The Bermudian former CEO of Cable & Wireless reflects back on his time as head of one of the island’s biggest telecoms companies
Q: You’ve seen a lot of changes to the telecoms industry during your time in Bermuda. What are some of the most memorable?
A: The real market reform started around ’97. We had TeleBermuda coming online, we 
had cellular networks coming online, the ISPs getting in the picture. (At the time, ISPs) were probably the most evolving part of our industry.
Back in ’98 we had a long standing dispute with Bermuda Telephone Company, (and) with the Bermuda government at the time. We ended up resolving the differences and moved on.
We faced the changes in the international planning regime, the FCC (U.S. Federal Communications Commission) mandated a change in the amount per month that foreign carriers would give to Bermudian companies. Any call coming to or from the U.S., the maximum that they would pay or receive would be 15 cents a minute.
At that time, we were getting 15 cents from U.S. carriers for calls coming into Bermuda, but still settling (the dispute) with BTC in the 23 cent area. Logic has it that if you only receive 15 cents and you pay out 23, you’re going to run out of money very quickly.
And so then (Telecommunications) Minister Renee Webb came in with the PLP government in ’98, and the first major issue she had to face was normalizing the domestic carriers so that the accounting rate was no worse than what we received.
Cable & Wireless (C&W) partnered with ATG, and brought Quantum back to the market in 2003, and that was a good milestone for us, just that we were able to resurrect Quantum, and give it the support it needed both financially and intellectually, and it’s proven today that it’s a very successful business.
Another was the lowering of the local access charge … that was probably the next major shift (in the industry).
It allowed us to further reduce the price of long-distance calls for the consumer.
Some have said that competition drove down the price but the reality is that before ’98, a long-distance call to the U.S. was $1.05 a minute. Eighty-five cents of that was cost that was out of our control, and it was a cost that was passed onto other people.
Another milestone was government’s recognition that the industry structure up until 2004-05 was inappropriate for the future of the country. So in October 2005 (the telecoms minister) had an industry forum at the Hamilton Princess Hotel to start shaping the way forward for the industry.
That process has continued even to today. I hate to say it – if you asked me one of the things I’m disappointed by – it’s how long the telecoms reform process has taken.
We’re well into two years, and we still haven’t got any determination as to what it’s going to look like.
Q: In 2006, Cable & Wireless attempted to acquire KeyTech. What was the motivation behind that move?
A: That was simply a move by any smart enterprise that continually looks at ways to grow its business, that it would seek opportunities for mergers and acquisitions.
People may think that C&W hasn’t had any discussions with KeyTech (previous to the takeover bid). The fact of the matter is that as long as I can remember, there has always been discussions between C&W and BTC of those days (now an affiliate company of KeyTech) about some form of arrangement.
We just felt that in ’06 that it was appropriate – we have two companies that have fantastic resourcefulness and scale that could do marvelous things for the market by working together. We saw it as a great opportunity. Opportunity for great efficiencies, infrastructure investment, a real commitment to fibre the island, to replace infrastructure with modern day technology – like in Monaco – where (C&W) has broadband to the household of 40 megabytes. We felt that Bermuda was very much capable of receiving that type of technology and capital investment.
Sad to say it didn’t work out, but we are not deterred at all by that event in terms of our relationship with Bermuda.
I’ve taken my responsibility for Bermuda with me to the Channel Islands, we’ve got a fantastic set of businesses up here.
We have a completely different customer experience up here and we want to make sure Bermuda can benefit from that … that it can be replicated in Bermuda.
Q: Had the acquisition of KeyTech gone through, how different would the island’s telecoms industry be today?
A: We would have streamlined the organizations and created a lot more productivity and efficiencies in both organizations.
We would have well into place by now a complete infrastructure upgrade and replacement of existing systems.
We’d be striving to place anything between 8 to 12 megabytes to the house and eventually the same levels we have in Monaco – 40 megabytes to the house.
We’d be looking to bring the converged platforms of services, both IP and voice. We’d be well along with the capital investment in infrastructure right across the island.
We’d have also brought in new customer experience measure and monitoring systems to make sure that what we do is oriented to delivering a unique customer experience.
We’d have many work streams going on concurrently. We would have been able to bring global products to the local market, leverage capabilities elsewhere in the group to bring even more value locally to businesses.
We would have also been able to bring in accountability at the local level as well, so that there’s no finger pointing, people wouldn’t say ‘it’s BTC, it’s Cable & Wireless, it’s somebody else’s’ (fault). You’d have complete accountability from beginning to end.
Q: There was a lot of resistance to the acquisition. One of the arguments against it was that it would have created a monopoly. Do you still stand by the claim that that wouldn’t have taken place?
A: Absolutely. We had no mission to create a so-called monopoly when in reality there’s many players in the market.
You’ve got to go back to government’s current agenda in the current reform policy. They would make sure – and we would work with government on this – that there’s no market dominance. That there was a disadvantage of other players in the market, and to the consumer. That would never be in our agenda.
We enjoy competing, we do it in all the markets we serve and we’re successful.
What we would have been able to do is create the right market structure for Bermuda. Bermuda is only a 22-square-mile island, and the problem is that we have wasted a lot of resources by duplicating networks – parallel this, parallel that – we’ve spent hundreds of millions of dollars, and at the end of the day we really don’t have much more to show than if we had individual networks loosely coupled together providing some end-to-end service, but no accountability.
If we were to put together all the money that we as carriers have invested in Bermuda – it would be in excess of $200 million – we could do amazing things with $200 million on a 22-square-mile island.
And then move the competition not to a facilities based, but to a services based competition model. That’s where the industry in Bermuda should be.
If your company spends $20 million, and the company across the road spends $20 million, the customer is going to be on one network worth $20 million – they’ll never benefit from being on a network worth $40 million.
That’s fundamentally where I think the competition model has not been right.
Q: It seemed as though at the time everyone in the industry was against the buyout of KeyTech by C&W, and many were speaking out publicly against you. Did that affect you personally?
A: It didn’t affect me personally. What it did say is that the Bermuda community can be a highly-charged, emotional (place). Bermudianization is something that has always been, as a Bermudian myself, it’s very important in our agenda that to make sure that Bermudian entities and people benefit from anything we do.
Did I take it personally? No I didn’t. I realized that these weren’t personal attacks by other players who saw a defence position to protect their own interests, and the only way to do that was to be offensive and look to the negative. In a proper free-market mind-set, that mentality wouldn’t survive.
The world is full of mergers and acquisitions that take place every day, and I think that most people and businesses in Bermuda understand that.
But with acquisitions here, there’s sensitivities. The Bank of Bermuda HSBC is a classic example. Where a Bermuda icon had been acquired by one of the greatest banks in the world, emotions came out again.
Maybe C&W was deemed to be ‘here they go again’, it was another example, and maybe we took the brunt of it.
These are emotionally charged situations and one can understand how people react like that. You’ve just got to work it as best as you can, or you decide that enough’s enough and you move on.
Are we better off by leaving things as they are? No, I think we’re still the same as we were two years ago. The consumer’s no further on, but the pride and prejudice in the context of self protection, I think that’s the way it is.
Part 2 of the interview will run in Friday’s Bermuda Sun.