11 September 2020

Response to New Telecoms Policy: St Helena Held Hostage by Foreign-owned Monopoly

originally published in the The St Helena Independent Volume XV, Issue 40, Friday 11th September 2020, p.9

On Monday the deadline for the public consultation of the new “Policy for Communications Networks and Services” ended. In July SHG published the new policy which outlines how our telecoms sector should be regulated after Sure‘s license term ends in December 2022. The consultation gave the public the chance to provide input on the proposed changes.

To the disappointment of many the policy shows a strong inclination towards extending Sure‘s monopoly, as Christian von der Ropp of A Human Right points out.

Christian who has been lobbying for our submarine cable as well as better and more affordable Internet access for more than eight years, submitted an extensive response to SHG extending over 55 pages.

It starts with a general introduction on the importance of better and more affordable Internet access for the island, describing how low Internet adoption limits our ability to attract tourists and adopt electronic forms of money as African countries have already done successfully and how the cable could lead to job growth in traditional occupations and bring new jobs. Besides the positive effect better Internet would have on our education and health system it also states that the “persisting digital divide on St Helena […] causes democratic deficits” as wide broadband penetration was a necessity for democratic participation on and off island.

Lastly, the introduction highlights how throughout the world broadband helped contain the COVID-19 pandemic and saved lives which would not be possible the same way on St Helena due to the low broadband adoption.

The second chapter of Christian‘s response compares St Helena to similarly sized island nations and finds that Sure‘s broadband plans are at least twice as expensive as elsewhere including in the Falklands despite their 27% smaller population and calls Sure‘s overage charges of 300-749% excessive and unfair as our lack of choice and our limited digital literacy is exploited recklessly. While tariffs are prohibitive it is pointed out that performance, service quality and availability of our broadband service is low, how the limited availability of St Helenian telephone numbers from abroad is partly owed to Sure‘s inadequate and expensive interconnections overseas and how we are not even allowed to bypass this barrier to international voice calling by the ban of certain Internet-based telephone services in Sure‘s terms and conditions.

The response goes on to blame Sure for not having upgraded our Internet link to a modern satellite system, for the lack of a backup link and the resulting blackouts in the past and that because of our slow satellite link Sure‘s investment in a 4G network which “is oversized for today’s needs and undersized to support high usage levels” in the future was a misallocation of capital while other key equipment has not been modernized.

A summary says that Sure has shown an unwillingness to increase capacity, that the absence of any public scrutiny of Sure‘s investment causes moral hazard and inefficiencies and that the current regime with a 10-year license term generally disincentivizes investments towards the end of that period.

Based on the fact that Sure prohibits businesses from reselling Internet access by Wifi hotspots or by setting up Internet cafés the response notes: “Sure’s license grants excessive rights that enables the company to crowd out local businesses, hamper entrepreneurship in St Helena and exclude the poorest from accessing the Internet”.

Sure‘s resistance to expand Internet access is explained by the fact that telephone calls and pay TV are key pillars of their business model which could collapse if we had unlimited Internet access and could access so-called over-the-top (OTT) services such as YouTube, Netflix, Skype or WhatsApp which could replace Sure‘s services at little to no cost.

Despite Sure having discounted the threat OTT services pose to their business model as “a worldwide trend” the response says there is a “direct and existential conflict between islanders’ hope and need for unlimited Internet access including discrimnation-free access to OTT services and the commercial interests of Sure”.

The response also analyzes our heavy dependence on Sure as the only provider of communication services and the financial penalty of ending their monopoly due to the obligation of SHG to buy out all of Sure‘s assets on island should their license not be renewed. Worse, if Sure don‘t upgrade their network prior to the cable‘s arrival in 2021 on a voluntary basis – so still during their current license term – SHG is at risk of losing the last tranches from the EDF grant with a total value of € 21.5 million as it requires 70% of users to get data rates of at least 10Mbps which are impossible today.

This, the report claims, “boxes in SHG with Hobson’s choice: accept Sure SA’s conditions or pay millions in compensation for [their] assets as the license terms stipulate and additionally lose one or more tranches of the EDF funding.”

It concludes that “St Helena is effectively held hostage by a foreign-owned monopoly profiteering from the island and hampering its socio-economic development not only at the expense of islanders but also that of UK taxpayers who have been keeping St Helena afloat, indirectly carrying the financial burden of the monopoly.”

Christian goes on to argue that the Policy fails to recognize the key problem of St Helena’s poor and expensive telecoms services which is its regressive regulatory policy protecting Sure‘s outdated business model, the abuse of monopoly power and a lack of regulatory oversight by the government.

The new policy proposes price controls and service quality obligations to be enforced by a newly created Regulator but Christian believes the Regulator will remain a toothless tiger since the Policy itself already notes that tools to monitor service quality were too expensive while he believes the proposed price control mechanisms were unfeasible. By several recent warning examples from the Falklands he makes the point that it is impossible for an island nation of our size to create the necessary regulatory capacity and that this will eventually lead to the loss of regulatory control.

Christian‘s response argues that the new policy is full of misconceptions and miassumptions ignoring facts and key developments of the global telecoms industry. Despite the BOTs of Montserrat and Anguilla allow competition and still have cheaper broadband rates and in ignorance of potential satellite earth stations that would elevate our bandwidth utilization to an equivalent of tens of thousands of subscribers, the policy asserts without evidence that St Helena is “well below minimum efficient scale due to market size”.

“The policy is totally imbalanced in that it does not investigate any of the countless problems of the monopoly but desperately seeks to extend the same with many factually wrong arguments.” Christian explained to the Independent and went on: “It also lacks any vision on future infrastructure upgrades beyond the 10Mbps threshold required by the EDF”, a rate no longer considered as “broadband” in many jurisdiction and a hundreth of the gigabit-level the UK seeks to deliver to UK homes by the end of 2025.

Referring to the recommendation of the Alliance for Affordable Internet (A4AI), a DfID-sponsored NGO, and many examples including from highly developed countries the response proposes to bring St Helena‘s broadband network into public ownership. It argues that because poles, ducts, manholes, cabinets and other infrastructure could be shared with the electricity and water network a public utility like Connect could build a fibre network up to 30% cheaper than Sure, that the long payback period of fibre networks meant Sure couldn‘t recover the investment in such, that instead the infrastructure-driven and capital-driven business model of Connect would better align and that local ownership of our broadband infrastructure would stop the capital outflow, one of our core economic problems.

Most notably if Connect [the St Helenian public utility company unrelated to this website] owned the fibre network the “direct conflict between any private company’s interest in generating profit and the goal of providing universal, affordable access, can be resolved as a government-led and -controlled rollout can unlock long-term benefits beyond bottom-line profits of a private telecoms provider.”

It is also criticized how the Policy is full of unnecessary concessions to Sure such as repeating seven times not to pose regulatory burden on Sure, undermining SHG‘s authority. At the same time the Policy proposes a new bureaucratic barrier by the requirement of an import license for telecoms equipment such as mobile phones that will inevitably lead to price increases for consumers.

The Policy‘s consideration to restrict access to OTT services like YouTube and Netflix to protect Sure‘s business model is called “absurd” in Christian‘s repsonse as regulators around the world adopt the principles of “net neutrality” seeking to ensure the opposite: discrimination-free access to OTT services which are main drivers of digital innovation. The response also notes the irony that St Helena will connect to Google‘s cable which is in fact a provider of OTT services which the policy considers to restrict.

“With a 10-years monopoly, the absence of competition, SHG as an anchor customer spending £686,000 p.a. on Sure‘s services, SHG‘s obligation to buy out Sure‘s network in case their monopoly is not extended and the fact that the submarine cable including capacity rights are paid for by SHG with money from the EDF there is a risk-free environment on St Helena, but still the Policy portrays Sure‘s business as risky and implicitly seeks to justify a high risk premium for Sure”,Christian criticizes.

He also highlights how the Policy desperately seeks to argue for the renewal of the monopoly by other wrong assumptions including that Saints would not immediately make use of unlimited Internet access or that St Helena‘s little landmass would make mobile networks inefficient because of interference. Being based in London the Policy‘s author should have noted that mobile networks even work pretty well where more people live on a square-kilometre than on the entire of St Helena.

“Rather than tailoring regulations to match the desires of a monopolist and its outdated business model the objective of the Policy should be to enforce a business model that aligns with society’s and the economy’s needs.” the report say.

“People believe that the huge capacity the submarine cable will bring, will finally usher St Helena into the broadband age but the truth is that there is another bottleneck and that‘s the uncontrollable private monopoly which must be removed”, Christian adds.

Apart from allowing competition including community-owned networks in the form of cooperatives the response calls for SHG to partner up with other BOTs and create a joint regulatory body for telecoms to better counter the „growing complexity of modern telecommunications with all the technical,economic, and legal aspects, some of which the Policy fails to assess appropriately”.

The report states that the dependence on Sure caused by their right to compensation for all their assets in case their license is not renewed paired with the dependence on Sure to deliver the EDF milestones results in a loss of authority and sovereignty over St Helena‘s telecoms sector which needs to be restored. If not, it is warned, we will continue to be exploited by an uncontrollable monopoly and the plan to render St Helena into a mid-Ocean hub where submarine cables and satellite earth stations interconnect will fail. The strategic value of such hub for the UK and its fledging space industry isn‘t considered by the Policy which generally lacks any macroeconomic scope, as the report notes.

Christian called the overall package, as unacceptable, not being in the interests of the island, and that the Policy does not contain any true reforms but only “cosmetic adjustment” with little to no effect.

High-speed broadband would be huge for education. Not only could we make better use of online materials, but with affordable broadband teachers could develop their practice from home.
I'm an IT engineer and I would love to return to my island to start an IT business, but because of the slow, expensive and unreliable internet connection this is simply impossible.
I had to leave St Helena to study. Being 5000 miles away from my family and friends is hard. Not being able to skype with them due to the slow and expensive internet on St Helena is even harder.
Socioeconomic status is now heavily reliant on broadband penetration. With the ever-growing importance of the internet, St Helena with its limited access is in danger of being left behind.