Govt ready for wide ranging talks with phone company
By Gitanjali Singh
June 3, 2000
The Guyana Telephone & Telegraph Company (GT&T) may be willing to break its monopoly given the changes that have been taking place in the telecommunications industry internationally. "They are willing to negotiate and have expressed a recognition of the need for a changed situation and the benefits that accrue from open competition" Prime Minister Sam Hinds told Stabroek News on Thursday.
The telephone company, which entered into a 20-year renewable monopoly contract in 1991, signalled to the government some time ago that it was willing to have talks and the Inter-American Development Bank is preparing a technical assistance programme to aid the reform process.
Hinds, pressed on whether discussions might include breaking the monopoly, said GT&T may not be "unwilling" to undertake discussions for the reform and modernisation of the telecommunications sector and expressed the view that "in time we will have an open, competitive system where prices for telephone services are set by the market."
The IDB will be assisting the government in crafting a strategy paper under a Multilateral Investment Fund (MIF) technical assistance programme which goes to the IDB board on June 15th for approval. This paper will assess the strengths and rights of GT&T as contained in its contract and will consider proposals to bring about the necessary reform and legislation needed to take Guyana into open competition.
The technical assistance programme is expected to span two years at the end of which Guyana is expected to have a market driven telecommunications sector.
GT&T's chairman, Cornelius Prior, had earlier this year indicated that the company was not opposed to competition but expressed the view that the time was not right and that GT&T's penetration rate was only 8%. It is understood that the new wireless technology is much cheaper to install and could pose a threat to the company if there was open competition.
However, Stabroek News understands that the company is facing a situation of lowered audio text revenues while it is also facing severe pressures from the US Federal Communications Commission (FCC) for lower accounting rates. Audio text revenues for the company for the first four months of this year are reported to be less than half of what they were for the same period last year and MCI has taken a decision to discontinue the transport of audio text traffic. Audio text has been a major source of GT&T's revenues.
This newspaper was told that if GT&T agrees to break its monopoly and embraces competition, the pressures by the FCC to lower rates will ease. The company will also enjoy the advantage of a first mover in an open competition environment in Guyana.
One source noted that a monopoly brings with it an obligation to provide service which has been expensive for GT&T to do, given the barriers on increasing rates locally. With accounting rates going down, the cross-subsidisation which has taken place over the years between local and foreign calls is no longer possible, making the financial position of GT&T more difficult.
As such, the source said, the monopoly is now proving to be a disincentive to GT&T as it may be more economical to allow competition in for such competitors may have to rely on GT&T for backbone support for which interconnection charges will be applicable.
Also, the absence of a monopoly removes the pressure on GT&T to invest in areas which might be uneconomical.
Hinds indicated to Stabroek News that in 1997 Cabinet decided that the government could either move to break with GT&T or try to resolve and reconcile the controversy surrounding its operations. He said the decision at the time was to embark on the second course and it was in that context that discussions were held with Prior and terms of reference for three major reviews including GT&T's monopoly rights, and financial audits were decided upon.
However, while this was taking place, the Cable & Wireless monopoly in Jamaica was broken and this started a debate locally about GT&T's monopoly, which led to Head of the Presidential Secretariat, Dr Roger Luncheon, asserting that the firm had an iron-clad monopoly.
But Hinds had later revealed that a programme was being undertaken with the assistance of the IDB to facilitate the legal reform of the telecommunications sector aimed at having an openly competitive system.
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