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Spectrum Steal

Apr 19, 2013 Editorial

 

 

We continue with the discussion of the implications of the cable spectrum arbitrarily issued by former President Jagdeo to two of his close associates, Vishok Persaud, son of the late PPP long timer Reepu Daman Persaud, and to Brian Yong.
In our Wednesday’s editorial “Spectrum Distribution”, we used as the basis of our critique, a paper from the US Congressional Service: Spectrum Policy in the Age of Broadband, to ensure impartiality. The US, of course, has been in the forefront of dealing with technological innovations and has vast experience in government regulation of national resources, of which the broadcasting spectrum has become a most valuable one.
We pointed out that it is now standard practice to use the bidding process in the allocation of broadcast spectrum. This ensures a level playing field to all those that may desire to enter the field and simultaneously ensures that the state is compensated for the use of the resource. It is to be noted that the purchaser does not own the frequency, but simply a licence to use it based on conditions set out in the auction. The licence can be revoked if the conditions are violated as occurred in India with their bid process on the 2G frequency, when bribes were accepted from bidders. We should revisit the process in which the former President awarded the cable frequencies to E-Networks Inc. (Vishok Persaud) and Quark Communications Inc. (Brian Yong).
Apropos to the situation that is unfolding in Guyana, the US Congressional briefing paper also detailed what was termed “barriers to entry” in this new and lucrative technology and to the overwhelming  advantages accruing to early entrants, such as Persaud and Yong. The first barrier, of course, is access to spectrum which was handed on a platter to the two individuals. There were other operators in the area who were not even considered in the black-box style allocation process handled solely by the former President as Minister of Information. Based on auctions of broadcasting spectrum in comparable jurisdictions, the licences handed out are worth billions of dollars.
The two individuals obviously were aware that they were going to be awarded the licences, because they went into operation immediately upon acquisition of those licences in December 2010. Through this strategy they have secured a tremendous advantage over others who may now wish to enter the field, through brand recognition, knowledge of the market and of early monopoly profits. These monopoly profits offer the early entrants the wherewithal to overcome the second barrier to entry – “large sunk costs”.
There are huge costs involved in the deployment of the cable, and subsequently in the transmission towers that will deliver the signals wirelessly into the homes of the subscribers. But in the case of one of the beneficiaries of the free cable licence, Vishok Persaud, there is an even more perverse angle that will make him into the dominant cable operator into the foreseeable future.
When the government made its surprising decision to bring in a fibre-optic cable from Brazil – even though GT&T had already announced their cable would be capable of taking care of all of our needs, including e-governance – it chose the controversial Chinese company Huawei. The US $35 million cable is almost twice of the cost of GT&T’s and the simultaneous announcement that Huawei will also be the company that would install Vishok Persaud’s WI-Max technology for his broadband transmission leads to the inevitable conclusion that there is a connection between the two deals.
Is the installation of Persaud’s network being subsidised by the government’s e-governance contract? Then there are the 90,000 laptops that are to be distributed ‘free’ by the government, but which provide a ready-made market for the early-entry cable licencees.
Through these measures, the two cable awardees, but especially Vishok Persaud’s E-Networks, have hit the trifecta, as they say in horse racing: first-mover advantages, large sunk costs, and access to spectrum. This has given them an insurmountable lead in this horse race that has been ‘fixed’ from the beginning.

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