From 1996: The Information Superhighway – A Double Edged Sword?

Reading Time: 11 minutes

Above: Photo by Jason Corey/Unsplash

Simon Fraser wrote this analysis, subtitled “A Warning for the Caribbean,” for Peter Neptune’s business magazine, Executive Times in March, 1996. It is reproduced here as a prescient analysis of the very earliest days of the Internet in T&T, with echoes that are bringing shocks that are relevant today.

It should be read, however, as writing that was current 22 years ago. Some of the businesses mentioned no longer exist, all the data offered is different today, but the essential thesis remains robust and relevant. Oh, and nobody calls it the Information Superhighway anymore. That’s not a thing.

Over last ten years several Caribbean countries have made massive investments in communications technology.  Together, the telephone companies, banks, cable and broadcast TV operators and Internet service providers have invested more than US $600 million in new plant and equipment.   These investments have allowed these companies to introduce an impressive array of new services and entertainment options.

Telecommunications of Jamaica (TOJ) has signed up over 25,000 Cellular service subscribers in less than 5 years.  Trinidad’s Cable TV companies, each offering between 25 and 35 channels, have managed to add nearly 40,000 subscribers in less than three years.  In Barbados, one banker describes the rush for new credit cards as a “stampede.”

Probably without realizing it, we have built our own on-ramp to the information superhighway.  Never to be left very far behind, we have proved as adept as any, in going along for the ‘ride.’

But as many Caribbean residents have unprecedented access to American advertisements, the ability to convert these into purchases via (800) numbers, credit cards, and now the Internet, we must ask just how do regional companies begin to compete with much larger competitors in the United States.  How does the local computer retailer compete with Dell? How does the local bookstore compete with Amazon.com?  How does Republic Bank compete with Citicorp or the world’s first virtual bank, First Virtual?

If they can’t, what will happen to all the several hundred thousand people employed in the retail, distribution and financial services sectors?  In larger more dynamic economies, many argue that new sectors will take up the excess.  There is considerable economic evidence that as one industry declines a new, an often even larger one takes its place.

But what about the Caribbean with so few economic engines?

A very busy 10 years (1990 – 2000)

Make no mistake, the Information Superhighway has an off-ramp right here in the Caribbean.  The investments that have already been made and are still to be made are impressive in their scale and scope. The services that being introduced are arguably on par with some of the most advanced in the World.

Telephone Companies

At the top of the list is Cable & Wireless and its regional subsidiaries, Telecommunications of Jamaica, Telecommunication Services of Trinidad and Tobago, Barbados External Telecommunications, to name just a few.  These C&W subsidiaries have invested several hundred million in local loop infrastructure, fiber optic rings, digital switches and cellular networks.  Some, like TSTT have joined international consortiums like the one responsible for the giant Americas 1 project, designed to carry voice and data traffic between South and North America for the next 50 Years.

Cable and Broadcast TV

Cable TV companies have also invested significantly in new plant and equipment.  This trend is perhaps best established in Trinidad and Tobago where four Cable TV companies have laid several hundred miles of cable since 1992.  There are now over 40,000 subscribers in Trinidad alone.

Even though their outlays are much smaller than the Telephone companies, they are significant.  At least some of these Cable TV companies are positioning themselves to enter the long distance voice market when TSTT’s  monopoly is removed.  Quite simply, these cable TV companies hope to become telephone companies in the not too distant future – following the pattern set in the UK – perhaps the most competitive telecommunications market in the world.

Broadcast TV Stations have also started to pop up throughout the Caribbean, challenging the entrenched state owned stations.  Trinidad now has three broadcast stations, TTT, TV6 and AVM.  Jamaica has three, and several additional channels could appear in Barbados, as soon as new legislation is passed.

Direct Broadcast TV

But there is more to come.  Caribbean broadcast and cable TV companies will soon have to contend with Direct Broadcast TV.  Direct Broadcast TV was introduced in the United States less than two years ago.  Subscribers have access to over 100 of high quality digital TV as well as several channels of CD quality audio for about US $30 per month and US$900 for the small ‘dish’ and receiver.

The Internet

The Internet phenomenon has also reached the shores of the Caribbean.  Most Islands now have at least one local Internet Service Provider, and the bigger territories have two or three.  Competition between the ISP’s has already started to heat up in Trinidad prices have fallen to around US$ 20 per month for unlimited access.  While no official figures exist as yet, it is reasonable to estimate that there are more than 20,000 registered ‘cybersurfers’ in the Caribbean.  This could double every six months for the next four to five years.

But wait, there is more to come!

Perhaps the most amazing development on the telecommunications front is yet to come.  At this time, there are several huge consortiums rushing to build huge satellite and terrestrial networks to support the new satellite based phone services.  The consortium names include Iridium, Teledesic and ICO Global Telecommunications.  Their backers are a virtual who’s who of the telecommunications industry – Motorola, AT&T, MCI, Inmarsat, Microsoft, etc. Together, consortium members are expected to spend over US $10 billion by the year 2000.

The primary goal behind these massive projects is to provide consumers with access to global voice, data, fax and paging services on hand held devices.  A consumer would be assigned a single number.  With this number, he or she would be able to ‘roam’ anywhere in the world and still receive phone calls, pages, faxes, etc. The initial cost is targeted at US $2.00 to $3.00 per minute when introduced in four to five years.  These are expected to fall to US $.30 to $.50 per hour as more and more consumers across the globe begin to sign up.

Have Money, Will Travel – Virtually!

For all intents and purposes, the Information Superhighway is already here in the Caribbean.  Basically, we are just adding a few extra lanes.   Of course, we could not travel these highways without money.  Thanks to the big regional banks like the National Commercial bank in Jamaica, Republic and Royal in Trinidad and the Mutual Bank in Barbados, we also have the fuel for the trip.  Call this new high octane blend VISA Unleaded!

According to a recent CANA Business article, regional banks have issued over 130,000 credit cards.  Furthermore, the market seems to be showing no signs of reaching saturation.  The VISA International Card accounts for about 20% of the total.  These can be used almost anywhere in the world.

Today, all we need to ‘shop till we drop’ is a TV, a telephone phone and a credit card.  Personal computers are fun to have, but they are still optional.  With these few simple tools we can order almost anything our hearts desire, without having to leave home.

If this is the case, if Caribbean consumers, like their North American counterparts, will soon be able to use these technologies to shop for the absolute best values, how do Caribbean firms compete?  Will only a few sectors be affected or will the influx of competition be pervasive and unprecedented ? Can we compete?

In Through the Open Door!

For instance, how does a local CD store that sells a few thousand units a year compete with the industry giants like Columbia House or the new online entrant — CD World.  Both direct marketing operations sell several million units annually and earn several million dollars in the process.  Columbia House uses the more traditional catalog operation while CD World [now defunct] operates a 24 hour a day, 365 day a year virtual store on the World Wide Web.  Even the traditional record retailers like in the US have to work hard to keep market share.

Similarly, a local bookstore in Port of Spain, Kingston or Bridgetown might be hard pressed to do battle with another Internet phenomenon – Amazon, another virtual store on the Internet.  Amazon stocks over 100,000 titles and sells at 10% to 15% below traditional retailers.

Both CD World and Amazon.com are implementing similar low cost strategies.   By buying in huge volumes, eliminating expensive retail space and keeping staff to a minimum, these companies drive cost down to levels that their traditional competitors may find difficult to match.    It is very likely that many more products will be sold in this fashion.

Over the last few years, it has become much easier for Caribbean consumers to order from these companies.  With access to 800, the Internet and credit cards, we can now call, order and pay, all from the comfort of our living rooms – and often at price savings in the 20% to 30% range.   A few days later we can pop over to our local Skybox and collect our purchases.

Traditional retailers are not the only Caribbean businesses likely to feel the heat.  Financial Services companies are also susceptible to new competition.  An unlike many retailers, financial services companies have very little physical product to move around.   They don’t even have the added difficulty of shipping goods over thousands of miles.

Imagine a consumer in Port of Spain, trying to decide where to save an invest.  Until recently, his or her choice was strictly limited by the offerings of local institutions.  Foreign exchange was hard to get, and it was difficult to get information on product offerings in the United States, or any of the offshore financial centers like the Cayman Islands, Bermuda or the Bahamas.

Much has changed.  The TT dollar has been floated; anyone can walk into a commercial bank and purchase US Currency. If he access to cable TV, he can tune into CNN or the finance oriented CNBC and get a considerable amount of information on the markets, stocks bonds, mutual funds.

In this environment, the Unit Trust can no longer define its competition as similar offerings from other local banks or credit unions.  All of a sudden, Fidelity, Janus, Templeton and the Mutual Series all loom as potential competitors.  How does the Unit Trust with a fund size of US $20 million compete with, say the Fidelity Magellan Fund, at US$ 35 Billion?  Needless to say, regional banks and insurance companies are not immune.

In the long run, the only companies that might be able to hide behind the barrier of time and distance are likely to be those selling ‘perishable’ products.  However, faster air transportation, refrigeration and improved packaging, may yet dismantle even these barriers.

Science Fiction?

Thanks to modern telecommunications, the world is certainly getting smaller and the marketing specialists love it!  With all these new technologies they can see the day where they can identify prospects anywhere in the world, especially the best ones – the ones with money.  As a bonus they are looking forward to dismantling traditional distribution channels.

They can now reach consumers directly without having to use expensive middlemen like distributors, and retailers.   Unfortunately, many Caribbean companies tend to be distributors.  Even the very large regional conglomerates like Neal and Massy, the ANSA McAl Group, Grace Kennedy still derive a significant proportion of their revenues from distribution.

I would characterise the next three to four years as the calm before the storm.  There are a few conditions that still must be satisfied before the extra regional competition really starts to hurt.

More people will have to get access to the superhighway, either at work or at home.  But that’s happening.  As I mentioned, the regional telephone companies have been spending billions to add more lines and more capacity into North America.

The Cable TV companies have run cable to our homes in order to sell additional TV channels. However, they are waiting for the ‘legislative’ word that will allow them to offer telephone service.  When this happens, the cost of long distance phone calls will fall by 20% or more, and more people will be able to afford access to overseas calls.

More personal computers will have to find their way into Caribbean homes and business.  For this to happen prices will have to fall.  Already, the talk of a US$500 stripped down PCs called Internet terminals has been translated into reality by a few small companies. The industry giants like IBM, Dell, Compaq and Apple will probably introduce products of their own.  The overall effect will be to drive the cost of personal computers down to US $750.

For the time being, many Americans view the Caribbean as a great place for a vacation. However, North American marketers will soon take a very active interest in Latin America and, in passing, the Caribbean.  To be certain they will ‘cherry pick’ at first – choosing only the most desirable high income prospects.  However, as the cost of acquiring a consumer falls they will soon be in a position to turn their direct marketing guns on the Caribbean middle-class.

Caribbean consumers will find it much less costly to purchase goods and services in the US.  North American companies will find it much less costly to sell in the Caribbean.  They will probably attempt to bypass the middleman.  Already, DELL Computers has started selling and shipping directly to consumers in Trinidad.  The consumer wins and the seller wins!

Conclusion

Many years may pass before we feel the full effects of these new competitive forces.  Like most waves this one is neither good nor evil.  However, we had better start leaning to surf.  If we don’t, we will look back on 15% to 20% unemployment, as the good old days.

About the Author

Simon Fraser

Simon Fraser’s work experience includes a stint in sales and marketing at International Computers Limited (now known as Fujitsu-Transaction Systems) with responsibility for Trinidad and Tobago and the wider Caribbean. 

He qualified for ICL’s ATLAS global sales achievement award in 1992 and 1993.  Subsequently, he joined the Tourism and Industrial Development Corporation of Trinidad and Tobago (TIDCO) where he was responsible for all information systems and related services.  His team launched the first domestically hosted web site in Trinidad – tidco.co.tt – in 1995.

In 1998 he moved on to serve as general manager of the ISP Group, a consortium of three Internet service providers.  At the ISP group, leading a team that managed to simultaneously increase revenue by 50% and triple customer satisfaction in eighteen months.  This turnaround allowed the group to post a profit for the first time in its history. 

In 2000, he returned to the University of the West Indies where he continues to lecture in information systems, electronic commerce, information security and business strategy. Simon holds a Bachelor of Science from the University of the West Indies St. Augustine (1985) and Masters in Business Administration from Columbia University in the City of New York (1988).