Competition in the South Pacific
Many of the islands in the South Pacific only have one incumbent telco, which often provides all residential telco services: voice, and Internet access, as well as mobile access. On some of the smaller islands this often can makes economic sense, with the local economy so small that it is not able accommodate another competitor. However as we are seeing, the majority of the islands do in fact have a large enough economy to sustain competition, although in most cases only one additional competitor could realistically supported.
Already a choice of mobile operators is now available in a number of South Pacific islands:
-
Papua New Guinea (two);
-
Samoa (three);
-
Tonga (two),
-
American Samoa (two);
-
Guam (five);
-
North Mariana Islands (three);
-
Palau (two).
Although it is difficult to make direct comparisons between the islands due to the vast differences in economic development, political influences, size and population, there does appear to be a direct correlation between the number of mobile operators and the level of residential mobile penetration. In fact, six of the top nine islands in terms of mobile penetration, have more than one operator.
Guam has by far the highest mobile penetration at 91% of the population and also the most number of mobile operators (five).
Deregulation leading to increased competition despite strong resistance
In many cases there has been a lot of resistance to entry of a new competitor by the incumbent telco of the island. This has often resulted in legal challenges by the incumbent involving the local regulatory system.
For example, in late 2007 the Papua New Guinea Government reversed its early welcome to Digicel, citing changes to its telecommunications policy and the importance of government control. Digicel had to gain a court injunction to prevent government moves to close it down, and the state-owned telco, Telikom PNG, had reportedly refused to connect its landline and mobile phone services to Digicel’s. In March 2008 Digicel was facing the threat of the loss of its own international gateway in Papua New Guinea after the government clarified that Telikom PNG still had the monopoly on these services.
However, a move to deregulate the telco sectors of a number of islands, is paving the way for more competition and lower prices. In late 2007 the Fijian telco sector was finally deregulated, after a lengthy process involving much resistance from the incumbent and many legal court battles.
Such resistance is understandable, with uncertainty and fear arising as to how a foreign competitor could impact the local economy. However, as we are seeing, new competition is not having an adversely negative impact on the incumbent; rather it is in fact making the incumbent sharper and more in tune with market demands. As well as improving the penetration of telco services and lowering prices, more competition is indeed benefiting the entire economy, including the creation of more jobs. This is a trend that BuddeComm is finding in many developing regions including Asia, Africa, Eastern Europe and South America.
For more information, see separate reports:
Oceania Com
Together with Informa BuddeComm is organising the Oceania Com conference which will take place in Sydney on 7 and 8 July. For more information see: www.comworldseries.com/oceania
May 22nd, 2008 at 8:21 am
Paul thank you for the opportunity to express my thoughts on the competition problem or discussion we have in Australia at this time.
To me, competition must be total and open. If, as you inform in your above article a market is to small to allow more than one competitor that will be determined by investors with an interest in that market. To set regulation and distort the market will in the long run cause severe problems in that market.
Let us look at Australia. If as has been claimed Telstra is a monopoly, and proceeds to charge exorbitant prices, an interested Party will see this and seeing an opportunity will enter the market to challenge Telstra on price and service and hope to succeed in their endeavour. This is the only check and balance that is needed in Australia.
Paul would you be so kind as to give me your opinion on this scenario. Optus wins the NBN tender. Optus builds the system and then Telstra, in the spirit of competition, decides to build an FTTN to compete with Optus. Considering their demand for competition without monopoly, could the ACCC or Optus demand legislation to stop Telstra, and stop competition and in fact make Optus a monopoly. Thanks again.