BTC Holds Bahamas Telecoms to Ransom

by Larry Smith

Last year, BTC introduced a new look as part of a plan to "foster improvement on every level of the communications spectrum."

The new corporate clothing retired BTC's earlier slogan - "Your First Choice" - in favour of a slightly less risible one claiming to be our "Connection to the World". This was a step toward "evolving and re-branding the company," the press releases said.

But evolution at BTC resembles creationism more than science - in other words, this is the way it always has been, and that's the way it will stay. It's been almost a decade since we started talking about BTCs privatisation as a matter of urgency, and ain't nothing happen yet, although State Finance Minister James Smith pops up every now and then with an optimistic update.

Years ago the government's original telecoms sector policy called for updated legislation, the sale of 49 per cent of BaTelCo to a strategic partner, a new regulatory body, immediate competition in the Internet market, and the gradual opening up of other telecom services.

Internet service was liberalised, with the result that Cable Bahamas won the lion's share of the market - over 25,000 Coralwave subscribers compared to 15,000 Batelnet users today. Voice service was then opened up, but BTC continues to thwart Indigo's plans while jealously guarding its mobile phone monopoly (there are almost twice as many cell phones as there are landines in the country today). And although most international players shied away from a minority stake in BTC three years ago, at least two groups did make offers - of up to $130 million - which the government spurned.

So instead of bringing in revenue to help cover the country's huge deficit, BTC has been on a clueless spending spree - installing new mobile phone systems that sometimes work, repairing hurricane damage that should never have happened and adding expensive fibre-optic cable links to our least populated settlements. Rather than removing the dead hand of the state from one of the world's most critical growth technologies, BTC continues to obstruct competition and deny service to consumers.

In fact, it is the only thing they know how to do well. Leon Williams, the acting GM who was bizarrely promoted over his boss after being suspended for making an unapproved $6 million decision, is the chief obstructor, sources say. He is ably supported by Works Minister Bradley Roberts. James Smith and BTCs former GM, Michael Symonette, are said to be in the pro-privatisation camp.

In an amazing example of self-indulgence, the obstructors at BTC are currently spending hundreds of thousands of dollars of public money on pointless litigation to hold back the rising tide of technology and competition. Despite the egregious claim that BTC is the Bahamas' "Connection to the World", analysts say that up to 70 per cent of outgoing international traffic bypasses BTC's network, with 30 to 40 per cent of business subscribers already using illicit voice over Internet alternatives such as Vonage or Skype.

Meanwhile, Indigo - the Bahamian company that was licensed to operate fixed voice service in 2004 - has been quietly building its network among business customers over the past two years and plans to launch residential service in a month or so. Years after Indigo was licensed, BTC began appealing the decision and recently asked the courts to declare that only it is authorised to use VoIP technology in the Bahamas.

Although BTC would naturally not respond to inquiries on this matter, analysts say the goal is to drive Indigo out of business: "This is typical behaviour in markets that are being deregulated," one observer told Tough Call. "But the genie is out of the bottle and it is not going back in. As competitive services gain a higher profile, consumers will demand more and as technology advances what BTC does becomes less and less important."

The term VoIP refers to the transport of voice over an Internet Protocol-based network. It covers a range of activities - Internet phones are just one application. New carriers like Indigo rely on VoIP technology for their core networks, and legacy carriers like BTC are rushing to migrate their networks to VoIP technology, which is cheaper and easier to operate.

In a bid to become more proactive, BTC recently launched its own Internet phone service called Vibe. Like its US-based competitor, Vonage, BTC's Vibe offers customers a foreign phone number and unlimited free calls to either North America or Europe for a flat monthly fee that ranges from $35 to $45. Calls to other areas cost a minimum of 20 cents a minute.

Vonage's commercial Internet phone service has led the way in the US and by most accounts has made impressive gains in the Bahamian market, although it is theoretically illegal - just like the prohibition of liquor was in the US during the early 20th century. Vonage provides the equivalent of full-service landline telephony, through an Internet connection and a telephone adaptor box.

The only requirement for an Internet phone is a high-speed internet connection, like Batelnet or Coralwave. VoIP phones have all the usual features such as voicemail, call forwarding, caller id and call waiting, but unlike regular phone service, these features are included free.

Vonage now has almost two million subscribers, although it is still losing money as it tries to build market share. Meanwhile, computer-based services such as eBay's Skype programme offer voice calls that are completely free.

Skype is a peer-to-peer service created by the inventors of the file-sharing software called Kazaa. It provides free telephony between computer users via a simple headset or USB phone without relying on a central infrastructure, and calls can also be made to regular phones for a few cents per minute. Skype has been downloaded by more than 100 million users worldwide.

But the biggest impact on telecommunications is likely to come from the new Wi-Fi phones that are now being introduced. These let consumers use wireless home and office Internet connections to make calls, and will soon be able to roam seamlessly between cellular and IP networks.

So where does that leave the dinosaurs at BTC? Probably looking sheepish. Meanwhile, the supporters of privatisation continue to talk to a consortium of private equity firms led by Bluewater Ventures, an investment vehicle headed by John Gregg, who is a former chief executive at NTL - Britain's largest cable company.

There is also talk that Cable & Wireless, Digicel and Columbus Communications are waiting in the wings to eventually snap up what remains of BTC after the obstructors have had their way. Both Cable & Wireless and Digicel were initially part of the privatisation process that was pronounced dead by the government at the end of 2003.

C&W is a British company that operated monopoly telecoms services in much of the English-speaking Caribbean for decades. It is reported to be trying to sell its regional portfiolio to Carlos Slim, the billionaire who owns Mexico's Telmex mobile phone operator.

Digicel is an Irish mobile operator that over the past five years has built a $1.2 billion regional network extending from Trinidad to Bermuda and from the Turks & Caicos to Cayman – a total of 22 markets.

Columbus Communications is a Barbados corporation that owns telecoms providers in 19 regional markets - including Cable Bahamas, Caribbean Crossings, Merit Communications and FibraLink Jamaica.

Analysts say that any BTC buyer must have the stomach to deal with the politics, handle the union and fix a broken company: "There are great opportunities throughout the Caribbean but investors have limited resources and the Bahamas is a difficult environment in which to operate.

"My view is that neither Digicel nor Columbus will chase BTC, but if it was offered on reasonable terms one or both could step up. In short, for telecommunication investments, other regional markets are much better prospects."

Most of the English-speaking Caribbean has already opened their telecoms markets to competition for the region's four million active phones. Cell phones are the preferred choice of users, there is an almost seamless roaming throughout the region, one price within and between most islands, and international calls are n ow 70 per cent cheaper.

The big question here is: how long will Bahamians be held to ransom?

In June BTC launched a promotion in Abaco for their GSM mobile phone service, which is not yet fully operational. Using the ironic theme "Happy Together", BTC admitted it was being "forced to deliver more efficient service."

After feasting on filet mignon and shrimp at the exclusive Winding Bay Club, BTC reportedly gave away a huge number of activated GSM phones, along with other expensive promotional items. Since it has a monopoly on cell phones and consumers are desperate for service, this alone should be proof that the corporation and its management should fold their tents and go gently into that good night.

Comments

[Charles Longfellow]

Your article dissecting the dinosaur known as BTC was absolutely correct.

I hope you target next BEC, Bahamasair and the structure of the public education mis-managed mess. All government-controlled money-wasting dinosaurs.

In 2003 an offer of $130 million was made for 49% of BTC.This was well after the acquiring company withstood the criteria necessary by the FNM to be a candidate.This was also after the new partner had conducted it's own investigation(otherwise known as "due diligence") of BTC's financial soundness or lack thereof.

Subsequent to the audit and review an offer was put on the table and then soundly refuted by the new party in power;the PLP. After all, they had to reward the BTC voting constituency with some additional years of feeding the dinosaur.

Sad to say but it is true the Bahamas is just a "banana republic". The Bahamas,due to the largesse of the US, has the highest per capita income in the area but the the poorest cell service of any caribbean nation.

I am afraid nothing will change until the Bahamian taxpayer is sick and tired of paying hideously high cell rates (hidden tax) with no free nights,weekends or holidays and maybe change the party in power.

What is BTC afraid of? I would love to see how they would pan out against Sprint/Nextel if they were allowed in.

This country with all the supposed "brains at the top" does not comprehend the most basic Economic theory. That is the "Law of Comparative Advantage".

Of course BTC has fear of competition since what Indigo has done to their revenues as well as VOIP.

They will never get near the 130 million that was offered because of the dinosaur not moving in correct fashion. What is really galling is to see Minister Roberts gloat over the BTC profits which came off the backs of the Bahamian public and solely from the monoploized cellular profits. Then afterward to see them muck up the cellular service for several days with their same old tired excuses.

[Etienne Christen]

I hope that more people read this article, because you are absolutely 100% spot on with your analysis. There is a flow to technological advancements that cannot be stemmed. Government's continued obtuse and reactive stance will simply force Bahamians to get their communications illegally. The clarion call for privatisation must be heeded.