[This week’s Communications column for the Vanuatu Independent.]
Last weekend’s announcement by Minister Rialuth Serge Vohor of an agreement to participate in the SPIN fibre-optic project had been met with cautious optimism from observers. While nobody doubts the desirability of having an undersea cable linking Vanuatu to the rest of the world, some questions remain.
The devil, as always, is in the details.
Not a great deal is known about the particulars of Vanuatu’s partnership in the project, which proposes to join several Pacific Island nations to a trans-oceanic fibre-optic cable stretching from New Caledonia to French Polynesia. The project, called the South Pacific Information Network, or SPIN, was originally envisioned as a way to join France’s Pacific territories, but it quickly expanded in scope.
A 2008 presentation by CEO Rémi Galasso states that SPIN is a limited company registered in Wallis and Futuna with private investment from the API Group and an unnamed French hedge fund. Its public investors include the French Territories of the Pacific Region. The project has the support of the SPC, the Forum Secretariat and the French Government, according to Galasso.
Before Vanuatu’s participation was announced, SPIN estimated the cost of joining New Caledonia, Wallis, American Samoa, Niue and French Polynesia at about 150 million euros. The cable would terminate in Sydney to the West and Hawaii to the East.
The Daily Post reported a price of 230 million vatu for connections to both Port Vila and Santo. That number represents the cost of the end points alone – that is, the structures and equipment required to connect to the cable itself. A recent World Bank report that looked at numerous scenarios for linking Pacific Island nations with fibre-optic cable estimated the cost of the cable itself at between about 1.8 and 2.9 billion vatu. At least one private venture has suggested that costs could drop as far as about 1.4 billion, but that would involve significantly lower bandwidth capacity.
According to the Daily Post report, the funds for the project will be provided by the European Investment Bank and Agence Francais de Développement. Vanuatu’s stake in the project will be established via the establishment of a joint venture with SPIN SA.
An integral part of the agreement is a 30 year concession – effectively a guarantee that the terms we establish today will remain in effect for a generation and a half.
There are many perfectly valid reasons to offer some degree of certainty for the investors. Nobody would willingly venture millions of dollars without some confidence that they’ll be able at least to have the opportunity to recoup their initial investment. That said, 30 years is a very long time. A lot can change.
The nature and structure of the organisation that will own Vanuatu’s fibre connections is due to be negotiated under fairly tight time constraints. Government spokesman George Tarimanu reportedly stated that it was their expectation to have a contract negotiated and ready for signing by August. That’s not a lot of time.
At a recent Pacific Ministers’ meeting in Tonga, where the World Bank report on regional connectivity options was first issued, the Ministers’ communiqué emphasised affordable access and an enabling environment as the most critical elements to ensuring access to information and communications for their respective citizens.
The World Bank report investigated the impact of several different approaches to ownership and management of international fibre-optic links. Among their recommendations was the creation of an ‘Open Access’ environment. Put simply, Open Access helps ensure that the worst effects of consortium-based management of the fibre-optic cable are not imposed on the national market.
Among the principles espoused by an Open Access environment are that “access to facilities is unconstrained and at a fair price” and that fair competition practices are enforced. The draft Telecommunications and Radiocommunications Regulation Act of 2009 currently contains language describing what are known as ‘bottleneck resources’ – that is, elements of the infrastructure where duplication is wasteful or too expensive. If it eventuates, the SPIN link would qualify as such. Because of the immense capacity of a single fibre-optic link, there’s little likelihood that anyone could justify a second any time soon.
Were SPIN designated as a bottleneck resource, the Telecoms Regulator would be in a position to insist that the operators of the link played fair with all national telcos and Internet Service Providers. In short, they would not be allowed to deny access to any party that could afford the price of a connection. The Regulator would also have some discretion with regards to stopping punitive or predatory pricing or any other anti-competitive practice.
Relative to the rest of the region, Vanuatu is fairly well placed in terms of establishing an Open Access environment. While the SPIN contract is under negotiation, the Government should ensure that this position is not eroded. Nobody wants to go back to the bad old days of communications monopoly.
One of the most fascinating aspects of the Internet is that it’s a supply-driven economy. Time and again, as our ability to transfer progressively larger amounts of data, consumers have proven that demand increases to fit supply. It wasn’t so long ago when Internet users in Vanuatu considered themselves fortunate to have a full-time dial-up at a mere 25,000 vatu per month. These days, we chafe at having more than twice that bandwidth at less than a quarter of the price. We won’t ever be able to get our Internet as cheaply as we might in Sydney or Auckland, but if we play our cards right, we could see Internet services improving quite literally by orders of magnitude following the arrival of an undersea cable.
The potential benefits for business can’t be understated. For real-time financial processing operations to offshore call centres, Vanuatu’s tax-free environment, relatively reliable infrastructure and well-educated populace offer a number of boutique possibilities that could have a significant positive impact on our tiny economy. It would only take a few to make a real difference.
Couple that with the learning opportunities that are created if we have access to cheap and accessible Internet and one can begin to imagine the arrival of a fibre-optic link as a truly transformative moment in Vanuatu’s development.
But…
All of this is contingent on the project being structured and implemented successfully. All it takes is one naïve mistake at the outset and we’ll be stuck for years wishing we had acted differently. The World Bank’s support was instrumental in ensuring that our transition to a liberalised telecoms market became a shining example to the rest of the region. It’s doubtful we could have done it at all without them.
We would be well served to turn to them again for advice and assistance as the negotiations proceed. They’re familiar with our market, with the problems and opportunities created by large-scale projects such as this, and they can bring no small amount of expertise to bear on the issue.
A fibre connection to the rest of the world is essential to Vanuatu’s development. But not at any price. A lot can go wrong in undertakings like this. We need to proceed carefully. If we don’t, we’ll be living with our mistakes for a generation or more.