Dan McGarry: Strings attached, please – but the choice isn’t so easy

"Telecommunications is something that requires large pots of money, but that’s not all that’s required. We need to be able to live with the results." Image: Seatools

ANALYSIS: By Dan McGarry in Port Vila

It’s been widely reported that Prime Minister Charlot Salwai wants a new submarine cable for Vanuatu.

It’s at the top of his wish list as he visits Canberra this week. And Australian Foreign Minister Julie Bishop stopped only a hair shy of agreeing to fund it before they’d even sat down together.

The visit can be credited largely to some very tactful engagement by the Vanuatu contingent of Australia’s diplomatic corps. While it has to be said that the idea coalesced long before the whole China furore erupted, there’s little debate why it suddenly got so much traction with Australia’s PMO.

In the time-honoured spirit of what’s good for that goose there and that other goose over there is good for this goose over here, it transpires that one of the most likely outcomes of the visit, glad-handing and ceremony aside, will be a second fibre-optic cable for the country.

That’s a great deal. It’s essential for Vanuatu, because it assures redundancy, should anything happen to our first cable.

It’s good for businesses, especially financial operations, who can now shop around for bulk bandwidth prices. This opens a lot of doors for offshore companies, among others.

It may or may not be a good deal for Interchange Ltd, however. That’s the company that owns the original cable, running from Suva in Fiji to Port Vila.

They’ve already announced their intention to build a spur up to Honiara to join with Solomon Islands’ new cable. This would effectively turn our internet point of presence into an international way-station, topologically speaking, rather than the end of the line.

The Vanuatu Daily Post published concerns expressed by CEO Simon Fletcher that he was being frozen out of the planning stages of the planned Coral Sea Cable joining PNG and Solomon Islands to Australia.

So an obvious question arises: If Australia accedes to Charlot Salwai’s request for assistance with a second cable, will it belong to Interchange or not?

That’s not a simple question. Nor is there a simple answer.

On the one hand, there’s a pretty strong argument to be made that steamrolling over privately-owned infrastructure using public funds is not what we generally mean when we talk about development.

On the other hand, competition is demonstrably good—and arguably necessary—in the telecoms sector. The introduction of a second telephone company in 2008 revolutionised communications in Vanuatu, adding an estimated 1 percent to our GDP growth in the mid-term.

Since the ICL cable arrived in 2013, internet use in Vanuatu has exploded. Bandwidth usage has increased by more than two orders of magnitude in just a few years. These have been achieved even though the lowest-cost broadband connection packages cost nearly 10 percent of the minimum monthly wage. Imagine the impact lower prices would have.

The Australian government has already invested millions of dollars in Vanuatu’s Universal Access Policy, which has made it a region-leader in broadband internet accessibility. To add a second more competitive cable as the cherry on top would be one heck of a final flourish.

The government of Vanuatu has got to feel conflicted here. It is a 12.5 percent shareholder in Interchange Ltd, and has gone to bat—and gone too far, according to the courts—in protecting shareholder interests in the company. After the independent telecoms regulator, or TRR, imposed price controls on Interchange and others, the Prime Minister wrote a scathing letter, accusing her (against evidence to the contrary) of rendering the telecoms sector “paralysed, handicapped and stagnant”.

Salwai’s attempt to suspend and presumably to sack her was rebuffed by the Supreme Court amid findings of conspiracy and collusion.

Since then, he’s resorted to legislative measures. In the latest Parliament, legislation was amended to make the TRR answerable to a politically appointed oversight panel. The amendment was introduced without any stakeholder consultation or public awareness. The Daily Post only received a copy of the bill after it was passed.

Australia is always quick to proclaim that its development aid is completely untied. In this case, however, a few strings attached wouldn’t go wrong.

Both the World Bank and the government of Australia have invested significant resources in helping develop Vanuatu’s telecoms sector, and the results have been a shining success. Vanuatu recently won international recognition at the UN as a leader in using ICT for development. Much of that progress was made possible by Australian taxpayers.

One of the largest interventions has been to help with the creation of an independent regulator to prevent a repeat of the depredations that happened in the bad old monopoly days before we had two telcos.

Fair and free competition
So it might not be inappropriate to remind the Prime Minister of the benefits of fair and free competition—and of the dangers of regulatory capture. Corporate influence and lobbying operations in the US telecoms sector have turned it from a world leader to a technological backwater for residential internet, allowing Europe and Asia to leapfrog them in terms of affordable and effective high tech.

And every Australian has the measure of the NBN.

China knows the value of e-commerce perhaps better than any other nation. And you can bet your bottom dollar that if Australia won’t come to play, China will—albeit with very different emphasis and values. It was fears over Chinese influence that drove Australia’s initial telecoms investment back in the oughties.

It shouldn’t be the defining concern, though. Telecommunications is something that requires large pots of money, but that’s not all that’s required. We need to be able to live with the results. And two questions pop to the top of everyone’s mind here when the subject of another cable comes up:

1) If public money is competing with private investment, what is the potential for market distortion?

2) But if public money is used to bolster Interchange’s de facto monopoly in Vanuatu, is this the kind of market balance we want?

If Australia wants to shout us a cable, they’ll likely have no choice but to attach a few strings. Choosing which strings to attach will be an unenviable task.

The Pacific Media Centre republishes Vanuatu Daily Post stories with permission.

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