UNCLAS SECTION 01 OF 02 PORT AU PRINCE 001697

SIPDIS

SIPDIS

STATE FOR WHA/CAR
EB/IFD
EB/CIP/BA
STATE PASS TO USAID FOR LAC/CAR
INR/IAA (BEN-YEHUDA)
COMMERCE FOR SCOTT SMITH
TREASURY FOR JEFFERY LEVINE
WHA/EX PLEASE PASS USOAS

E.O. 12958: N/A
TAGS: ECON ECPS ETTC PGOV HA
SUBJECT: HAITI: CELLULAR INTER-CONNECTIVITY AT LAST

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1. Summary: Minister of Public Works, Transportation and
Communication Frantz Verela announced that all three cellular
operators in Haiti -- Comcel, Digicel and Haitel -- will
finally be inter-connected by September 24 at midnight.
Since May, the two incumbent operators, Comcel and Haitel,
refused to connect with the newest operator, Digicel. Comcel
is currently the largest operator in Haiti with about 510,000
subscribers. Digicel and Haitel have around 300,000
subscribers each, and Digicel expects to surpass Comcel soon,
thanks to its extremely aggressive campaign. The lack of
inter-connectivity underscores the many obstacles to
development, but Verela's initiative to settle the dispute
signals GOH willingness to act as the proper regulator in
improving halting procedures and updating antiquated laws.
End summary.

Interconnection Dispute
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2. Though all three operators were involved, the conflict
resided primarily between Comcel and Digicel. It started
with Digicel's scheme to use the Jamaican Mobile Country Code
(MCC). The Jamaican MCC offers Digicel an international
roaming advantage over the Haitian MCC. Also, the GOH
offered Digicel exemption from customs duties in May while
Comcel's own exemption was not approved until August 4,
despite Haitian regulations stating that all competitors must
have an even playing ground. (Note: Due to the dispute over
the exemption code, and because all GOH officials use Digicel
phones, Haitians in the telecom industry claim the government
favors Digicel. End note.)


3. The national telecom regulator (CONATEL) could not solve
the problem of inter-connectivity, which began with Digicel's
arrival in May. Minister of Transportation, Public Works and
Communication Frantz Verela personally mediated a solution in
late July/early August. In return for an agreement signed by

Comcel, Digicel and Haitel, the GOH promised the same
advantages to all operators and asked Digicel to switch to
the Haitian MCC. Digicel requested five years to complete
the migration and said it will cost about US $ 30 million.

Telecom Industry Needs a Strong Legal Framework
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4. Ultimately, the problem between Comcel and Digicel --
other than aggressive marketing strategies and harsh
commercial attacks -- lies in a weak regulatory framework for
the developing telecom sector. The framework dates back to
1977, when the national telecommunications company, Teleco,
had a monopoly on all telecommunications services. In 1999,
the World Bank and the Inter-American Development Bank tried
in vain to assist the GOH with the creation of a strong legal
framework to guide the development of the sector. Jean Marie
Maignant, head of the telecom unit at the Ministry of Public
Works said the absence of a regulatory and legal framework
could further jeopardize the development of the sector. Weak
regulations hamper the entrance of new operators, thereby
limiting competition. CONATEL Director General Montaigne
Marcelin recognized the weakness of his agency vis-a-vis the
cellular operators and said this is to blame for the recent
dispute over inter-connectivity.

The Road Ahead
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5. Maignant told econoff that he is expecting a World Bank
(WB) mission at the end of September to assist with updating
the 1999 draft of the telecom regulatory framework. The GOH
hopes to present an updated telecom bill to parliament in
early 2007. Verela said the GOH will be looking for a
strategic international partner to help revitalize -- and
eventually privatize -- Haiti's national telecommunications
company, Teleco. (Note: Michel Presume, newly-named Director
General of Teleco, is a former member of the Council for
Modernization of Public Enterprises. End note.) According
to Maignant, Teleco is also currently implementing an
underwater fiber-optic cable project in cooperation with the

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Bahamian Telecom Company. This will extend the Bahamas
Domestic Submarine Cable Network to Haiti, instantly
increasing and updating tele-communications capacity in Haiti.


6. Comment: The inter-connectivity dispute underscores the
need for regulations and up-dated laws in Haiti. The
tumultuous recent past has put Haiti behind its neighbors,
particularly in the rapidly advancing telecommunications
industry. According a recent report by the Inter-American
Development Bank, the state of telecommunications
infrastructure varies throughout Caribbean, with 85 percent
in the Cayman Islands and 1.7 percent in Haiti. Haiti has a
long-way to go, but with guidance and support from its
neighbors will catch-up significantly under Verela's
initiative.
SANDERSON