Seldom does a company act on its own volition to give up a contractually granted monopoly three years early and invite new competitors into the market. Nevertheless, that is exactly what Jamaica’s LIME (Landline, Internet, Mobile, and Entertainment) is doing by giving up its exclusive Free Trade Zone Carrier license and Free Trade Zone Provider license granted to its subsidiary company Digiport International in 2000 for a 15 year term.
The free zone boasts an expanding ICT, BPO, and Contact Center presence with 14 providers employing 75% of Jamaica’s 13,000 BPO workers, which generates 100 million USD in service trade revenues as reported by Zagada Markets.
Despite the open door to competition, there is not much shifting as of yet. “Since the end of that monopoly, Flow (Columbus Communications) has been meeting Free Zone tenants individually. The trend so far appears to be that companies are not switching from LIME to Flow, but are contracting Flow for redundancy,” stated Michele Marius, Senior Consulting Officer at JAMPRO, Jamaica’s Investment Promotions Agency.
That change isn’t much more than paper work anyway as Flow had already been providing redundancy support to companies in the FTZ through LIME as the facilitator. There is no big loss for LIME as the business it derives from the free zone is miniscule in its larger revenue picture as stated in the company’s annual report.
OUR recently responded with new powers granted to the agency by the Telecommunications (Amendment) Act 2012 and set a new interim mobile termination rate to become effective on July 15, 2012.
However, since the company has been struggling to be profitable for a few years now, one might intuitively think it would hold on to any advantage. Instead, it’s common speculation that LIME abandoned its FTZ exclusive rights in a friendly gesture to the Office of Utilities Regulation (OUR) which is revising interconnection rates and termination charges between LIME and its only competitor Digicel. LIME argues those rates (established in the early 2000s) have been asymmetric and unkind for years. (Rate flows here)
Incumbent on the Ropes
Although LIME is the market incumbent, formally Cable & Wireless which operated without competition until the liberalization of Jamaican telecom 12 years ago, the carrier threatened to shut down operations in the wake of an approved merger between Digicel and Claro in early January. That didn’t happen and most likely will not, but Digicel now is thought to have twice the amount of customers LIME does. It is easy to imagine how out of whack interconnection and termination rate charges – an annoyance that drives up the cost of telecom in Latam markets – can eat into the smaller player’s profit margins.
OUR recently responded with new powers granted to the agency by the Telecommunications (Amendment) Act 2012 and set a new interim mobile termination rate to become effective on July 15, 2012. It is part of the Long Run Incremental Cost (LRIC) model being constructed as a framework for telecommunications legislation that governs such critical elements as interconnection charges.
Digicel fired back in early June soliciting the Jamaican Supreme Court to block the interim rate from going into effect until a full Judicial Review is carried out; Digicel believes the new interim rate decree unconstitutional. Digicel’s request has been granted, but no determination has been made.