Then and Now

[This week's Communications column for the Vanuatu Independent.]

In July 2004, the World Bank presented a report on the state of Vanuatu’s public utilities to the public.

This was a watershed moment. From that moment, the government of Vanuatu formally committed itself to a process that ultimately led to the break-up of the telecommunications monopoly and the creation of the Utilities Regulatory Authority.

The transformation since then has been nothing short of remarkable. Nobody seems to have anticipated just how widespread and immediate the effects of telecoms liberalisation would be. Some of the expectations outlined in the Infrastructure Regulatory Review appear now to be quite conservative, in some cases landing nearly outside the ballpark.

Perhaps most telling is the report’s contention that ‘low income, low population base, low urbanization and low literacy rate are characteristics which suggest that demand for telecommunications services in Vanuatu is likely to be constrained.’

Experience seems to indicate quite the opposite.

Between 2002, when TVL first introduced mobile telephone service, and 2004, when the report was released, the number of mobile subscribers increased to 7500. The overwhelming majority of these subscribers were located in Vila and Santo. That number rose to about 20,000 even before Digicel came onto the scene.

The factors driving this surge lie in the nature of Vanuatu society.

Village life in Vanuatu features very tight communication loops from which no one is exempt. Conformity, congeniality and consensus are invaluable commodities in island culture, because disagreements exert an immense price on the community. The one-to-one aspects of village communications are significantly enhanced by mobile communications. The result is that our island geography (and gestalt) creates more value per user than traditional business analysis might lead us to believe.

One of the questions that comes up regularly when I talk about this is how people in the islands will be able to afford mobile services. Given that 5000 vatu per month is not an unusual rural family income, even topping up with 100 vatu credit (currently the smallest increment available) would be a burden, would it not?

The answer is yes and no.

There’s an interesting relationship between commodity prices and agricultural production here in Vanuatu. When the price of coffee, copra or cacao rises, production generally goes down, not up. That’s because the need for cash in rural areas is quite limited. Once a villager earns enough to pay school fees, clothing and a few staples, there’s no more need to make money. So if they can earn the same amount of money for less effort, they do so. Wouldn’t you?

This is one of the factors leading to a kind of economic insulation for the average ni-Vanuatu. The bottom line is that the cash economy remains small in rural Vanuatu because cash is only a small part of the overall economy.

When mobile communications are introduced, the perceived need for cash increases. In the short term, this puts stress on the pocketbook, but the situation rights itself through a nominal increase in the amount of cash generated. Dry another half ton of copra, and you’ve bought yourself a mobile, along with enough credit for a few months, all without sacrificing any other expenditures. Add to this the increased efficiencies that come hand in hand with better communications, and we’ll likely see more prosperity and economic activity – in cash terms – than less.

In other words, this is not a zero sum game.

The World Bank further assumed that large household size would limit the number of mobile phone subscriptions. Anecdotal evidence seems to indicate that the opposite is true, at least in Vila and Santo. Individual family members are obligated to share their phone with others, true. But the presence of one phone only increases the pressure on others to purchase their own. Now that there is a phone in the house, it becomes a viable means for individual members to keep in touch when they’re away. But only if they own a phone themselves.

The role played by family jealousy and rivalry in this equation should not be discounted, either.

One statistic that might leave us all feeling slightly nostalgic: Between 2002 and 2004, TVL reported a grand total of zero faults in its GSM service, accompanied by a peak-time call failure rate of zero percent. In 2007 and early 2008, as we are all vividly aware, GSM service quality suffered terribly under the twin burdens of over-subscription and equipment malfunction.

TVL found itself in the uncomfortable position of having to wait for Digicel to pick up some of the load. Cold business logic dictated that further investment in capacity would be foolish in the face of certain losses to their new competitor. Since Digicel’s arrival, the problem seems largely to have fixed itself, although intermittent problems calling between the two services are still being reported.

One critical metric that will bear close scrutiny in the months and years to come is availability. In 2004, TVL reported that they cleared 76% of all faults within their target time. The number looks worse when one considers that their time frame for urban customers was 3 days, and a whopping 30 days for rural subscribers. Current figures for neither Digicel nor Telecom Vanuatu were available as this column was being written, though anecdotal evidence seems to indicate a significant improvement, at least in the municipalities.

The place where we experience service improvements the most, though, is in our pocketbook. In 2004, TVL’s fixed-line telephone services and international calls were among the most expensive of the 13 comparable markets reviewed in the World Bank study. One notable exception was the cost of national calls. Telecom’s flat-rate pricing for all national calls made them the cheapest of the lot. Mobile prices, on the other hand, were not nearly so competitive.

The intervening years have been very kind to consumers. In a series of mostly unilateral moves, TVL drastically reduced prices on many of their services. Since Digicel’s mobile service started, mobile customers have seen a further decrease of up to 50% on calls, depending on their subscription. Per-second billing and Digicel’s free ‘call me’ text service also help make a few vatu go a long way.

One area that the World Bank study on utilities studiously ignores is rural power. The report’s authors note that they limited their review to Vila and Santo at the government’s request. Be that as it may, we have yet to see a coherent rural power policy from government.

Without at least micro-generation in the islands, further improvements in communications and access to information will likely prove difficult.

Whoever the next minister of Infrastructure and Public Utilities proves to be, there remains a great deal of work to be done. One only hopes that they will take their role as seriously as their predecessor.

Posted: August 28th, 2008
Categories: hard-core, journamalism, wonk
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