“In terms of the Pacific, it’s only Vanuatu that stands out as completely out of whack.” Jeremy Birks is Digicel’s General Counsel for the Asia Pacific region. He pulled no punches on Tuesday during an interview on the sidelines of the ITU’s annual Global Symposium for Regulators at the Warwick Le Lagon.
The theme of this year’s event is inclusiveness. Availability, accessibility and most importantly, affordability were the subject of the first day’s debate.
Attendees are being treated to truly world-class internet, with download speeds consistently over 100 Megabits per second, thanks to collaboration between Interchange Ltd and Digicel. Interchange donated an additional 200 Megabits of bandwidth to the event, and Digicel laid a half kilometre of new fibre optic cable to provide the venue with a kind of internet experience unknown through most of the Pacific.
While many Vanuatu residents will be asking when this kind of service will reach the rest of the country. The aim of the conference is to figure out how to make it possible.
For a start, said Mr Birks, the cost of Internet bandwidth has to drop drastically. If it did, he argued, the volume used will rise by a massive amount, making Interchange more profitable, not less.
Internet usage rates have already skyrocketed since the arrival of the Interchange fibre optic cable five years ago. Downloads have risen from 16 million Megabytes in 2014 to over 660 million in 2017. Sector revenues rose as well, from VT 3.88 billion to VT 5.38 billion annually.
But affordability remains a hot topic for all stakeholders. Digicel is adamant that Interchange’s prices are “unreasonable”. Digicel Vanuatu CEO Ben Kealy told the Daily Post that they were several times more than in Samoa and Tonga, and 14 times higher per megabit in Fiji.
Fiji benefits from its proximity to the Trans-Pacific Southern Cross cable, which makes landfall in Suva.
Interchange CEO Simon Fletcher has argued that it’s an unfair comparison. Tonga’s cable, for example, was subsidised by a massive World Bank grant. Interchange, on the other hand, was privately financed, and has a duty to its shareholders. The Vanuatu National Provident Fund is the largest shareholder, with 38.5% of shares. The Government of Vanuatu has a 12.5% stake, and Vanuatu Post Ltd has a stake as well.
Asked to comment, Interchange executive Andrew Middlebrook told the Daily Post that the company had dropped prices in the past, but not all of the savings were passed on to consumers. One stakeholder actually reduced its spend, rather than leveraging the cost reduction to increase supply.
Interchange remains willing to push for lower prices, though. Company officers argue that only way to get the kind of elasticity needed to start a virtuous cycle of lower prices and higher volumes is to increase revenues to a point where the company can meet its financial obligations.
Interchange is making progress toward that goal, Mr Middlebrook said, “but they have to meet us halfway.”
He said that a new offering is on the table right now. If the telcos increase their spend by a small amount, they will have access to a major reduction in cost per megabit. “This won’t get us all the way” to the financial sweet spot. “But it will bring us a lot closer.”
At a press conference yesterday, the Daily Post asked Prime Minister Charlot Salwai if he intended to exercise the government’s right as a shareholder to request a cost reduction. “That’s up to the Regulator,” he said.
He reiterated the company’s right to profit from its investment and insisted that a comparison between Vanuatu and other Pacific island nations wasn’t valid, because of the different funding arrangements.
Besides, he argued, international bandwidth is only part of the picture. “The cost of telecommunications—it’s not ICL only.”
The telcos themselves bear a lot of the costs in building out infrastructure, he argued, all of which must ultimately be carried by consumers.
For his part, the recently appointed telecommunications regulator Brian Winji told the media that he intends to begin consultations on internet pricing immediately after the GSR is complete.
The bottom line for him, he insisted, is consumer protection. If any price reductions are required of Interchange, they will have to be accompanied by a commitment from the telecommunication companies to pass the savings on to their customers.
A Chinese representative at the opening session of the GSR said that China had ceased to look at telecommunications as a business and preferred to see it as a social responsibility. She was not alone in the sentiment. Institutional funding of the so-called ‘second half’ was a common theme, repeated by the ITU Secretary General among others.
Several stakeholders have suggested that institutional funders and donors should be investing in domestic fibre infrastructure, and make it possible to run cable to all the major islands. Such an undertaking would be costly, as much as VT 2 billion.
Others suggested that unless operating costs are met too, there’s no point in sticking Vanuatu with a mass of equipment it can’t afford to operate.
Interchange does consider a fibre optic cable to Luganville feasible, and is advancing plans to make it happen as part of their ICN2 cable project.
Others have suggested that Chinese cable maker Huawei is actively discussing the possibility of a multi-island domestic cable network. Huawei built the government’s E-Government radio network about a decade ago.