The Bahamas as a Digital Colony

First Published: 2000-02-24

In the 21st Century will the Bahamas become an offshore international center for Internet-based E-commerce… much as it is now a leading banking center …or… will it become a "digital colony" of the United States? This is a timely a question since the former rather than the latter is the announced objective of Government. To answer it let us look elsewhere to get some insights.

Western Europe – Alan Greenspan's evaluation

Recently at the World Economic Forum Alan Greenspan was asked about the prospects of Western Europe. The world-s most powerful central banker said that Europe is falling behind America in the development and exploitation of the Internet. "The technologies which now exist in the U.S. and are available in Europe and indeed elsewhere are not being applied to the same extent that they are in the U. S. and therefore the growth and the underlying improvement in the European Community is less than in the U. S." He attributes this to Europe-s restrictive labour laws and government "meddling". Others at the Forum concluded that Europe will become a "digital colony" of the United States.

The United States – no regulation and deregulation

The Internet, the worldwide network of computer users, is one of the great technical innovations of all time. Electronic computing, transmission, and storage speeds and capacities have been increasing at blazing rates… equal to and even exceeding "Moore-s Law" for computing speeds… a doubling every 18 months. This has and will continue to produce profound changes in how people live and work. Productivity in the U. S. economy increased from 1.1% per year during the 20-year period 1973-93 to 2.7% in the past six years. One third of the increased rate of growth is attributable to technology.

Jason Oxman, Counsel for the Federal Communications Commission, in a major review of government policy noted that beginning in 1969 the FCC fashioned a policy for the marriage of a deregulated telephone system with an entirely free and unregulated data processing industry. It did not impose the old telephone system regulations on new technologies; and when the new technologies began to displace the old, it deregulated the old instead of regulating the new. It discouraged anti-competitive behavior and kept regulatory responses to a minimum.

New Zealand – market driven solutions

One may argue that the Bahamas is different and its policy initiatives should not be based on the experience of Western Europe or the United States. Then let us look at New Zealand… another island country that was forced to build a niche for itself in the Global Economy. In 1984 it was the most "socialist" country in the OECD. Also… it was primarily an agricultural exporter that lost its favored position in its best market… Great Britain. The New Zealand Labour Party committed the country to change and after a review of its options undertook one of the most wide sweeping programs of market-orientated structural change ever attempted by a democratic society anywhere. As described by G.M. Kelly in the International Labor Review of May 1995 "market choice, not bureaucratic intervention, became the engine of economic activity."

For instance, the State Owned Enterprises Act of 1986 converted twenty state-owned business activities to government owned privately managed corporations. These were run on a commercial basis for profit under private sector boards, free from government red tape and removed from political interference.

In September 1990 the Government took the next step… it sold 100% of the state-owned telephone monopoly, New Zealand Telecom, to Bell Atlantic and Ameritech on the condition that they would in turn sell 50.1% to the public in New Zealand and abroad. It did so within two years and in April 1998 Ameritech sold its shares so that today Bell Atlantic owns 24.9%, 22% is held locally and the balance of 53.1% are American Depositary Shares held abroad.

New Zealand did not create a public utility commission to regulate the industry… there is no control of utility rates or standards. Rather it set requirements that guaranteed a competitive environment so that NZ Telecom now competes against three new companies… two land based and one wireless… plus an array of Internet Service Providers.

NZ Telecom in 1998 paid taxes six times greater than the profit it earned in 1987 as a state-owned company; it is 99% digitalized; and the per minute cost of its local calls has dropped 30%. In 1995 the World Competitiveness Report of Switzerland ranked the telecom system of the country second in the world.

The Bahamas – bureaucratic intervention

With regard to the above it is clear that the telecommunications policies of the Bahamas are the opposite of the United States and New Zealand. Batelco has and is operated as a government owned and government managed company. The announced intent of government is to sell 49% to a foreign strategic partner and retain 51%. Batelco would become privately managed but government controlled and not a privately owned, controlled and managed corporation… a more commonly accepted definition of privatization.

Furthermore, according to the Utilities Commission Act of 1999 the Commission will determine whether telecommunications services are "satisfactory" and it will establish service standards. It will determine whether utility charges are "reasonable" and "determine… the rates which may be charged." It will have the power to investigate, to penalize the public utilities for non-compliance to its directives; and to tax such companies to provide the funds to cover its own costs of operations.

The Bahamas has chosen government control and bureaucratic intervention rather than deregulation, no regulation or limited regulation as its telecommunications policy. This is out of touch with the realities of the industry and certainly is not in line with experience elsewhere. And… its efforts to date to privatize Batelco suggest that the country is more likely to become a digital colony of the United States rather than a leading offshore center for E-commerce.

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