20 years later, Telecom Reform Act delivers on promise
The telecommunications industry is marking the 20th anniversary of the Telecom Reform Act of 1996, which in Puerto Rico sparked unprecedented levels of competition in a sector formerly dominated by a single carrier and astronomical calling rates.
Fast-forward two decades later, the island’s telecom market is now fueled by competitors who deliver growth, innovation, better prices and better service, said Naji Khoury, who now presides Liberty Cable of Puerto Rico, after spending years as a high-ranking executive at the former Centennial Communications.
Centennial was one of six wireless carriers that at one point competed for local callers, and was one of the national frontrunners in launching unlimited voice services. The evolving market has hosted over the years Celulares Telefónica — formerly run by Puerto Rico Telephone and is now Claro — Cellular One (now AT&T), and SunCom Communications (now T-Mobile.) Local consumers would also see the arrival of Open Mobile and Sprint, which are still in the mix.
“Previous to the implementation of this law, the Puerto Rico government was the sole provider of services,” said Ray Flores, regional vice president of AT&T Puerto Rico. “Today, and as a result of the adoption of that law, Puerto Rico enjoys an open market with more than 60 providers that aggressively complete to the benefit of all consumers.”
The telecom law “injected billions of dollars in the local economy across many sectors, an influx that otherwise would have been impossible. It shows that the free market concept works when every player abides by the same rules,” Khoury said.
Khoury, who is now leading a company that offers cable television, telephony and Internet services, offered a run-down of milestones associated with the law, namely: The implementation of one calling zone in Puerto Rico driven by Centennial, breaking down all barriers between adjacent towns on the island; Unlimited fixed calling where metered (minutes) calling disappeared; Unlimited wireless voice, pioneered by Centennial in 2006-2007, becoming the first in the nation to offer such pricing; and broadband speeds available across the island at numbers that were unheard of a few years ago. Today, we have speeds of more than 200Mbps, when only few years ago we were taking in terms of 1, 2 or 3Mbps, among others.
While the law passed in Congress in January 1996 under President Bill Clinton’s administration, it would not be until September 1996 that a local version of the law — generated in most part by former lawmakers Kenneth McClintock at the Senate and Angel Cintrón — would go through, bringing with it the establishment of the Puerto Rico Telecommunications Board.
“The Board oversaw that companies would effectively conduct business under the same set of rules, that prices were based on costs, that no one was impeded of entering the Puerto Rico market and everybody would have the same opportunity to compete under the same set of rules,” said José “Pepe” Morán, executive director and senior legal counsel for AT&T.
“So as the regulatory body, they were key in watching over how companies would conduct their business here on the island and make sure they were doing so fairly,” he said.
Over the past two decades, the Telecom Board has overseen a number of memorable battles by sector competitors, lead by the so-called K-2 Tariff, or the per-minute access fees that the incumbent carrier, as owner of the island’s largest telecom network, charged competitors to route calls. After years of legal wrangling, Puerto Rico Telephone/Claro was required to base the rate on costs, which represented a significant reduction in the charge that was ultimately passed down to consumers.
The result of a market regulated by competitive forces was better prices and more advanced services. Twenty years ago, consumers would pay more for wireless calls within Puerto Rico than for long-distance service between the island and the U.S. mainland.
“Puerto Rico is very likely the most competitive wireless market in the world. This has benefited consumers greatly as on average, wireless services and products are more accessible than in most parts of the world,” said Jorge Martel, general manager for T-Mobile Puerto Rico, who was once a former marketing executive for SunCom.
“From that perspective, the Telecom Law was very effective. However, constant attempts to add regulation threaten the very essence of this competitive environment,” he said.
“It is important to realize that what got Puerto Rico to this place was free market that led to better consumer pricing the opposite of excess regulation. We still have ways to go as our wireless penetration is still below world standards,” Martel added. “This is critical to jump-start economic growth and effectively fight poverty in marginalized segments.”
Now that the Telecom Act has effectively stimulated competition in voice and data, the focus is on reallocating spectrum to foster high-speed broadband networks as a “pathway to the 21st Century,” FCC Chairman Tom Wheeler said in a speech delivered at the Library of Congress in Wash., D.C. last week.
Looking ahead, Javier Rúa-Jovet, the fourth government-appointed president of the Board — succeeding Phoebe Forsythe-Isales, Miguel Reyes and Sandra Torres — predicted that an emphasis on so-called “disruptive” technology and services will likely take center stage, as “technology moves faster than regulation.”
He mentioned, for example, companies like Netflix, that deliver video content online, competing with cable and satellite paid television providers.
“We’ll have to look at this from the point of view of offers and different ways of delivering products by not thinking so much about is as ‘telecom vs. Internet’ and more like digital communications as a whole, which is how many countries, especially in Europe, are already viewing it,” Rúa-Jovet said.