EDITORIAL – ‘Government fiber’: A landmark intrusion into the private sector

“All these years, we keep struggling unsuccessfully to get [the telecom companies] to deploy the fiber they agreed to, so we’re going to abandon that approach. We’re going to build the fiber network and we’re going to charge the licensees for it.”
– Premier Alden McLaughlin

When leaders of the Cayman Islands telecommunications companies heard Premier Alden McLaughlin say the government was going to build a fiber optic network throughout the east side of Grand Cayman – and make the telecom companies pay for it – they might have thought they were experiencing a “bad connection.”

In other words, “Say that again?!”

It is almost always unwise to announce a massive new undertaking without providing crucial details and needlessly provocative not to discuss – or even inform – the parties involved.

Above-board communication and coordination is of even more importance when the topic of discussion appears to be a landmark intrusion by the public sector into a highly competitive area of the private sector.

The issue, from the government’s point of view, is that each of Cayman’s telecom providers has agreed to build out their high-speed fiber networks across Grand Cayman and the Sister Islands (except for Flow, which does not have this condition). More than a year after the deadlines expired, none has fulfilled this obligation.

The reason is economically obvious. It is difficult to imagine how the companies could ever recoup the cost of such a resource-intensive investment. Apparently, however, the premier and the Utility Regulation and Competition Office (OfReg) are willing to dismiss concerns about costs, and take on the project themselves.

Consumers who equate faster internet with better internet (i.e., almost everybody) might be tempted to welcome the proposal … until the bill arrives. The premier says the cost will be charged to the telecom companies – which means, of course, to consumers.

Put another way, the premier’s idea is for the majority of the population (West Bay, George Town, Savannah) to subsidize the cost of broadband access for the minority of the population (Bodden Town, North Side, East End).

That is the sort of thinking that prevails in a “centrally planned economy,” where the government attempts to decide what’s best for consumers, as opposed to a free economy, where “the market decides.” (And, historically, guess which type of economy succeeds in the long run, and which stagnates and inevitably crumbles. Think: Cuba vs. Switzerland.)

If it is true that regulators have been “struggling unsuccessfully” to compel the companies to abide by the rules of their licenses, apparently with no credible threat of licenses being revoked or meaningful fines being imposed for noncompliance, then what is the point of the licenses? More pointedly, what is the point of the regulator?

Further, what makes this regulator confident it can successfully execute the functions of a developer or contractor?

Exacerbating our concerns about the fundamental competence of our government is the government’s demonstrable failure in basic communications efforts.

As of our press deadline Wednesday afternoon, we were still awaiting comment from OfReg which, on Monday, the regulator said would be provided “in a day or so.” (Sorry, OfReg. No hurry. Apologies if we woke you. It’s only that we thought the public might have a legitimate interest in what you are up to.)

Cayman’s telecom sector is competitive, nimble, resource-intensive, highly technical and integral to the functioning and future growth of the country’s economy. To treat such an essential industry in such a cavalier manner borders not only on arrogance – but on regulatory folly.

1 COMMENT

  1. It appears the telecoms companies have assumed that they can cherry pick the lucrative parts of the market, without delivering on their obligations to provide a universal service.
    Faced with intransigence the regulator/government has several options – court action to compel them to install the infrastructure they promised, revoke the licences, or build it themselves and charge the the telecoms companies.
    Court action is slow, expensive, uncertain, and we all know the difficulties caused by the government’s failure to invest in a new court. Revoking licences could result in the telecoms companies calling the regulator’s bluff. The option they have chosen is fine provided the licences allow them to bill the telecoms companies, and do not allow the telecoms companies to pass on the cost to their consumers. This cost should have been priced in already, it should not result in a price hike.

  2. “…The reason is economically obvious. It is difficult to imagine how the companies could ever recoup the cost of such a resource-intensive investment…”

    If true, the companies were fundamentally dishonest or incredibly naive when they agreed to do the work.

    The government has a choice. Fine the companies / pull their licences, which won’t guarantee the work will get done, or get the work done and charge the companies.

    If the companies don’t like it they simply need to fulfill their obligations, or shutdown and sell to someone who will.

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