EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf

In Vanuatu regulatory powers are vested in the Minister for Telecommunications. The
original Telecommunications Act introduced a regulatory authority, but this was
subsequently repealed and the Minister assumed oversight of the sector. In Vanuatu, the
concession is regulated informally. Lack of government capacity is one reason frequently
cited for not establishing more robust regulatory capacity.
A.2.1 Policy Recommendations
Monopoly arrangements inhibit growth in telecommunications in the Pacific. Small size and
remoteness are two reasons commonly given for maintaining a monopoly. Pacific
governments argue that very small markets will not attract investors and will therefore be
unable to sustain competition, ultimately driving up costs for consumers.
Monopoly arrangements are generally profitable for the operators, but these profits do not
necessarily translate into increased investment in infrastructure. For example, in Fiji, ATH’s
ratio of profits to revenues is 20%. Vodafone Fiji and FINTEL’s (in which ATH is also a
shareholder) are 42% and 35% respectively. The level of reinvestment of profits into
telecom infrastructure in Fiji is low compared with other countries 36 . It records a capital
expenditure to revenue ratio of 24%, lower than the small islands average of 28% and the
recommended 40%.
The examples of St Lucia and Tonga’s mobile sectors and ISPs in Samoa and Papua New
Guinea show that despite small market size and a geographically dispersed population, most
Pacific countries could sustain multiple services providers at least in these two sub-sectors,
and that liberalization would help drive improved quality, better prices and increased access.
We therefore recommend liberalization for countries like Fiji, Federated States of
Micronesia, Solomon Islands and Vanuatu. These countries all have populations of 100,000
or more and are as big as or bigger than other countries where competition has been
successfully introduced in mobile, internet and international service provision
Smaller states could benefit from regional competition in certain services. Countries with
similar constraints (e.g. Micronesian countries have similar population sizes and geographical
challenges), could collaborate to encourage private sector interest, by asking potential
investors to bid to serve them as a group.
Competitive markets need to be supported by appropriate regulatory capacity. All Pacific
countries have arrangements to regulate telecommunications prices. Additional capacity and
institutional strengthening may be needed to oversee interconnect agreements and
radiospectrum management. The Caribbean example of ECTEL (described in Box 7.9)
demonstrates that there are benefits from regional regulatory cooperation.
36 Fiji Internet Case Study, ITU June 2004
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