As COVID-19 has prompted government to put tech at the centre of Cayman’s economic recovery with its smart island initiative, some of the topics taking centre stage are internet costs, speed and accessibility.
The ambition to use high-tech telecommunications to improve people’s lives and the ease of doing business is leading government to investigate the addition of a third submarine cable.
At the Chamber of Commerce Economic Forum in August, Joey Hew, minister for commerce, planning and infrastructure, said the pandemic demonstrated the need to transition to a digital economy. This in turn would require robust broadband infrastructure and strategies to encourage businesses to make the necessary investments for this transition.
“Cabinet has issued a directive for a team to explore the opportunity to land a modern submarine cable in the Cayman Islands,” Hew said, adding, “This submarine cable will be the foundation to make the Cayman Islands a data and information centre hub and place us at the cutting edge of modern business communication.”
Cable & Wireless, the owner of the Cayman Jamaica Fiber System (CJFS) and the local member of the consortium that owns and operates the Maya 1 subsea cable, which respectively connect Cayman to Jamaica and Miami, responded with a defence of its investments into the internet infrastructure against suggestions that these connections were nearing the end of their life.
In a press release, the company said both state-of-the-art fibre optic cables had been continuously upgraded over the years, including as recently as 2018, to ensure that they continue to provide the best speeds and improved resilience.
Speed and capacity
The Maya 1 system is currently undergoing an upgrade that from late October 2020 will introduce 100Gbp/s client access. The CJFS system is already prepared for 100Gbps speed.
Referring to the potential for a third subsea cable, Cable & Wireless said, “While a third cable with a direct link to the United States would bring an additional path and capacity to the marketplace, it would not provide material improvement in latency to the USA and beyond.”
The company claims that an additional fibre route from Cayman to Miami was going to have similar capabilities as Maya 1. “A direct cable to Miami could create a small benefit of a few milliseconds for customers accessing websites and cloud servers in Miami, but it is unlikely to be noticeable to the end customer,” Cable & Wireless said.
Capacity was also not an issue, according to the company’s statement, noting that the Maya 1 cable is only at 41% of its operating design capability and the Cayman Jamaica Fiber Cable is at just 5%.
Paul Kirwan, director of Consortium Cable Management for Cable & Wireless Networks, which has overseen the operations and management of both subsea cables since their inception, said, “The continued investment in the Maya 1 cable has transformed the ICT landscape of The Cayman islands and positioned us as the major solutions provider over the last two decades.”
Kirwan added, “Even if Caymanian consumption were to increase five-fold in the next 10 years, there would not be a capacity concern for the current subsea network.”
Bob Taylor, head of corporate business development at Global Risk and Data Authority Ltd., a compliance solutions provider, says what is missing from the conversation is price.
He argues that the price consumers pay internet service providers for connecting to the internet is dependent on the price that the cable operators charge the service providers.
“So, while technically there is a lot of capacity on that cable, it comes at an incredibly expensive price, which ultimately translates into very expensive internet for individual consumers and businesses,” he said.
Taylor, the former CEO of WestStar, believes the current infrastructure is not going to attract big tech companies. While he agrees with Cable & Wireless that bandwidth is not the issue, he said, “The big global tech companies are going to say that bandwidth is too expensive and there is not enough diversity or redundancy in the network.”
A December 2019 survey of global internet prices by cable.co.uk, released earlier this year, put Cayman as the 13th-most expensive place in the world for an average monthly fixed-line broadband connection. In the list, Cayman was mainly trailing countries in Sub-Saharan Africa. In the Caribbean, only the British Virgin Islands was more expensive than the average US$150 cost of broadband access in Cayman. In terms of price per megabits per second (Mbps) Cayman fares a little better, coming in as the 75th most expensive out of 206 countries surveyed.
In the Cable & Wireless statement, Kirwan noted that because the Maya 1 cable is owned and operated by a consortium of independent operators, Cable & Wireless has to compete with the other consortium members when selling bandwidth on the cable. “Over the years, we have seen a continuous decline in pricing per Mbps for bandwidth, without a parallel reduction in operating costs,” he said.
However, while subsea cables are expensive to deploy, they offer enormous economies of scale. Rising demand for capacity reduces the operator’s unit costs for the cable. As a result, prices do not have to rise in response to increased demand, and they may in fact decline.
For critics, the main issue is that while bandwidth may be inexpensive, Cable & Wireless is the only provider of access to the subsea cables. Unlike in other markets, Cayman does not regulate how much the monopoly provider can charge internet service providers to connect to the cables, for instance in relation to its operating costs.
A hearing by the Public Accounts Committee in July heard about complaints from internet service providers that Cable & Wireless effectively blocked them from accessing and sharing the company’s infrastructure. This included access to the landing station of the Maya 1 cable.
The regulator OfReg gave evidence that it is investigating these claims but admitted it was lacking the legal resources to officially formulate its findings. Proper enforcement would also require a legal team that the regulator does not currently have.
Redundancy and resilience
In response to questions by the Cayman Compass, the regulator said subsea fibre optic systems are critical infrastructure components of a country’s socioeconomic needs and that digitalisation was driving greater demand for capacity, connectivity and route diversity.
Sonji Myles, the acting executive director ICT at OfReg, said the existing subsea infrastructure and service provider had done well at meeting these technical demands over the years. Moving forward, increased capacity and connectivity could be achieved by upgrading existing systems with newer technology or by investment and development in new greenfield projects, such as a third subsea cable. “Both methods deliver benefits,” Myles said.
For Cayman, with its special geographic characteristics, “the need for redundancy and resilience in our offshore/international connectivity is a significant requirement when considering investment and development, and protecting our critical national communications infrastructure,” he said. “Even temporary damage to these lines of communications can have serious economic and reputational damage to our country.”
If there were damage to one of the existing cables, Kirwan said in his statement, it would take on average 15 to 25 days to carry out the repairs. But most internet service providers’ routing systems were designed and scaled to automatically re-route traffic to a secondary cable to facilitate repair without any noticeable impact or congestion.
However, Myles added, “Redundancy in systems and operators will mitigate this risk and may promote investment and development in the country as well as encourage competition in relation to pricing, quality of service and levels of service.”
In response to how a third subsea cable could turn Cayman into a technology hub, the acting director for ICT said, a resilient network, supported by long-term capacity, strong bandwidth, low latency state-of-the-art technology and competitive pricing will contribute to a comprehensive ICT solution that drives and enhances innovation processes and economic growth.
The result of all this could indeed lead to Cayman potentially becoming a global hub of technological innovation.
Under the law, OfReg’s remit is to protect critical infrastructure, and facilitate investment and the development and promotion of competition.
With regard to government’s policy to potentially attract investment into a third subsea cable, Myles said, “from a regulatory perspective, the office remains poised to receive and vet applications and where appropriate, licence any suitable applicant meeting the relevant legal criteria for establishment and provision of subsea fibre infrastructure and service.”
Running a third cable from Cayman to Miami is almost certainly going to be expensive and take time. At the Chamber Economic Forum, Cayman Finance chairman Conor O’Dea noted such a project would take more than three years to resolve and would cost about $150 million.
Economist Marla Dukharan suggested at the same event that Cayman’s government should set up a sovereign wealth fund for the future of the country. She said an undersea cable would be just the type of hard asset that such a fund could invest in.
Because Cayman is too small a market to make a third direct cable to Miami economical, the suggestion is that government should consider it a core infrastructure like roads or the airport.
Another option would be to buy a used cable and run it to Jamaica at a fraction of the cost. It would still require buying connectivity to the rest of the world, but it could be another path, said Taylor, of Global Risk and Data Authority, who is on the board of a company which operates a subsea cable connecting Singapore to the US.
However, for the third cable to work, Taylor said, Cayman needs to first deregulate the sector.
He asserts that the only thing that is going to drive down prices is choice and the ability to switch providers. “And that’s really what is holding Cayman back from a tech standpoint.”
But ensuring shared access to the landing stations and the cables, and deregulating existing contracts requires a sophisticated regulatory environment with effective enforcement, he said.