Area Development / June 1999
By Larry Luxner
If you visit the sprawling Montego Bay Free Zone along Jamaica's northern coast, don't expect to see garment workers cutting fabric for blue jeans -- that's pretty much in the past. These days, you're far more likely to find roomfuls of well-dressed women at computer screens -- taking airline reservations, processing credit-card orders and even accepting sports bets over the phone.
Thanks to the Montego Bay Digiport, an earth station that provides direct links to the rest of the world, a growing number of companies are investing here. They range from tour wholesaler Apple Vacations to English Sports Information Processors Ltd., a company that helps Americans place bets on anything from dog races to pro basketball -- a practice that's illegal in the United States.
"We have a very good reputation and presence here as the No. 1 tour wholesaler to Jamaica," said Cindy Guzel, manager of client services and training at Apple Vacations. "One reason we came was the 30% unemployment rate here and the ability to recruit. Also, we were approached by the free zone and asked if we'd be interested in putting an office here."
In fact, telecommunications -- ranging from basic phone service and cellular telephony to Internet access, data-processing and online gambling -- has become one of the Caribbean's hottest growth industries.
"It's a very simple formula," says Che Douglas, an investment consultant at the Eastern Caribbean Investment Promotion Service in Washington. "Companies are looking not just for cheap labor, but middle-tier, value-added services. The Caribbean is uniquely located for that, in that it's about two and a half hours from the U.S. coast, it's in the same time zone, it's English-speaking, and the labor is cost-effective.
"Moreover," he says, "the quality of the worker has been found to be of a standard that's easily molded into telecom services. Riding on all of that is Cable & Wireless, which has recently begun to soften its stance as rates rates are concerned, and has allowed the region to become more competitive."
C&W is easily the largest single investor in the English-speaking Caribbean. Over the last five years, C&W has poured over $1 billion into the development of the region's telecom infrastructure; it plans on spending another $1 billion between now and 2000.
The company now has around 900,000 lines in place throughout the islands, and recently introduced its $60 million Eastern Caribbean Fiber System -- which links 14 islands from the British Virgin Islands in the north to Trindad & Tobago in the south. The ECFS replaced the Digital Eastern Caribbean Microwave System and is considered the world's most advanced telecom cable link. Other important investors in the region include AT&T, MCI, Telefónica de España, Telecom Italia, Telmex and Northern Telecom.
Douglas says while similar data-processing opportunities are offered by Ireland, Scotland and India, those countries aren't in the same time zone as the eastern U.S. Another advantage is that most of the Caribbean falls under the North American Numbering Plan, meaning calls can be dialed from the U.S. without having to use country codes.
"We've seen the industry develop faster over the last six to eight years in the Eastern Caribbean, as opposed to Jamaica or Trinidad," says Douglas, whose agency promotes investment in Antigua, Barbados, British Virgin Islands, Dominica, Grenada, Montserrat, St. Kitts-Nevis, St. Lucia and St. Vincent. "Overall, the Eastern Caribbean has collectively done more than any of the bigger guys."
According to the Washington-based Strategis Group, the Latin American/Caribbean cellular market alone will quintuple over the next five years, reaching 45 million subscribers and generating $20 billion in annual sales by 2000, hitting $30 billion by 2002.
Meanwhile, privatization fever continues unabated throughout the region. In the past three years, the state-owned phone monopolies of Panama and Puerto Rico were sold to huge multinational consortia, while in Colombia, the well-entrenched government monopoly on local and long-distance phone service has finally come to an end. Even in remote Suriname, telecom deregulation is the buzzword of the moment.
Throughout the region, people are logging onto the Internet as never before. One firm, Teleglobe, says its Caribbean revenues have jumped tenfold in less than two years. Strategic investments in the region's fiberoptic cable and satellite systems have enabled it to become a leading provider of global Internet connectivity services in the Caribbean.
Teleglobe currently provides Internet connectivity via its Globeinternet worldwide backbone to Antigua, Aruba, Bahamas, Barbados, Cayman Islands, Curaçao, Dominican Republic, Grenada, Jamaica, St. Martin, Trinidad and Turks & Caicos. This brings to 12 the number of Caribbean access customers Teleglobe has secured in the past 18 months.
Yet despite having some of the most advanced telecom technology in the world, the Caribbean isn't without its problems. In Communist Cuba, there are only 400,000 lines for 11 million people, and in Haiti, fewer than one person in 100 has access to a phone lines.
Another growing concern is the region's growing dependence on phone sex and Internet gambling. Guyana, Montserrat, the Dominican Republic and other countries have cashed in on audiotext -- a technology that generates huge amounts of incoming telephone traffic, and thus revenues -- while other Caribbean islands earn millions of dollars by issuing offshore business licenses to operate Internet casino and gambling sites.
According to the Sunday Sun newspaper in Barbados, Antigua tops the list with 31 registered companies, followed by Curaçao with nine, Grenada six, and Dominica, St. Kitts-Nevis and the Dominican Republic, with four each. There are two in the Netherlands Antilles, and one each in the Cayman Islands, St. Vincent and Trinidad.
Here's a roundup on what's been happening in telecommunications throughout the Caribbean:
ANTIGUA & BARBUDA: Domestic telephone service in this twin-island nation of 67,000 is provided by the Antigua Public Utilities Authority. In 1997, there were just under 29,600 lines in service, with a switch capacity for 39,000. The service is fully digital, with 80% of the network served by fiberoptic cable. Cellular service is provided by Cable & Wireless Caribbean Cellular Antigua Ltd., with over 1,000 customers.
BAHAMAS: Telecom facilities are highly developed in the Bahamas, where 80,000 phone lines connect a population of 284,000 living on 29 of the country's 700 islands. In addition to basic phone service, Bahamas Telecommunications Corp. (Batelco) -- currently the focus of a bitter privatization debate -- offers fax, data-packet switching, paging, telegraph, telex, cellular and VHF maritime mobile services. AT&T recently won a $26 million contract to build a 470-kilometer undersea fiberoptic cable linking the islands with Florida.
BARBADOS: Cable & Wireless owns the Barbados Telephone Co. (Bartel), which operates 100,000 lines; C&W also provides international services through its Barbados External Telecommunications Ltd. subsidiary. In 1997, Bartel completed its $48 million Bridgetown fiberoptic ring, which connects the island's major urban centers.
CUBA: The Caribbean's most populous country, with 11 million people, Cuba nevertheless has only 400,000 lines -- around half of them located in Havana. Due to U.S. State Department limits on how much the Cuban government can make per minute of long-distance traffic, the split on long-distance revenue has been about 54.5% for the U.S. carriers, and 45.5% for Cuba. Since the 1992 provisions went into effect, Cuba has earned about $173 million in foreign exchange from this traffic.
DOMINICA: One of the world's first countries to achieve 100% digitalization, Dominica's phone system has 14,600 lines and is operated by Telecommunications of Dominica Ltd., a joint venture between Cable & Wireless (80%) and the government (20%). Dominica is an integral part of the Digital Eastern Caribbean Microwave System.
DOMINICAN REPUBLIC: GTE Corp. owns the Dominican Republic's largest phone company, Codetel, which has around 735,000 lines and is fully digital. Earlier this year, GTE announced it would invest $40 million over the next five years in new digital Personal Communications Services (PCS). Lucent Technologies will design Codetel's PCS network based on CDMA technology.
GTE's biggest competitors are Tricom and All America Cables & Radio. Tricom, a venture between Motorola and Grupo Financiero Nacional, is installing a $24 million digital system and expects to invest $200 million over the next five years. Meanwhile, Latin America's first Network Access Point has been inaugurated in Santo Domingo. The project is an alliance between Codetel and Washington-based CAIS Internet.
GRENADA: Grenada Telecommunications Ltd. (Grentel) has just under 25,000 lines in service for 100,000 people, and is a venture between Cable & Wireless and the Grenadian government. Grenada is connected to the Eastern Caribbean Fiber System, an 1,800-km high-capacity fiberoptic network linking 14 Caribbean islands.
HAITI: The poorest nation in the Western Hemisphere, Haiti also has its lowest teledensity -- about 0.8 per 100 inhabitants. Haiti's president, René Préval, wants to privatize Teleco -- which with 64,000 lines is the only state entity making money -- though the plan is unlikely to succeed given fierce labor opposition.
Meanwhile, rich Haitians are enjoying cellular phone service for the first time ever. Several thousand people in west-central Haiti have already signed up for the new service, being offered by Rectel S.A. and two other entities. Phones will cost $450, not including a $100 start-up fee. Monthly charges will be around $20, plus 25¢ a minute for calls.
JAMAICA: Telecommunications of Jamaica Ltd., a unit of Cable & Wireless, has 370,000 lines in service -- a number projected to reach half a million by 2000. TOJ also has 56,000 cellular customers; other services available include voice mail, prepaid calling cards, PBX systems, data transmission and Internet access. The switching and transmission networks are completely digital, with 27 host exchanges and 160 remotes.
Earlier this year, C&W put into operation a $36 million digital cellular system for Kingston, Montego Bay, Ocho Rios, Negril and Mandeville.
When completed, the new Ericsson TDMA network will serve 80,000 subscribers, says Steve Twomey, senior vice-president of mobile services for C&W Jamaica.
"What makes this project unique is the fact that we kept the analog system. We'll have the two systems talking to each other," Twomey explained. "We are going to redeploy the NEC analog sites to provide service in remote, rural areas of Jamaica."
A total of 68 cell sites are now scattered throughout the mountainous, 11,000-square-kilometer island, which is home to 2.7 million people.
CURAÇAO: Curaçao's sole telecom provider is Servisio di Telekomunikashon (Setel), which has 85,000 fixed and 24,000 cellular lines. Of the latter, 6,000 are prepaid lines. Setel is 100% owned by the Curaçao government, and its cellular infrastructure is 100% supplied by Ericsson.
PUERTO RICO: With 1.3 million access lines, over 155,000 cellular subscribers and over 237,000 paging customers, the Puerto Rico Telephone Company -- now owned by GTE Corp. -- is the largest phone entity in the Caribbean. Puerto Rico has a teledensity of 43 lines per 100 inhabitants -- among the highest in the Caribbean, but lower than the U.S. mainland average of 63 per 100.
ST. KITTS & NEVIS: St. Kitts and Nevis Telecommunications Ltd. (Skantel) provides basic phone service in this twin-island state of 46,000 -- the smallest independent nation in the Western Hemisphere. Skantel is owned by Cable & Wireless (65%), the government (17%) and individual investors (18%), and has around 16,000 lines in service.
ST. LUCIA: Domestic and international services are provided by Cable & Wireless, with over 30,000 customers connected to an all-digital system.
ST. VINCENT: St. Vincent has a fully digital telephone system, with 19,000 lines in use; Cable & Wireless operates all national and overseas services.
TRINIDAD & TOBAGO: All basic telecom services in this nation of 1.3 million people are privided by Telecommunications Services of Trinidad & Tobago (TSTT), a joint venture between the government (51%) and Cable & Wireless (49%). TSTT operates 209,000 lines and enjoys a monopoly on basic services until 2010. By then, the company hopes to have half a million lines in operation.