- Published on Thursday, 23 May 2013 00:27
- Written by Trinidad Guardian
On May 13, 2013, Columbus Networks and CWC Wholesale Solutions announced the formation of a joint venture to provide expanded wholesale bandwidth capacity for the Caribbean and Americas region. The development promises greater route choice, improved reliability and higher performance for customers. At the same time, it raises questions about who will safeguard against the possibility of anti-competitive pricing and practices.
When Columbus Networks and Cable & Wireless Communications, announced the formation of their new joint venture entity at International Telecoms Week 2013, it signaled an important milestone for the telecommunications sector in Latin American and the Caribbean.
The development comes at a time when the region’s appetite for broadband is rapidly rising. The market for wholesale broadband capacity is experiencing solid growth and shows no sign of slowing anytime soon. It is no surprise then, that we are seeing consolidation in the market as service providers position themselves to take full advantage of the growing demand.
The two companies were already the most significant providers of wholesale bandwidth for the region. Barbados-registered Columbus International, which operates in 27 markets in the greater Caribbean, Central American and Andean region, estimates that it currently manages 70% of the region’s traffic. CWC Wholesale Solutions is a subsidiary of UK-based Cable & Wireless Communications, which manages a diverse set of telecommunications businesses in Central America and the Caribbean including the well-known LIME brand. Their joint venture, called CNL-CWC Networks, will be managed by Columbus, whose share will be 72.5% to CWC Wholesale Solutions’ 27.5%.
Columbus and CWC in a joint statement said, “The new joint venture company will serve as the sales agent of both Columbus Networks and CWC Wholesale Solutions for international wholesale capacity.” It added, “Columbus Networks and CWC Wholesale Solutions will retain ownership and control of their respective existing networks in the region.”
The companies expect that after completing necessary network interconnections, the joint venture will offer wholesale customers an expanded network platform that spans more than 42,000 kilometers and reaches more than 42 countries in the region.
In addition to the joint venture, CWC Wholesale Solutions has entered into a separate services agreement with Columbus Networks under which Columbus Networks will provide CWC Wholesale Solutions certain operation and monitoring services.
Officials from both companies shared that the companies hope to offer customers greater IP traffic routing options, improved reliability and higher performance as the joint venture rolls out.
Paul Scott, president of Columbus Networks, promised that "Wholesale customers will be able to take advantage of expanded network reach and service benefits by doing business with a company that can provide more bandwidth and broader reach, faster and better."
Simeon Irvine, chief executive of CWC Wholesale Solutions spoke about the venture similarly, saying, “By creating this joint venture, CWC Wholesale Solutions can expand its network reach and increase the diversity and security of supply for our customers and those of Columbus.”
For all their enthusiasm about the joint venture, the success of an enlarged Columbus/CWC is by no means guaranteed. Given the strong parent brands, there is the real possibility of potentially conflicting strategies from Columbus and CWC for development of the Caribbean market.
It remains to be seen how the enlarged entity will position itself in the market. For Columbus, the deal enables the supply of international wholesale capacity and IP services to markets the company does not currently reach, such as Grenada, Barbados, St Lucia, Antigua and St Vincent and the Grenadines. It also provides them with additional connectivity options for Dominican Republic and Jamaica. For Cable and Wireless, its current LIME territories will be able to benefit from enhanced bandwidth capacity, enabled by access to Columbus Networks sub-sea capacity.
However, both companies must await further regulatory approvals in Panama, Columbia, Cayman Islands, The Bahamas, Anguilla, Antigua and Barbuda, The British Virgin Islands, Montserrat and St Kitts and Nevis before they can begin rolling out services on behalf of the joint venture in those countries. It is anyone’s guess as to how long this approval process will take.
The promise of an expanded network that can offer greater resilience, redundancy and routing options for Caribbean and Latin American traffic is certainly laudable. So too is the possibility of improving the region's access to international capacity to better meet the increasing demand.
However, the benefits of this joint venture must be weighed against the possibility that this new entity can negatively influence pricing, competition and downstream market growth. Unhealthy collusion or price-fixing in this significant sector of the telecommunications market could deal a serious blow to already fragile economies in the region. This must not be allowed to happen.
But who is to be tasked with the responsibility of ensuring that things proceed in the interest of health market growth and economic development?
There is no official body with the means or mandate for providing oversight of the region’s telecommunications sector. The small markets of the Caribbean are marked by under-resourced national regulators, more practiced in responding to local telecom wrangling than to strategically analyzing the international wheeling and dealing of trans-national players.
So the questions now are, who is going to act as watchdog to safeguard regional, national and public interests? And, who is going to ensure that the promised efficiencies and capacity increase, actually benefit the region? Hopefully, it will not be too long before the answers emerge.