Sunday, 20 June 2010 1:56 AM

Telecom Prices

In a 16 June 2010 Letter to the Editor, Mr. James Faiau asks why telephone rates in Solomon Islands are so much more than elsewhere in the world. While there are a myriad of reasons, let me address the major causes.

The first is economy of scale. There are basic, minimum costs associated with offering telecom services. Beyond that, the relationship between number of users and cost are not linear, in other words, the cost to have 100,000 telephone customers is not five times more than the cost to have 20,000. This situation is amplified when the number of customers is counted in the millions, as is the case in Japan, USA, Australia, and New Zealand. Thus, it is simply fact that a smaller nation such as those in the Pacific will not enjoy the lower per-user costs as found elsewhere.
The second cause for higher costs is location.

For an inverse example, where I live in upstate New York (close to Canada, and a six hour drive to the nearest salt water ocean), the price for tuna is SB$390/kilo. Yes, that is correct- it is not a typographical error. Compare that to Solomon Islands, where an entire tuna costs far less than that. And this is for comparable product-our tuna come from Samoa, Kiribati, or Solomon Islands, but it's the same tuna-at somewhere around twenty times the price! The reason of course, is largely in shipping and storage to move that tuna from the blue Pacific to our remote city sixteen thousand kilometers from the source.

The same occurs with telecom gear, which is required to provide service. All of the telecom equipment in Solomon Islands is imported; it is also heavy. That means high shipping costs. In addition, government import duties and/or VAT artificially drives up the price to Telekom, which then must be passed on to the consumer.
Of utmost concern is the cost of satellite service.

I can call from New York to California (4000 km) or New York to Buenos Aires (8400 km) and the call goes over a well established fiber optic network, so in theory is relatively inexpensive (to the telephone company) to operate. In addition, the telecom boom and bust of 1999-2000 left USA with hundreds of thousands of miles of "dark fiber" (unused fiber optic cable) [http://en.wikipedia.org/wiki/Dark_fibre]. Simply supply and demand in the case where supply far exceeds demand has resulted in cheap calls within USA; no such situation exists in the Pacific, where expensive satellite capacity is maximized. Likewise, the economy of scale based on number of calls between high-volume locations such as Europe and Hawaii have made it economically feasible to put in fiber optic cable; to date, it has been considered economically unsound to put in fiber optic to Solomon Islands, so the calls continue over the expensive satellite connections.

Further, Solomon Islands and PNG are developing nations, and the telephone network is also in a constant state of development and expansion. Compare that to New York, where the telephone service has been available for some hundred years. The cost to provide a new service area is far more than the cost to upgrade an existing network.

That said, it is unreasonable to compare costs of calling to and from Pacific Island with calls to/from USA, Australia, New Zealand, Japan and Europe. It is more reasonable to compare costs with other Pacific islands.

In doing so, again note that the telecom infrastructure of both PNG and Solomon Islands started later, and has more challenges (which means costs) than in other countries such as Cook Islands, Fiji, and Tonga. Historically, there have been additional socio-economic challenges in Solomon Islands; for example, the high cost and long delays of coordinating land usage rights for mobile and microwave towers. Solomon Islands also suffered years through the Tensions, resulting in reduced income to Solomon Telekom (which means reduced investment capability), destroyed equipment, and stolen assets which had to be replaced. In fact, I give great credit to Solomon Telekom which, during the Tensions, continued to roll out telecom services to the provincial capitals- I dare anyone to find another telephone company in the world that actually expanded service during a time of social and economic crisis.

Mr. Faiau claims that calls from Japan to PNG and Solomon Islands are the most expensive in the world. Since he did not cite his source, I can only provide evidence from my side. Using the data from my mobile provider- Verizon Wireless- I cite the following mobile-to-mobile costs (in US$ per minute) [http://b2b.vzw.com/international/Long_Distance/index.html] listed in order of increasing cost:
. Cook Islands $1.49
. Solomon Is. $1.49
. Australia $1.55
. Fiji $1.57
. France $1.66
. UK $1.67
. Germany $1.68
. Spain $1.72
. New Zealand $1.75
. Niue $2.50
. Kiribati $2.50
. Afghanistan $2.50

As can be observed, my calls to Solomon Islands are less expensive than those to Australia, New Zealand, and Europe! So the problem here appears not to lie with Solomon Islands, but with the mobile carrier selected in the originating country. In Mr. Faiau's case, it would appear that his Japanese mobile carrier is charging far in excess of what is fair, though note that the ¥125 (US$1.38) he pays to call Solomon Islands is less than the $1.49 I pay; so perhaps calls from Japan to countries outside of Melanesia are just a great deal!

In closing, one must realize that one cannot directly compare the services and costs amongst countries with vastly different situations. I have already cited the price for tuna in New York; there are other elements to consider as well. While workers in New York are compensated with wages far higher than those in Solomon Islands, our costs are much higher too. I know of few (actually, none) Melanesians who have to buy snow tires or snow shovels, pay to heat their home when the outside temperature is -18C, or pay to store their boats on land when the lagoons freeze over for four months. And while the life expectancy of Solomon Islanders is many years less than that of Americans, I argue that the quality of life in Solomon Islands is far in excess of that in USA. There is no place in the world more beautiful than the mountainous rain forests and pristine beaches of Solomon Islands; likewise, I know of no people who are so caring and giving as the Solomon Islanders. My friends, there is a price to pay for living in paradise; all things considered (including the price of telecom calls) in my opinion you all have it pretty good!

Thank you for your consideration and I await my next visit to your wonderful country.

Charles DeRoller
New York, USA

Disclaimer: The views and opinions expressed in this letter/article are those of Charles DeRoller and do not necessarily reflect the official policy or position of Solomon Times Online.

Other Letters to the Editor All Letters
By GEOFFREY MAURIASI USP, Lacuala Campus, Fiji
By CHARLES KOULI Gizo, Western Province
By JAQUE FRIEDMAN New Zealand