA mobile
licenses
– 2 bids received- winning bid of US$47.5
million
• March 1, 2000 new Telecommunications Act
came into effect
3
Cont’d
• New carrier and service provider licenses
issued to incumbent (March 14, 2000)
• Competition in resale of outgoing minutes,
multi-line CPE, FTZs (March 1, 2000-August
31, 2001).
• Competition in domestic fixed wired and
wireless facilities, resale of domestic switched
minutes, internet access over STV facilities
(September 1, 2001-February 28, 2003).
4
Cont’d
• Competition in international voice and data
facilities (March 1, 2003).
• Fourth mobile license (March 2004) – US$6
million or US$2.31per head compared with
US$17.31(Oceanic) and US$18.27 (Digicel).
5
Impacts of Liberalization
•
•
•
•
Competitive Entry
Market Size & Growth
Diffusion in Telephony Service
Prices (handset, outgoing international
calls,mobile to fixed, on-net/off-net mobile
calls)
6
Competitive Entry
Mobile Operator
Technology
Spectrum
Band
Build out Obligation
Service Launch
Oceanic
Digital Code
Division 800 mHz,
Jamaica (ODJ)
Multi
Access 1900 mHz
(CDMA)
90%
geographic November 2001
coverage. In 2003 this
condition
was
changed to 90%
population coverage.
C&WJ
Time Division
Multi
Access
(TDMA); Global
System
of
Mobile
Communications
(GSM); General
Packet
Radio
Services (GPRS)
1900 mHz
(GSM), 800
mHz
(TDMA)
None
Digicel
GSM
900 mHz,
1800 mHz
90%
geographic April 2001
coverage
AT&T
GSM
1900 mHz
N/A
1991
N/A
7
Cont’d
• Distribution of market share –Digicel
(53.19%), C&WJ (43.24%).
• Erosion in C&WJ’s market share has been
more rapid than in EU where the 2002 average
for incumbents is around 47% (Henten et. al,
“Has Liberalization of Telecommunications
Failed in Europe?” Communications &
Strategies, No. 50, 2nd. Quarter, p.19-48).
8
Cont’d
• Market is highly concentrated
– Digicel and C&WJ account for
more than 90% of market
share.
- Herfindahl-Hirschman Index
(HHI) of 4712, thus implying a
highly concentrated market
9
Market Size & Growth
Period
Mobile
Subscribers
1991-Dec. 1999 117 861
(premium
service)
Dec. 2000
249 842
(incumbent
anticipate
competition)
Dec. 2001
640 453
2003 (Pre.)
1.4 million
Market Structure
One mobile
operator
One mobile
operator
Three operators
Three operators
10
Diffusion in Voice Telephony
Services
Period
Dec. 1999
Main Lines Mobile per Telephone
per 100
100
Subscribers
19.99%
4.71%
24.7%
Dec. 2000
N/A
9.99%
N/A
Dec. 2001
N/A
25.62%
N/A
53.85%
71.15%
2003 (Pre.) 17.30%
11
`
80
St. Lucia
70
St. Vincent & Grenadines
Mobile Subscription per 100 Inhabitants
60
Jamaica
50
Antigua & Barbuda
Bahamas
40
Suriname
y = 2.9296Ln(x) + 5.5408
2
R = 0.045
30
Trinidad & Tobago
Grenada
20
Dominican Republic
Belize
Guyana
10
St. Kitts & Nevis
Dominica
Haiti
Barbados
Cuba
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
GDP Per Capita, US$
12
Factors driving Mobile Subscribership
• Positive relationship between income and
subscribership
• Coefficient of determination is 4.5%
• Competition is the biggest factor driving
mobile subscribership.
• Not surprising given innovation in service and
billing (CPP, per second billing), pricing
(prepaid options, no monthly fixed charge,
lower prices, etc.) rapid build out of network.
13
Pricing
• Lower handset prices to encourage take-up
(e.g. Ericsson DH6 regular price of US$131,
dropped to US$22 by June 1999).
• Lower prices for international calls originating
on mobile handsets – declined by as much as
210% (peak prepaid rate)
14
Cont’d
• Mobile to fixed down by more than 50%
• On-Net mobile charges down by more than
50%. but still substantially above the price for
making fixed to fixed calls
• Off-net mobile charges are higher than on-net
charges and charges for outgoing international
calls in some instances.
• Important to understand strategy of mobile
entrants in order to guide regulatory policy
15
Regulatory Challenges
• Given market concentration potential for tacit
collusion
• Mobile termination – already evidence is that mobile
operators will resist any attempt to regulate
termination charges – protection of the status quo
• Not incline to provide information to allow for cost
based termination rate
• Principle of cost orientation should be extended to
mobile termination charges
• International roaming charges – competition or
regulatory lacuna?
16