Growing Pains for Tico Telecom Market

March 6, 2009

Michael Kister is frustrated.

As president of TicoSAT, which aims to provide satellite broadband Internet service in Costa Rica, Kister has awaited the implementation of the Central American Free Trade Agreement with the U.S. (CAFTA) for months, if not years, anticipating the open telecommunications market that the treaty had promised.

But over two months have passed since CAFTA entered into force on Jan. 1, and it has been a bumpy ride for TicoSAT and businesses like it.

In several interviews with representatives from firms hoping to compete in the Tico telecom market, many expressed frustration that the new government agency set up to manage the industry’s opening, the Superintendent of Telecommunications (Sutel), has been slow to master its regulatory role. Compounding the problem, they said, has been the state-run monopoly Costa Rican Electricity Institute (ICE), which has filed formal complaints against a competitor with Sutel and denounced its new rivals in the local press. Allegind that the competition is not authorized to operate in the country.

“We’re not the outlaws in the black hats,” Kister told The Tico Times. “We’re the good guys here. All we want is recognition that we’re allowed to be here-not have ICE brand us as criminals.”

Last month, ICE officials denounced TicoSAT and aspiring Internet phone service Intertel Worldwide in the daily La Nación, accusing its competitors of operating in the country without authorization. After Intertel set up public phone booths throughout the country, ICE filed a formal complaint with Sutel, which said it would investigate the claim and has yet to issue a formal ruling.

As of press time, no competitor had been formally authorized to operate in the Country, according to Juan Manuel Campos, a lawyer with Ciber-Regulación Consultores who has been consulting Intertel. Campos, who characterized the process of opening the market as “slow, chaotic and difficult,” said Sutel was applying an overly strict interpretation to aspects of the Telecommunications Law that were written vaguely to begin with.

“The intent of the law was to promote opening,” Campos said. “They are carrying out things that aren’t in the law.”

Campos complained that Sutel was forcing prospective competitors to undergo feasibility studies and submit financial records that had no place in the process.

Sutel, for its part, has said that it is working to make sure that only companies with a long-term interest in investing in Costa Rica are allowed access to the market, and has been critical of ICE as well. George Miley Rojas, president of the Sutel board, told the daily La Nación last month that ICE was behaving like a spoiled child.

“What happens with the firstborn child when a younger sibling is born and it does not receive all the attention?” he said. “It throws a tantrum.”

Sutel did not respond to multiple requests for comment by The Tico Times. ICE spokesman Elbert Durán brushed off Rojas’ comments, but said ICE would defend its interests while welcoming competition.

“We see this experience as a great opportunity,” Durán told The Tico Times. “We are working to improve our deficiencies. We like the idea of having competition.”

Durán also echoed the criticisms of his competitors toward Sutel, saying the regulator “needs to state the rules” of the newly opened market.

“We want a level playing field, with the same rules,” he said. But first, “The rules need to be defined.”

Kistler agreed, while expressing sympathy for Sutel’s steep learning curve.

“We’re in exactly the same spot, we’re both waiting for Sutel to say ‘This is what you need to do’,” he said of ICE. “But I feel really bad for Rojas. He’s in a terrible position. He hasn’t been instructed what to do yet.”

While acknowledging that some “growing pains” were inevitable as the market opened up, Kislter characterized the process as “a cart-before-the-horse struggle” and said his firm was being asked to comply with regulations that had yet to be promulgated.

“I want to be in compliance,” he said. “Tell me what compliance is, and I’ll be there.”

 

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