* Krishneel Maharaj



The June 4 Commerce Commission decision on the Southern Cross Cable Network (SCCN) monopoly for the provision of Internet backhaul service will have a far-reaching impact on the future of Fiji’s broadband connectivity.
Competition in the provision of backhaul is the single-most important determinant of pricing and quality of service.
While the decision should help lower the astronomical costs ISPs must endure under the SCCN’s agreement with FINTEL, it will not succeed in other measures like bringing new ISPs to Fiji’s Internet users.
In the long-term, it may also prove costly to bring about real competition.
The commission’s decision effectively reduces the cost of sourcing bandwidth from the SCCN via FINTEL by a factor of more than 3.5 times in some categories.
Where the cost presently is in excess of $1300/mbps, by July of 2011, the same category of service will be available to ISPs for $360/mbps.
FINTEL’s arrangement with SCCN is a monopoly position and as such, despite outward promises, they are bent on preserving the status quo.
The reduction in pricing is a concession, not all that costly when considering what they could face with real competition in the marketplace.
To understand this is also to recognise some of the shortcomings in the ruling.
The price reduction is a method SCCN is employing to deter new competitors from entering the market. They would like to sign up local ISPs for long-term contracts that would make it difficult for newcomers to gain a foothold.
Lower prices and ISPs locked into long-term arrangements, create a bigger hurdle for new entrants like the South Pacific Information Network cable project (SPIN).
Facing such a scenario, investors in the SPIN cable and other projects are unlikely to give their financial backing.
Other providers like satellite operators O3b Networks also find themselves unable to compete. O3b Networks offers service at $750/mbps, considerably higher than the new SCCN pricing structure.
With its launch delayed possibly beyond 2012 and priced out of the Fiji market, O3b Networks now faces dim prospects of finding customers in the region.
The commission’s decision may end up unwittingly strengthening FINTEL’s position.
Parameters for considering regulatory intervention and liberalisation success should include fostering investment in additional network infrastructure, and bandwidth, facilitating the entry of new companies in both wholesale and retail, lower prices, and improved service for consumers.
As such, the commission might succeed in lowering costs for consumers in the short-term, but has failed to consider what their actions would mean to the other categories of measuring successful outcomes of liberalisation.
The reduction of price alone will not necessarily make existing and potential new ISPs feel comfortable when approaching FINTEL as a partner.
In order to accomplish these outcomes, we have to look at the examples of our larger neighbours in the region.
Telecom New Zealand has already undergone a restructure and Telstra most probably will face a regulatory framework known as functional separation.
In these scenarios, incumbent operators enjoying similiar position as FINTEL, are forced into firewalled wholesale and retail operations.
This remains the only means to foster competition and encourage new entrants into the retail market.
The commission’s decision does not refer to fostering investment in new cable infrastructure and bringing in new entrants, requirements for real competition in wholesale backhaul.
In the long-term, if the commission does not take a more encompassing view of measuring the success of liberalisation, it might end up doing more harm than good.

* Krishneil Maharaj is founder of The Coconut Wireless found at http://coconutwireless.wordpress.com