Telecoms companies oppose OfReg’s internet plan

Regulator misses timeline for issuing broadband determination

In March, the Utility Regulation and Competition Office, known as OfReg, announced that it was launching a process that would result in high-speed internet services being made publicly available to every resident in the territory.

The announcement was made around the same time as when Premier Alden McLaughlin and other legislators made public statements decrying the slow internet speeds in the eastern districts and other under-served areas.

OfReg’s process was to determine what mandatory internet speeds should be offered by Cayman’s telecommunications companies and by when those speeds should be available. OfReg said it would then determine how the speeds should be provided. Mr. McLaughlin said government was planning on building its own fiber network and making the telecoms companies pay for it.

OfReg said in March that it planned on making a determination on these issues by the end of September. However, that timeline has not been met, and the telecommunications companies strongly oppose OfReg’s proposals.

When the initial consultation was launched in March, OfReg proposed to force all telecoms companies to offer broadband internet access services to all residents of the Cayman Islands, with at least one of their broadband service plans offering an unlimited data allowance. The regulator’s proposed definition for “broadband” is download speeds of 100 million bits per second (Mbps) and upload speeds of 50 Mbps or higher.

OfReg proposed to set a three-year timeline for telecoms companies to meet these requirements.

The regulator’s proposals were not met favorably by the telecommunications companies, which objected for a litany of reasons in a public response document posted on OfReg’s website.

For instance, Flow criticized OfReg for putting the “cart before the horse” by mandating internet speeds without first formulating a plan for how they would be delivered.

Flow also stated that OfReg’s speed requirements would be much more stringent than those in other developed countries.

“The [United States] download speed target of 25 Mbps and upload speed target of 3 Mbps diverge significantly from OfReg’s proposed speed requirements of 100 Mbps download and 50 Mbps upload,” Flow stated, adding that the U.S. does not have a required date for the implementation of its target speeds.

Canada, too, only has speed requirements of 50 Mbps for downloading and 10 Mbps for uploading, and has a “loose” 10-15 year timeline for implementing those requirements, Flow stated.

According to Flow, the European Union is the only jurisdiction cited in OfReg’s consultation document that will require minimum download speeds of 100 Mbps. However, the EU is giving companies a nine-year timeline to implement those speeds – as opposed to OfReg’s proposed three-year timeline – and does not have a requirement for upload speeds, the company stated.

Flow further criticized OfReg’s three-year timeline, wondering how the regulator came up with that number.

“Nowhere in the Consultation Document does OfReg explain why three years is a reasonable period to achieve these very high proposed speeds and make them available universally, and without any caps on consumption, to all residents and every household across the Cayman Islands,” Flow stated.

Digicel also disagreed with OfReg’s minimum speed requirements. While other countries have set minimum speed targets, they have not mandated individual providers to cover 100 percent of their populations, the company stated.

Digicel added that it finds it “pointless” to mandate speeds higher than what customers need, want or are willing to pay for.

“Digicel recommends, therefore, that before proposing any such limits, OfReg needs to conduct a more fulsome examination of the demand-side requirement,” the company stated, adding, “The OfReg approach of considering a single set of download and upload parameters for fixed and mobile services is fundamentally flawed, given the inherent differences in characteristics between the services.”

Like Flow and Digicel, Logic criticized OfReg’s proposed mandatory speeds and timeline, calling them “clearly unrealistic.”

Logic stated that, based on its research, the average Cayman customer uses download speeds of 20 Mbps and upload speeds of 5 Mbps. The performance minimum should be set accordingly, and could be universally achieved within five to seven years, the company argued.

Logic also warned against requiring all the companies to build their own fiber networks. The company admitted that its licensing agreement requires it to roll out fiber to the entire territory – all telecoms companies besides Flow have this requirement – but stated that, in retrospect, that obligation was unreasonable.

“Historically, there was a belief that scale economies in other jurisdictions would ultimately reduce the hardware and software costs, and that the level of complexity and labour requirements would similarly reduce, to the point where 100% deployment would be economically possible,” Logic stated, adding, “These assumptions were common to all market participants, and the regulator, and they were quite simply overly optimistic.”

Logic stated that it has spent some $10 million over the last two years to provide fiber to about 65 percent of Cayman homes, and plans to invest another $6 million in the current fiscal year.

However, requiring all companies to build fiber networks through the whole island would likely lead to one or more providers going out of business, Logic warned.

“If forced to do the uneconomic, a licensee will ultimately fail, and underserved households will remain unserved, while the broader market will lose the competitive benefit of that licensee,” the company stated. “Customers and the broader public will be worse off if licensees go out of business.”

Instead of requiring islandwide fiber rollouts, 5G wireless technologies could offer a feasible alternative to providing broadband universally, Logic added.

C3 provided the most favorable response to OfReg’s proposals. That company stated that minimum speeds requirements should be set at 50 Mbps for downloads and 10 Mbps for uploads.

C3 did not provide a substantive response for when those speeds should be required to be available.

“The first objective of the broadband policy is to assure that all the residents of Grand Cayman have access to at least two providers of fixed network technologies islandwide. Until that first objective is achieved, the Broadband Policy can’t be considered as meeting any of the other objectives,” the company stated in response to the question on a reasonable timeline for achieving the mandated speeds.

OfReg did not respond to Compass questions about its time line for making a determination on the above issues.