Inside track: Notes from a different island.

A viewpoint by James Fitzgerald.

Successful deregulation of Bermuda's telecommunications market shows that Cable and Wireless's decision to accept competition in St. Lucia was the right one.

Some commentators may regard last week's agreement to introduce competition to the telecommunication's market place in the eastern Caribbean as a climb down for Cable and Wireless, the region's monopoly holder.

While it is true that C&W has moved a long way from its ultimatum of withdrawing from the region rather than accept competition, the fact that it has agreed to a timetable toward liberalisation marks real progress.

C&W has enjoyed an exclusive presence in the region for more than a century, so naturally it will try to protect its position.

Putting vested interests aside in the spirit of free competition is like giving up ringside seats to a bunch of new pretenders in a stadium that you built.

St. Lucia, the second largest of the Windward Isles, has been the unlikely location for a power struggle between one of the world's biggest telecoms groups and national authorities.

One thing has become apparent during this deadlock: that there is much more at stake on both sides than the price of a local phone call.

One of the first twists in the tale was C&W's threat in February to withdraw from St. Lucia completely rather than see the end of its exclusive licence status.

The company has until now enjoyed an almost unchallenged monopoly status.

St. Lucia countered its threat with the help of four of its eastern Caribbean neighbours, which banded together to threaten the group with expulsion if it abandoned the island.

In fact, deregulation started last year in Jamaica, where mobile licences were granted to two competing companies.

Barbados and Trinidad and Tobago are also taking steps to end C&W's monopoly status.

And the East Caribbean Telecommunications Authority (ECTA), a fledgling union of five island authorities, including St. Lucia, has also started to test its muscle in the area.

Negotiations between C&W and ECTA continue but as far as C&W is concerned, St.

Lucia is the thin end of the wedge.

Those wishing to defend such a dominant market position often talk in terms of a drop in overall infrastructure investment, a rise in prices in other, related areas, job losses and a fall in levels of service.

But what are St. Lucia, ECTA and the other Caribbean islands really fighting for? Part of the argument adopted by these authorities is that telecoms infrastructure plays a crucial part in the region's overall economic development.

They have cited the World Trade Organisation as a source for their case, arguing that C&W's monopoly position is prejudicing economic activity and holding back progress and growth.

They also believe that job creation on the islands has suffered, as have prospects for overseas inward investment.

It is difficult to predict what will happen, but the Island of Bermuda, at least, provides a comparative frame of reference.

Bermuda is often wrongly thought to be a Caribbean island. It is in fact in the north Atlantic.

There are, however, many parallells that can be drawn between Bermuda and the situation the islands to the south find themselves in with regard to C&W.

Like St. Lucia, Bermuda is a British dependent territory. With 60,000 inhabitants, it has only half St. Lucia's population.

Crucially, as far as the Caribbean islands are concerned, Bermuda still has C&W as a telecoms operator -- but not in a monopoly position.

It competes with TeleBermuda International for off-Island traffic. Bermuda deregulated its telecoms market in 1996 and has managed to take advantage of the subsequent Internet and communications explosion to position itself as a global hub for e-commerce.

The element of competition in Bermuda has not only resulted in lower call charges both on the Island and for overseas calls but has also forced C&W to step up its own game in terms of investment in infrastructure and the level and type of services it offers.

The Island now has its own e-commerce incubator facility, several co-location sites and a number of Internet service providers, as well as a burgeoning technology, media and telecoms sector, which includes all the spin-off service businesses that these companies need in order to operate.

This has not only created jobs in itself but has also created a more competitive employment market, boosting the need for investment in employees in terms of training and higher wages, which again has knock-on effects on productivity and the economy.

Multinational carriers have also invested heavily in high-bandwidth telecoms `pipes', which in turn make the Island more attractive to multinational business and inward investment.

To operate in this environment and to remain part of Bermuda's thriving scene, C&W has had to invest in training, new services and infrastructure.

Obviously, the customer benefits from competition as long as it is controlled and fledgling competitors can be protected but, as the precedent set by Bermuda has shown, the market for telecoms services can grow through lower prices, new services and competition. Economic growth and development, as illustrated by the Bermudian example, is what the eastern Caribbean islands were fighting for and C&W's laudable change of heart has removed a significant barrier to achieving this goal.