Home / Blogs

Joint Venture Promises Broadband Benefits with Potential Risks for Latin American, Caribbean Markets

Bevil Wooding

When Columbus Networks and Cable & Wireless Communications announced the formation of their new joint venture entity at International Telecoms Week 2013, it signaled an important milestone for the telecommunications sector in Latin American and the Caribbean. The development comes at a time when the region's appetite for bandwidth is rapidly rising. The market for wholesale broadband capacity is experiencing solid growth and shows no sign of slowing anytime soon. It is no surprise then, to see consolidation in the market as service providers position themselves to take full advantage of the expected growth in demand.

Significant Development

Columbus Communications’ Submarine Cable Footprint (Click to Enlarge)
Source: Columbus Communications
The two companies were already the most significant providers of wholesale bandwidth for the region. Barbados registered Columbus International, which operates in 27 markets in the greater Caribbean, Central American and Andean region, estimates that it currently manages 70% of the region's traffic. CWC Wholesale Solutions is a subsidiary of UK-based Cable & Wireless Communications, which manages a diverse set of telecommunications businesses in Central America and the Caribbean including the well-known LIME brand.

Their new arrangement is not a union of equals. CWC's assets, subject to the joint venture arrangement, had a gross asset value of US$108.2 million, and recorded a loss before tax of US$0.9 million in the year to 31 March 2013. In contrast, Columbus's assets, subject to the joint venture arrangement, had a gross asset value of US$304.6 million and recorded a profit before tax of US$29.3 million in the year to 31 December 2012. Their joint venture, called CNL-CWC Networks, will be managed by Columbus, whose share will be 72.5% to CWC Wholesale Solutions' 27.5%.

Columbus and CWC in a joint statement said, "The new joint venture company will serve as the sales agent of both Columbus Networks and CWC Wholesale Solutions for international wholesale capacity." It added, "Columbus Networks and CWC Wholesale Solutions will retain ownership and control of their respective existing networks in the region."

The companies expect that after completing necessary network interconnections, the joint venture will offer wholesale customers an expanded network platform that spans more than 42,000 kilometers and reaches more than 42 countries in the region.

Officials from both companies shared that they hope to offer customers greater IP traffic routing options, improved reliability and higher performance as the joint venture rolls out. However, for all their enthusiasm about the joint venture, the success of an enlarged Columbus/CWC is by no means guaranteed. Given the strong parent brands, there is the real possibility of potentially conflicting strategies from Columbus and CWC for development of the Caribbean market.

It remains to be seen how the enlarged entity will position itself in the market. For Columbus, the deal enables the supply of international wholesale capacity and IP services to markets the company does not currently reach, such as Grenada, Barbados, St Lucia, Antigua and St Vincent and the Grenadines. It also provides them with additional connectivity options for Dominican Republic and Jamaica. For Cable and Wireless, its current LIME territories will be able to benefit from enhanced bandwidth capacity, enabled by access to Columbus Networks sub-sea capacity.

However, both companies must await further regulatory approvals in Panama, Columbia, Cayman Islands, The Bahamas, Anguilla, Antigua and Barbuda, The British Virgin Islands, Montserrat and St Kitts and Nevis before they can begin rolling out services on behalf of the joint venture in those countries. It is anyone's guess as to how long this approval process will take.

Unanswered Questions

The promise of an expanded network that can offer greater resilience, redundancy and routing options for Caribbean and Latin American traffic is certainly laudable. So too is the possibility of improving the region's access to international capacity to better meet the increasing demand.

However, the benefits of this joint venture must be weighed against the possibility that this new entity can negatively influence pricing, competition and downstream market growth. Unhealthy collusion or price-fixing in this significant sector of the telecommunications market could deal a serious blow to already fragile economies in the region. This must not be allowed to happen.

But who is to be tasked with the responsibility of ensuring that things proceed in the interest of health market growth and economic development?

There is no official body with the means or mandate for providing oversight of the region's telecommunications sector. The small markets of the Caribbean are marked by under-resourced national regulators, more practiced in responding to local telecom wrangling than to strategically analyzing the international wheeling and dealing of trans-national players.

So the questions now are, who is going to act as watchdog to safeguard regional, national and public interests? And, who is going to ensure that the promised efficiencies and capacity increase, actually benefit the region? Hopefully, it will not be too long before the answers emerge.

By Bevil Wooding, Internet Strategist at Packet Clearing House. Follow Wooding on Twitter: @bevilwooding and Facebook: facebook.com/bevilwooding or email

Related topics: Access Providers, Broadband, Telecom

WEEKLY WRAP — Get CircleID's Weekly Summary Report by Email:

Comments

To post comments, please login or create an account.

Related Blogs

Related News

Topics

Industry Updates – Sponsored Posts

Ofcom Benchmarking UK Broadband Performance Welcomed, But Needs Considerable Improvement

DotConnectAfrica Attends Transform Africa 2013 Summit in Rwanda

dotMobi and Digital Element Announce Strategic Partnership

Dyn Research: CDN Adoption Across Our Customer Base

Neustar Chief Technology Officer Appointed to FCC's Technological Advisory Council

Neustar Expands Professional Services Offerings for Communications Service Providers

Reducing the Risks of BYOD with Nominum's Security Solution

Nominum and IBM Partner Around Big Data

New Nixu Solution Slashes Cloud Application Delivery Times from Weeks to Milliseconds

Virgin Media Selects Nominum to Support London Underground WiFi Roll-out

Nominum Releases New Version of Carrier-Grade DHCP Software for Telecom Providers

Neustar Labs Innovation Center Grand Opening (Video)

How Secure is Your Mobile Network? And Does It Even Matter? (Webinar)

Nominum Survey of World's Leading ISPs Shows Nearly 60% of ISPs Plan to Roll-Out IPv6 by End of 2012

Nominum Launches Comprehensive Suite of DNS-Based Security Solutions for Russian Service Providers

Nominum Sets New Record for Network Speed and Efficiency

Implementing a Cyber-Security Code of Conduct: Real-Life Lessons From Australia (Webinar)

Neustar and University of Illinois Launch the Neustar Innovation Center

Australian ISP iiNet selects ARI Registry Services to Help It Apply for and Operate .iinet TLD

Nominum Launches World's First Purpose-Built Suite of DNS‐Based Solutions for Mobile Operators

Sponsored Topics