Compass investigation – Cayman communications: From telegrams to broadband

When former Cable & Wireless CEO Tim Adam started his telecommunications career in the 1970s, much of the Cayman Islands’ tourism and financial sectors communicated with the rest of the world via “telex,” a network of machines that could send and receive text-based messages to each other.

Such technology seems archaic by today’s standards. According to Mr. Adam, telex wires carried speeds of roughly 50 bits per second, allowing users to communicate at the rate of roughly 66 words per minute. However, telex machines were a major improvement over what many local businesses used before: telegrams transmitted via shortwave radio.

Since then, everything has changed. In the 1980s, telex was replaced by fax machines and “international database access service” – a popular precursor to the modern internet – and both would eventually become outdated after the World Wide Web took off in the 1990s.

Today, some of the same copper wires that transmitted 50-bit telex messages decades ago now carry millions of bits per second to residents. Newer, fiber-optic cables carry even more than that, pumping along speeds of 100 million bits per second (100 Mbps) and faster.

Still, Cayman’s internet services – a vital piece to keeping the jurisdiction competitive in the global economy – have much room to improve.

According to studies published in late 2017 by the U.K.-based research firms BDRC Continental and Cable.co.uk, Cayman ranks 39th in average internet speeds (13.15 Mbps) and a dismal 190th in average prices (US$175.27 per month) – though the local telecom companies dispute these studies (see sidebar on page 9).

Moreover, Cayman faces disparities within its own borders. While Jonathan Martin, technology operations manager for Flow (the descendent of Cable & Wireless), said his company is experimenting with delivering speeds of up to jaw-dropping 1 billion bits (one gigabit) per second, the parts of the territory where fiber-optic cable has not been installed – mostly the eastern districts – get only a small fraction of that speed. Fiber is generally required to deliver speeds faster than 25 Mbps.

Government is looking to change this situation soon. A consultation paper published in early March by the Utility Regulation and Competition Office (OfReg) proposes that each internet service provider must offer broadband internet – defined as download speeds of 100 Mbps and upload speeds of 50 Mbps – to the entire island. If that proposal becomes a legal mandate, internet providers would have three years to reach those benchmarks, according to the consultation paper.

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Going east

Shortly after OfReg published its paper, Premier Alden McLaughlin proposed that government achieve universal broadband access by building its own fiber network in the eastern districts.

The premier said this is necessary because the telecoms companies have been dragging their collective feet in fulfilling their licensing requirements. All the telecommunications companies, besides Flow, have deadlines in their licensing agreements to expand their fiber networks across Grand Cayman and the Sister Islands, and those deadlines passed more than a year ago.

“All these years, we keep struggling unsuccessfully to get [the telecom companies] to deploy the fiber they agreed to, so we’re going to abandon that approach,” Mr. McLaughlin said on March 16 in the Legislative Assembly. “We’re going to build the fiber network and we’re going to charge the licensees for it.”

But despite the licensing requirements, there are major logistical and economic restrictions to expanding fiber networks through the entire territory, according to the telecommunication companies.

Logistically, the telecom companies laying fiber – C3, Logic, and Flow – can either run cables underground or hang them on telephone poles owned by the Caribbean Utilities Company and managed by CUC subsidiary DataLink.

Companies sometimes run their cables underground, leasing the infrastructure owned by Flow. However, that is about four times as costly as hanging the cables from telephone poles, so Flow’s competitors typically opt for the latter option.

But even hanging wire from poles is a time-consuming undertaking.

DataLink CEO Sacha Tibbetts said that when his company receives an application to hang a fiber wire on a pole, it must go to that pole and conduct a safety evaluation. This includes CUC linesmen making sure there is adequate space between the fiber cables and the electrical devices on the poles.

Sometimes, there is not enough space, which complicates matters, he said.

Referring to the fact that Cable & Wireless had a legal monopoly on telecommunications in Cayman until the territory liberalized in 2002, Mr. Tibbetts said, “All of the infrastructure was built quite some time ago when there was only Cable & Wireless, so there’s only space on many of the poles for one provider.

“They can’t all go in the same space; there has to be separation between them. So now we have to either reconfigure the pole or in some infrequent cases, we have to change the pole to a taller pole, which is quite an expensive undertaking.”

Mr. Tibbetts said DataLink also has to make sure the poles are designed for wind-loading, which entails making sure they can support the weight of the extra cables in the event of a hurricane or a high-wind storm.

“If we go from one telecommunication wire to four wires, that’s a lot more of a load,” he said. “The way you manage that is either thicker poles, or we can put poles closer together – so we’d put a pole in the middle of two poles to help support the load.”

This limits the number of pole applications DataLink can process to about 200 per month. At this pace, it would take more than four years for the company to process all the applications for the 10,000 remaining poles C3 CEO Martin Bould said his company needs to hang fiber through all of Grand Cayman.

“That’s the big thing. We’re not in control of our own destiny,” C3 owner Randy Merren told the Compass. “If we want to go there, we need permission. It’s a timely process.”

Logic CEO Rob McNabb agreed with Mr. Merren, telling the Cayman Compass that the delays in the fiber expansion cannot be pinned solely on the internet service providers.

Along with being time-consuming, hanging fiber from poles is also costly. Mr. McNabb said fees for hanging fiber run around $1,000 per pole. This can make extending fiber to a lone home in a remote area of East End uneconomical, he said.

Pending the outcome of a court case between DataLink and OfReg, the telecom companies could soon be seeing lower fees associated with hanging fiber from poles.

The dispute between DataLink and OfReg stems from the fact that DataLink charged telecom companies to reserve unused space on its poles since 2012. But last July, OfReg issued orders prohibiting DataLink from continuing to charge reservation fees, and to refund fees that have been charged in the past.

DataLink challenged those orders in an application for judicial review a month later. DataLink is seeking a court order to quash OfReg’s orders, and a suspension of those orders while the case is being litigated. The dispute is scheduled to be heard on June 4.

OfReg officials declined to be interviewed for this story, but have said in the past that the issues surrounding the pole attachments are hindering the expansion of fiber.

“The uncertainty around pole attachments is a leading cause of delays in rolling out fiber networks across Grand Cayman,” stated Alee Fa’amoe, OfReg’s telecommunications regulator, in August last year, after the judicial review application was filed. “Moving these issues forward will ultimately benefit the consumer, who has suffered long enough.”

‘We are building as fast as we can’

Despite all of those factors delaying the rollout, the telecom companies insist they are making good progress in rolling out their networks.

DataLink stated that it is processing applications for pole usage faster than ever, and Flow, C3 and Logic continue to lay fiber. Mr. Merren said C3 has invested more than $20 million in its fiber project and has laid about 350 miles of cable so far.

“We’re building as fast as we can,” said Logic’s Mr. McNabb.

Flow, for its part, disputed government’s characterization that there are no fiber connections in the eastern districts.

Flow Interim Managing Director Danny Tathum explained that Flow has “fiber to the curb” throughout Grand Cayman, due to its parent company, Cable & Wireless, installing fiber optic links for its telephone infrastructure in 1991. Basically, that means Flow’s network is fiber along the island’s major roads, with copper cables running from exchange points to neighborhoods and other areas in the eastern districts.

In some eastern areas, Flow even has extended the fiber from the curbs to the homes.

“If you listen to the politicians speak – and they have no reason to know unless they ask – but they’ll say, ‘When are you bringing it to East End?’” said Mr. Tathum. “Well, we have it in East End for the customers that require the speed. On the Queen’s Highway, we have fiber connections for those customers as well. But it’s about demand. If the demand for bandwidth is reliable, we expand.”

Some telecoms officials also wondered whether government would be wise to pursue a fiber build-out to the entire island when technological advances such as 5G – wireless internet delivered over the electromagnetic spectrum rather than through cables – could be coming soon.

Both Flow and Digicel told the Compass that they are seriously looking into providing 5G technology.

Flow Technology Operations Manager Jonathan Martin stated that 5G would revolutionize Wi-Fi, saying that comparing current 4G technology to 5G is like comparing dial-up internet to broadband.

Nevertheless, government and some residents are dissatisfied with the progress, and are impatient to wait for future technology. Mr. McLaughlin said on March 16 that he wants OfReg to have universal service implemented within 18 months.

Just how that will be completed is not clear. OfReg published a press release on Thursday stating that the regulator “has been formulating a plan and considering timelines for the installation of the [universal service network] accordingly,” but does not provide any other details about the project.

Currently, the regulator is in the consultation process of formulating a broadband policy, which will define the term broadband and set a target for licensees to make broadband available to all residents by a certain date.

That consultation period ends on April 18, and is a precursor to OfReg determining exactly how it will implement universal broadband service.

“Once this new definition of broadband is finalised [as a result of the consultation], if we as the regulator feel, that the local providers are unable or unwilling to build out their networks to meet the specified targets, OfReg is willing to leverage its powers under the [Utilities Regulation and Competition] Law to build a [universal service network] to achieve the desired end result,” OfReg stated in its Thursday press release, adding that it expects to make a final determination on this issue by the end of September.

From monopoly to market

If government indeed opts to build its own fiber network in the eastern districts, it would likely be the largest impact policymakers have had on the telecoms industry in more than 15 years, and would mark the latest sea change in how telecommunication services are provided in the Cayman Islands.

Before there were multiple telecoms companies competing for customers, residents received their telecoms services from only one company, Cable & Wireless, which held a government-sanctioned monopoly on the industry for nearly 40 years.

But when jurisdictions throughout the English-speaking Caribbean began liberalizing their telecoms markets in the 1990s and 2000s, pressure began to mount on Cayman to do the same.

At the time, Cable & Wireless was still in the midst of a 25-year licensing agreement that allowed it to maintain its monopoly in the territory until 2011. However, company officials agreed to “sign away our exclusivity” after years of negotiations in July 2003.

At the time, Cable & Wireless officials painted their decision as something that would make both their company and the territory better off in the long run.

“To be brutally honest, when you’re a monopoly for so long, you begin to think a certain way about your service, about your customers, about who you are in the grand scheme of things – and that has to change,” said Mr. Fa’amoe (now the regulator), who was then head of sales for Cable & Wireless, according to Compass archives from 2003. “We need to become more customer-oriented, we need to be more proactive, and less reactive. And that’s the honest truth.”

After the July 2003 agreement between government and Cable & Wireless was signed, a flurry of competitive activity began, benefiting consumers.

In September 2003, WestStar – now Logic – began offering internet for sale, and by April 2004 Digicel, TeleCayman, and AT&T were offering phone services. That same month, Cable & Wireless announced rate cuts for its fixed-line telephone service.

“The lowering of charges is the second price cut on international calls made by C&W in just over four months,” states an April 6, 2004 edition of the Compass, “this time around, shaving off 10 cents per minute for weekend calls generally with some selected countries being targeted for lower charges.”

Some Cayman residents even carried two cellphones from separate providers.

“I have two phones: one Cable & Wireless and one Digicel. It is cheaper to make overseas calls to Jamaica on Digicel. Cable & Wireless I use locally,” explained Terry Ebanks, according to a June 4, 2004 article in the Compass. “The reception from both companies is good, but it depends on what type of phone you have.”

Competition and regulation

However, not all business was conducted in the spirit of open competition.

In February 2004, WestStar filed a complaint against Cable & Wireless with Cayman’s telecoms regulator – then known as the Information and Communications Technology Authority – claiming that Cable & Wireless was overcharging it to use its internet infrastructure.

“They charge us more than double what they would charge anybody else for that line,” then-WestStar Chairman Rod Hansen told the Compass at the time.

A month later, the regulator would also prevent Cable & Wireless from slashing its mobile phone rates, deeming the prices cuts “uncompetitive.”

Buyouts, mergers, and regulatory disputes would persist over the next decade, with services steadily improving over that time.

But when deadlines for 100-percent fiber coverage became overdue several years ago – Digicel, which has not laid any fiber, had a deadline of Dec. 31, 2015; C3 had a deadline of Dec. 12, 2015; and WestStar had a deadline of Dec. 31, 2014 – the regulator began warning that it may take a heavy hand to ensure universal service.

“Where the telecoms providers cannot meet the obligations they have under the terms of their licenses to take service to the outer districts and the Sister Islands, the ICTA has to consider other options that will finally deliver the promise of a liberalized telecommunications marketplace and give customers more choices,” Mr. Fa’amoe forewarned in February 2016. “What we are considering instead of individual license rollout obligations is the concept of a universal service, which would provide citizens with potentially a menu of services, from any and all providers, no matter where they live in the country.”

Just more than two years later, government has apparently opted to go all out in paving the way to universal service. Companies – including Digicel, DataLink and Logic – seem receptive to the plan.

If implemented correctly, DataLink’s Mr. Tibbetts said, he believes a universal service in the eastern districts would be more efficient than having multiple telecom companies build out their networks separately in a sparsely populated area.

“There are only so many homes here, which means that there’s a limited amount of sales available for the service. If you have multiple providers putting up multiple networks, you’ve got a lot more costs involved, when one network could be sufficient,” he said. “So the universal service can make a lot of sense if it’s done correctly.”