THERE’S a big debate that should be going on in Jersey, but isn’t. That debate is about the future of telecoms in the Island, which people obviously don’t think is as important as whether the Constables should sit in the States, for example.

In Jersey, we obviously prefer to have interminable arguments about trivia, while something as critically important to our economic well-being as telecoms apparently goes unremarked.

It’s only when Jersey Telecom announces that it has to lose 80 jobs that anybody sits up and takes any notice. But the ‘business transformation’ that is being forced on JT has little to do with the current recession. It’s all about competition and whether there is too much or too little of it. It’s a difficult question but it has to be answered.

Those who have sympathy for JT will say that there is too much competition for a limited amount of telecoms business in a small island. As a States monopoly, JT was bound to see its business whittled away by newcomers supported by a regulator who clearly understands the benefits of competition to the consumer.

Those who believe JT hasn’t gone far enough in adapting to change and meeting the competition head-on will see the 80 redundancies as an admission that the company was bloated and is only now adapting its business model to the realities of a modern economy.
These are totally opposing views which are strongly held and I, for one, haven’t got a clue who is right.

I suppose I have to say that, at the moment, there appears to be more evidence against the JT camp than for it. The Jersey Competition Regulatory Authority, as part of their review of competitors’ access to JT’s network, employed leading Netherlands-based consultants Regulaid to advise them.

Their report, which has had very little publicity and no public debate, concluded that more, not less, competition is needed in Jersey. JT responded by saying that Regulaid was advocating European-style regulations which are costly and inappropriate for a very small island.

The problem for JT is that much of Regulaid’s report was based on a comparision with Guernsey, which is also a small island and indeed has a smaller economy than Jersey’s. This concluded that in virtually every area of telecoms, JT’s charges were higher than those in Guernsey. An average low-user residential customer pays 32% more in Jersey than in Guernsey, the report said. An average small or medium-sized business pays 27% more in Jersey. Other price differences were not so dramatic but still significant.

Not only that but the prices JT charges other telecoms operators to allow them to use its network are so high that the competitors can’t make a profit. That’s why Regulaid concluded that there was not enough competition in Jersey.

In a report that couldn’t be much clearer, Regulaid said that in Jersey there was ‘a circular dynamic of weak regulation, ineffective competition, high prices and inefficiency, which is not serving the short-term and long-term interests of Jersey’.

The report says: ‘As a result we think that the JCRA faces a major task to require JT to introduce new wholesale products (for competitors), to reduce its wholesale prices, and to become more efficient.’ Perhaps becoming more efficient equates to 80 fewer jobs.

The report concludes that the ‘playing field’ in Jersey is tilted more towards the incumbent operator (JT) than in other jurisdictions and that the Islands’ telecoms problems are severe.
On the other hand, JT says that it is ‘profoundly disappointed’ by the report. ‘In short, Regulaid appears not to have properly considered whether a raft of costly and intrusive regulation is sensible and justified in such a small market. Instead, it has overly relied on replicating actions from markets which are larger by orders of magnitude.’

A major shortcoming of the report, according to JT, is that Regulaid’s analysis is ‘often cursory and not in-depth’.

While you might agree that ‘transportation of EU-style solutions to Jersey is not appropriate’, the Regulaid report does at least identify that there is a problem. The remedies suggested by the Dutch-based consultants might not be right, but there must be a reason why most telecoms prices are higher in Jersey than in Guernsey.

It’s obviously a problem that needs to be tackled, but the difficulty is determining whether the solution is more competition or less.

The comparisons with Guernsey might be telling, but then you also have to take into account the fact that the incumbent operator there is part of a multinational group and JT is very much on its own (although perhaps it doesn’t have to be).

A further problem for JT is the very high expectations of its owner, the States of Jersey. As a publically owned commercial company, the States obviously wants a decent return on its ‘investment’. But it also wants JT to behave responsibly, protect the interests of all its customers, allow competition to flourish and even take the technological lead and help drive the economy.

In addition to all that, of course, there is no certainty about what is going to happen to JT in the near future. Are they going to be for sale in a couple of years? Will anyone want to buy them in the current circumstances? The chief executive is also leaving shortly and the executive most responsible for diversifying JT’s business has also gone over to the opposition.

So there is a lot to be sorted out at JT, which is obviously crucial to the future of the Island’s telecoms industry. Mind you, you wouldn’t know it by the amount of debate going on about it.
Peter Body is editor of Business Brief magazine