Faster, stronger, NOT cheaper

Extracted from Cook Island News

High-speed internet is just around the corner – but low-cost internet is still a distant hope. 

The people of Rarotonga and Aitutaki could be streaming internet on the new high-speed undersea cable as early as this month, if cable operators and Vodafone can just agree the last details, the telecommunications regulator believes.

But Vodafone is dampening down hopes of any price reductions, until the economy recovers from the Covid-19 downturn.

A new economic report on operating the fibre cable proposes a shift from charging retailers by the amount of capacity they pre-purchase, to the volume of traffic they actually use.

The cable should enable a 40 per cent reduction in wholesale prices paid by Vodafone for internet data, it estimates – but without competition, that might translate to only a 10 per cent reduction for families and businesses.

That would be a reduction from $13.34 per GB to $12 per GB on the average prepaid plan – still far more than the benchmark of $3 per GB paid elsewhere in the Pacific.

That is why it is necessary for new competitors to help lower prices further, the report says.

Independent economist John de Ridder’s report was commissioned by the new Competition and Regulatory Authority of the Cook Islands.

Authority chairman Bernard Hill said mobile consumers could be switched over the cable this month, all going well. “I’m prepared to bet Cooks will be the first in the Pacific to have proper commercial service running on the Manatua.”

And he said the traffic pricing model would make it easier for small players to enter the mobile phone and internet provider markets. Already, he said, there was interest from new internet services and facilities providers, as well as the Orama mobile operator.

De Ridder’s report says: “A retail service monopoly is not healthy for the sector and the government is committed to market liberalisation. It would be better, in my view, if retail competition came from new entrants rather than from, say, Avaroa Cable Ltd.”

The cable company yesterday expressed caution about the recommendations, but they were welcomed by William Framhein, whose company Orama Ltd has been engaged in a long legal fight to enter the mobile phone market.

“Fortunately Mr de Ridder has taken an entirely pragmatic and, if I may say, enlightened approach to licensing and sale of bandwidth by the cable company,” Framhein said.

“Far from fearing ‘small players’, Mr de Ridder supports a tariff that allows entry at a low level of cost because it is more likely to encourage competition.”

Vodafone has been hit by the Covid-19 travel restrictions, meaning less business traffic and less tourist traffic. It is still finalising an agreement with Avaroa Cable over how much it will pay for international data – and the de Ridder report acknowledges both companies will take a hit from Covid-19.

Retail prices should drop, de Ridder says, when the undersea cable is switched on to supplement the existing satellite internet. But his report notes that Vodafone is still contracted to buy bandwidth from its satellite provider, SES, and to service the Pa Enua.

This means that if wholesale prices come down 40 per cent, retail prices for the end-consumer might drop only 10 per cent.

Until prices come down, Cook Islands has the most expensive prepaid data of any of the eight Pacific Islands nations the report compares.

Avaroa Cable chief executive Ranulf Scarbrough said John de Ridder was a respected telecommunications regulatory economist and “his views are always interesting”.  

Telecommunications competition was a complex subject, he said, with different model and viewpoints around the world.

“The important thing for the Cook Islands is that consumers have access to affordable, fast, reliable and resilient telecommunications services,” he said.

“It is good to see the new regulator taking a thorough, robust and intellectual approach to helping deliver on these goals, and with a willingness to at least entertain more radical approaches. 

“However, Avaroa Cable Ltd believes more industry dialogue is required and there is some way to go before the best approach for the Cook Islands is determined.”

The Manatua Cable, Scarbrough explained, was a highly-complex, multimillion dollar, transnational development project – and they would not be rushed.

“The 3600km state-of-art optical fibre cable, with six landings in four countries, has taken years to plan and build.  It involves a myriad of investors and stakeholders, such as the Cook Island Government, the New Zealand Aid Programme, the Asian Development Bank and many more. 

“Despite the worst global crisis in living memory, a measles epidemic in Samoa, two cyclones and all the challenges of working with the remoteness of the Pacific Islands, the cable is close to being ready. 

“The vast majority of funding has come from taxpayers’ money and so it is all the more critical to ensure all aspects of the project are delivered precisely as expected and with value-for-money at the forefront. 

“Extensive testing has indicated that the cable is operating well within design parameters.  The final stages of accepting the cable will not, however, be rushed by the Manatua Consortium.

“ACL realises people are both excited and expectant – which is fantastic.  Please be assured that the service will be delivered as soon as possible and without compromising on the all-important quality that is essential if the cable is going to deliver for the people of Polynesia for the next 25 years.”

Vodafone Cook Islands boss Phillip Henderson said he could not say with certainty whether the cable could be operational by the end of the month – but he did look forward to offering better value to consumers.

It was important to remember Vodafone has to keep providing phone and internet services to the Pa Enua “despite services not being profitable”; if new competitors entered the market, Vodafone could not keep carrying that loss.

“Unfortunately for Manatua consortium the current Covid-19 crisis has introduced a level of uncertainty and increased risk associated with making any long term commitments,” Henderson said.

That would affect the price paid by consumers.

“The assumptions and considerations typically associated with these types of decisions have been turned on their heads,” he said. “We will need to see a major recovery in the Cooks economy and any benefits associated with the cable are likely to be aligned with the timing of that recovery.”