Healthy competition in the IT Industry

The draft bill for the liberalisation of the telecommunications industry in Malta, which is being debated in Parliament, has been received with considerable reservations by many of the major players in the sector.

Melita Cable, Vodafone and the Internet Services Providers have been wary in their comments on the draft bill, giving the impression that not all is well with the government's plan for liberalising the market. As many local analysts have said, the draft bill is more of a structured plan to dismantle monopolies and to move the market towards an open market in as smooth a manner as possible rather than liberalisation.

Full liberalisation, despite the government's intentions, will not come about until after 2003. This is made very clear in the draft bill. The government, rather than creating a free-for-all, has opted to expand on the regulations its published in October of last year, consolidating its beliefs and providing a clear picture of the how it envisages the future of telecommunications.

There is no doubt that when drawing up the bill, the future of Maltacom was top priority for the government. Maltacom, the country's sole telecommunications provider for fixed telecommunications, has still not completed its restructuring programme. Despite doing extremely well on the financial side, its present structure is not conducive to competing in a free market scenario. That the company is overstaffed is evident and despite Maltacom's efforts to reduce the workforce, there is still a long way to go.

Opening up the market now would have only created a situation which would have forced Maltacom to act immediately rather than over a period of time. By staggering the liberalisation process the government is ensuring that Maltacom will be able to restructure by 2003. However this exercise does not favour the other players in the field.

Melita Cable, despite being given the option to offer data services over its network, will not be able to enter the fixed telephony or international gateway services. It is believed that Melita Cable were interested in becoming the third mobile service provider, yet this will not be possible until 2005.

On the other hand, Vodafone have been given the option to enter the data services sector but not the provision of international gateway services. Neither will they be able to further reduce their tariffs until Mobisle Communications - Maltacom's mobile subsidiary - begins operations at the end of September, thus preventing the creation of an unfair playing field in the mobile sector.

Internet Service Providers are not happy either. Aldo Calleja, chairman of the ISPs sub-section of the Chamber of Commerce, said on radio on Monday that the bill vindicated what they had stated last October but one particular clause related to open access of Melita's infrastructure was still unclear. The ISPs are unwilling to voice their opinion until a meeting with the Minister next Monday, however, industry sources close to the ISPs have said the bill is a "no-go".

One of the main questions that the government still has to answer is why a third mobile player will not be able to enter the market before 2005. Experience abroad, particularly in the UK, has shown that the market and the consumer have suffered when only two mobile players were allowed. The creation of a duopoly is not right and does not allow for healthy competition. When you have a duopoly, there is the risk that both players will work to keep their own clients and protect their interests. There is little hope of cut-throat competition between the two. However, a third player can make or break the market. Not allowing a third player access to the mobile telephony market before 2005 is, we believe, not a good move. The government may be protecting the incumbent companies but the consumer is not benefiting at all. Neither is the market.

The government has effectively dismantled Malta's monopolies, yet certain clauses in the bill, have created duopolies. While government's intentions to safeguard workers in the sector are welcomed, there are certain areas that the government would do well to reconsider.

Treating the symptoms of the country's telecommunications industry is only good in the short-term. The only remedy in the long term is treating the cause of the problem. And that is by going for full liberalisation.