Telecommunications firm loses Solomon Islands monopoly

Updated August 28, 2009 06:16:33

Solomon Islands has passed its Telecommunications Bill 2009, bringing to an end a long-standing monopoly. Yesterday, Parliament passed the bill breaking the dominance of local provider "Our Telekom".

Presenter: Geraldine Coutts
Speaker: Paul Budde, independent telecommunications analyst, Budde.Com

BUDDE: I think it's great news for the Solomons, it really is one of the last countries in the Pacific that has stopped competition and it's so obvious what the results of that is. You know it has one of the lowest penetrations of telecommunications in the South Pacific and you see that in other islands where you have seen more competition, you've seen an enormous increase in mobile use, but also an increase in the economic results of that.

COUTTS: Well staying with the Solomon Islands for a moment since it's the latest news, what will customers there now enjoy that they haven't so far?

BUDDE: What you typically see is that the incumbent, Solomon Telekom or Our Telekom as they're called, also very nicely by the way to say listen we call it nowOur Telekom , isn't that fantastic? Now the reality is that it is fantastic for the one or two per cent of people on the Solomon Islands who can afford telecommunications. What then happens is that because they're limited and they charge such a lot of money the people that can afford it pay a lot of money and that results in high profits for Solomon Telekom, and then Solomon Telekom goes to the government to say listen guys, you own us so here you've got some beautiful profits from us yeah, so don't touch us. So what over the last ten years or 15 years has become clear that it's not just a matter of how much profit Solomon Telekom can make, but what the economic benefits are for the country if you have a more equally spread and widely available telecommunications network that also the more poorer people can use in the country.

And that is the main difference, so you shift the emphasis as a country away from profits from one company to the benefits to the whole country. And that's what this is going to do, it's going to take the monopoly away from Solomon Telekom and is actually then allowing for companies such as Digicel for example, which is a very, very active mobile operator in the Pacific to enter the market, they've indicated already for years that they'd love to compete in the Solomon Islands, and they can then actually make sure that very rapidly, 20, 30, 40 per cent of the population certainly can afford telecommunications and obviously that has a hell of a lot of social and economic benefits.

COUTTS: Mr Budde is there a danger though, we'll stay with the Solomon Islands as an example then, that the government could swap one monopoly for another, because we know that Digicel as you just mentioned gets really good penetration in the countries it's in. So is it likely then to dominate and become a monopoly itself?

BUDDE: No I don't think so because what you see is that on Solomon Telekom will be forced to be competitive. It cannot just sit there and let Digicel coming in and eat their lunch. So what you will see is you also get a far more lean and mean and eager Solomon Telecom that suddenly is forced to compete. We've seen that for example in countries like Australia and New Zealand, when the incumbent is forced into competition then suddenly you see that prices are becoming better, you get more services, you get better services. So I think that will be the same in Solomon Islands where with Digicel it's not Digicel that's taking over, but they are just becoming an extra competitor to Solomon Telekom and that combination, the dynamics between these two companies is going to provide these benefits for the country.

COUTTS: Now we know in Tuvalu recently, they've signed an agreement with Pacific Teleport to enable the Tuvalu Telecommunication Corporation to revive its mobile services. Is mobile perhaps going to take over from landline?

BUDDE: Oh absolutely, there's no doubt about that. You know you see that also in Africa and Latin America. Typically in these development countries what we've seen is that they never ever got the telephone penetration as the western world has seen over the last 50 years. So around the development world you've seen that penetration in the landline did promote and one, two, three, ten per cent at the most. So in order now to catch up with this dramatic growth in telecommunications it's simply impossible and far too expensive to actually start digging up the country and putting cables in the ground or putting forward there and spread telecommunications in that way. So you have to do it with mobile communication.

We've seen that as I mentioned you had penetration, and this is across the world; Africa, Latin America, Pacific, you start to this penetration with one, two, three per cent, and within two, three, four years you see penetrations of 30, 40, 50 per cent. It's actually mind-boggling. I'm a researcher, I'd never have predicted that in such a short period of time these countries, which we are classifying as development countries, that within such a short period of time you see that up to half the population certainly has a mobile phone. And in these countries it's not just chatting to your mum or your dad, in these countries it's very much like using that for economic and social reasons. You know these people quite often live very remotely. So there is regular sort of communication. So a mobile phone is a godsend, you know you can certainly start phoning to the market, five or ten kilometres away, find out if you can sell your fish there, if there is demand for it you start your walk because it takes two or three hours to walk there. And if there's no demand you phone another village and find out if the market's better there. And certainly you see that the economics of one mobile phone can lift the economics of a family by 20 or 30 per cent. So it really is quite amazing the power of the mobile phone, what does to a country, to the population.