The ministry announced the modification to its previously declared position on the issue last Friday, arguing that while the new policy would engender broader market competition, the restriction to two new entrants would still prevent the industry from becoming overcrowded, and therefore allow the investors a reasonable return on their capital outlay.

Courtney Jackson, the deputy director general of the Office of Utilities Regulation (OUR) who conveyed the new position, reiterated that the new entrants into this end of the market - now dominated by Cable & Wireless - represented a safeguard for rate cuts on Internet and voice services.

"[There is] the critical need to introduce competition in the supply of bandwidth to the retail market such as Internet Service Providers (ISPs) and ISP subscribers," says Jackson.  "We are keen to ensure that Jamaica [keeps] it competitiveness with countries such as Dominican Republic, Puerto Rico and Panama."

At present, Jamaicans pay about 10 times more for bandwidth than telecom customers in the United States, and significantly more than their neighbours in the region.

Part of the difference in rates is accounted for by the fact that only one main fibre-optic cable exits Jamaica - controlled by local telecom company Cable & Wireless.  The line travels physically for hundreds of miles underwater to the Cayman Islands, eventually running into Miami, USA.

C&W invested billions of dollars over several years to lay down this infrastructure.

But Jamaica's Internet and voice traffic is said to be growing faster than the present fibre-optic infrastructure can manage - with the OUR estimating that the growing demand may not be met by even two additional cables.

"We do not think (that it will reduce the return on investment)," says Jackson, apparently trying to allay fears expressed by at least one potential investor.  "We feel that there would be an explosion of demand."

Technology minister Philip Paulwell modified the proposal last weekend, just before going away on business this week.  The upshot is that the OUR has extended the application period until November allowing, the agency argues, applicants to make the necessary adjustments to their business models.

Five players are lining up for the two licences.  One candidate told the Business Observer that the modification would not affect his company's application.

"We do not have to rework it because our model is open to competition, so it really does not matter the number of cables," said Mark Reid, an executive of Jamaica Network Access Point (JNAP).  "In fact, having two gives a better chance of securing the licence."

JNAP's model involves a consortium of 30 telecoms buying individual space on the fibre, instead of one firm controlling the fibre and reselling parts of it to other telecoms.

Cell phone provider Digicel expressed interest in applying for a licence on its own, but executives of the cellular phone company were not available for comment (since Monday) to say whether they were opposed to Paulwell's modification.  Said Jackson about the modification: "One of the questions is the development of enough demand for bandwidth over medium-term, three to five years at most."

Other reasons for modifying the proposal include the belief that with two licence holders, each investor would be more inclined to build the cable faster, than if there was only one.  Additionally, there is a belief that at least one of the two cables would maintain connectivity during hurricanes.

Jamaica lost much of its Internet and international voice traffic "for four days" after Hurricane Ivan on September 10 and 11 as the storm passed from Jamaica to Cayman.  The storm surge damaged the underwater cables.

The OUR will evaluate the proposals with a US consultant.  "Up to a maximum of two [licences will be given], it does not mean that we are going to offer two," explained Jackson.  "If there is only one good bid then we would offer one."

The OUR will have another consultant to ascertain Jamaica's ability to transfer traffic from fibre to satellite connectivity during periods of hurricanes.

http://www.jamaicaobserver.com/magazines/Business/html/20041026T220000-0500_68308_OBS_OUR_TO_AUCTION_TWO_FIBRE_OPTIC_LICENCES.asp