INTERVIEW | Wednesday, 01 August 2007

Transforming the Communications industry

Gerald Fenech speaks to Malta Communications Authority Chairman Joseph V. Tabone on the implications and effects of the communications industry on our economy

I arrive in Joseph V. Tabone’s office after the usual sweltering search for parking at the Valletta Waterfront. It is 34 degrees outside and rising but inside the office, it’s an oasis of calm as I immediately get down to business asking Tabone on how the MCA all began and where has it gone from those heady days at the turn of the millennium.
“Well, I suppose I’m quite proud to say that it’s come a long way since its inception. When I was first approached by government in 2000 to see whether I would be interested in the Chairmanship of the Authority, the organisation was just a concept, the legislation was being debated in Parliament at the time and I basically had to set up the Authority from scratch. After 5-6 years we now have a staff complement of about 50, so we’ve grown substantially although I don’t really like to measure an organisation’s worth by the number of its staff. It’s really the results produced that count and I’m more than satisfied to say that the results and transformation we have achieved in the telecom sector are considerable and that has to be taken in context of the rather challenging situation that prevailed in 2000 -. we had in effect three monopolies for fixed line, mobile and Cable TV distribution. Each of these monopolies has proved to be a particular difficult nut to crack. Actually one of my first interventions when I was approached to head the MCA was to secure an interconnection agreement with Vodafone for Go Mobile to start operating. I was entirely on my own in those days although I brought in some specialist consultants to help me benchmark relevant European interconnection tariffs before issuing a decision, but I’m proud to say that the issue was successfully resolved and Go began operating. The rest is mobile history”.
With an industry generating a turnover in excess of Lm 120 million a year, the Authority must have quite a task to regulate operations in the communications sector.
“It’s a fairly significant contribution to Gross Domestic Product, around 5%, even when compared to other countries, where typically the communications industry contributes less than half this or just short of 2%. These are the signs of a very healthy industry and whether you look at the home, in the classroom or in business, we have become completely dependent on information technology. Just before I started heading the MCA, I was involved in an assessment for the then Ministry of Economic Services to gauge the sort of capacity building that would be required in the light of EU membership which was in prospect. Amongst other things this involved looking at the operation of the Department of Trade and Industry, together with MDC and IPSE. These latter entities subsequently made way for the creation of Malta Enterprise. However one of the interesting insights this experience gave me was that many of the knowledge based companies which were operating at the time, which were telecoms dependent in those days had rather prohibitive telephone bills, which in some instances inhibited growth, particularly where this involved international operations. Any expansion considerations entailed a long hard look at the impact of such communications costs. This was obviously one of the factors holding back economic development.
Well we have come a long way since those days and one of the reasons for that is the liberalisation of the telecom sector which has given us choice, competition, innovative services and reduced prices. Actually one of the reasons why our knowledge-based industries are so successful now is due to the high standard of our telecommunications infrastructure and competitive service offerings. This has helped in no small measure the rapid transformation and growth in economy with attendant socio economic benefits.”.
Still, although charges have gone down for all communications services, there are still complaints that mobile charges remain quite high. What’s being done by the MCA on this front?
“I think that initially, we had a downward trend in prices, especially when Go Mobile came on the scene, however this downward movement stalled somewhat around 3 years ago. Our recent market review concluded that we have joint dominance enabling us to impose remedies aimed at attaining more satisfactory levels of competition and price reductions. This was a landmark decision in a European context – joint dominance is a difficult market state to prove in economic terms acceptable to the European Commission. What this decision effectively means is that the two mobile operators have to provide access to what are termed as ‘full MVNOs’. This is something which both would not do in the absence of regulation. We have also put in place an effective number portability system, that places a competitive pressure on both operators. Changes in prospect such as the possibility of mobile virtual network operators or a third operator may serve to impact the situation for the better as regards lowering of tariffs. The recent Commission ruling on roaming tariffs is also beneficial to the consumer and most particularly business customers. Having said that, mobile operators have considerable room for manoeuvre with regard to wholesale charges as we have now brought down the interconnection tariff from a high off 11c5 a few years ago to around 4c.
Digital TV is another thorny issue. How has the Authority managed to handle market developments in this sector and the rather delicate situation that has arisen in the past few months?
“Our involvement in this is not actually broadcast content based but more to do with regard to garnering the radio spectrum and the allocation of this. The fact that we have an element of retail competition in the TV broadcast distribution sector is a very positive development indeed, not just on pricing but also enabling a more varied content, although in my opinion this latter still leaves a lot to be desired. However that also has to do with our economies of scale and where content is concerned, we are very much reliant on foreign broadcasting media. I don’t think we have got the most inspiring content offerings but that cannot be helped up to a certain extent because of our size. When local operators are negotiating terms with distributors, our small size works to our disadvantage as costs can also be disproportionately high. This is an area where we in conjunction with the Broadcasting Authority, since content is their remit, would like to see some improvement. As I mentioned previously, we are actually involved on the radio spectrum side of things and we have set a target date for complete digital switchover by the end of 2010. The switch from analogue to digital will enable a maximisation of our radio spectrum – spectrum capacity that is presently used to transmit one analogue TV transmission will enable at least four digital transmissions of improved quality. Last year we also had the unfortunate development where Italy reneged on an agreement that we had negotiated for the use of a number of TV channels for digital transmission purposes, bringing Malta’s total digital terrestrial capacity to 19 frequencies. As a result of this. we had issued 2 digital terrestrial TV network licences but just a few months after this, the Italians went back on this agreement resulting in far fewer analogue channels at our disposal. We have now renewed co-ordination efforts with Italy and hope to regain lost ground in time.”.
We also spoke about postal services, an area which is often overlooked. Does the post leave something to be desired as regards quality of service?
“I do believe that there has been a considerable improvement in services with next day delivery services now up to 92 per cent which is not bad at all although we believe that Maltapost can actually improve on that. We stage quality checks on a regular basis and stress the importance of client sensitivity. Some of the problems and customer satisfaction issues could be avoided and to be fair, I do believe that management is committed to instilling an improved service culture in its employees”.
What about the change to adopt EU legislation that the authority has had to undergo?
“It has been quite a massive task as we had to adopt two legislative frameworks in very quick succession. The EU has a complex but effective framework which has as its corner stone the market review on a cyclical basis of 18 specific markets such as wholesale broadband access, that is access by network operators to ISPs, and other such markets in fixed and mobile telephony, leased lines and TV distribution. We have concluded these reviews in record time, however in two of these – broadcasting and broadband services, the Commission has expressed doubts on our findings and thus the remedies we are proposing are at odds with the Commission. Our position in regard to the broadband market, is that there is joint dominance by GO and Melita and that regulatory access remedies should obtain to both. Presently whilst GO is obliged to proved access to third party service providers, Melita is not. It is the Authority’s view that if we had proper competition prevailing in this market, the consumer would get a better deal from a price/quality standpoint. In broadband statistics, we are still a bit behind the EU average with just 13 per cent of the population having a broadband connection although that figure goes up to 17 per cent when 128kb connections are taken into account.”
Our final discussion focused on the Authority’s staff and its plans for the future.
“It is to be expected that in such a small country, you aren’t going to find a lot of people specialised in telecommunications regulation, but one of the things that gives me most pride is the formidable team of people we have managed to assemble in the Authority. Some of this is attributable to the freedom we have enjoyed until recently in the selection of our people. We have persons from a range of disciplines - law, engineering, economics, accounting and public policy. We also invest heavily in people’s development; some of this is experience based, other through sponsorship of training or academic programmes, but a good deal of it through working alongside our European counterparts on a range of projects undertaken by the European Regulatory Group. Through these relationships and wealth of exposure we have been able to develop a team of people that is confident, effective and is second to none. In what is a relatively short space of time we have earned the respect of the industry, our counterparts and Commission officials, but more importantly we have produced results.”