(CMR) The Cayman Islands Ministry of Planning, Agriculture, Housing, Infrastructure, Transport, and Development (MPAHITD) has published a business case that recommends the Government proceed with the Subsea Cable Project to ensure resilience for the country’s international connectivity.
This marks a significant step in the Ministry's ongoing commitment to transparency, accountability, and the enhancement of the nation's digital connectivity infrastructure, a CIG release stated on Thursday.
This initiative aims to foster open dialogue with the public and stakeholders, elucidating the strategic significance, benefits, and expected outcomes of the Subsea Cable Project. By doing so, the Ministry said it is reinforcing trust within the community and ensuring that the Cayman Islands are positioned to thrive in the evolving global digital landscape.
Hon Johany “Jay” Ebanks, Minister of Planning, Agriculture, Housing, Infrastructure, Transport, and Development (MPAHITD), shared his vision for the project:
“The Cayman Islands Subsea Cable Project is more than an infrastructure initiative; it's a commitment to our future. By releasing this business case to the public, we are underscoring our dedication to transparency, accountability, and our unwavering belief in the power of digital connectivity to drive progress. I am confident that this project will serve as a lighthouse, guiding our islands towards unprecedented growth and connectivity.”
According to the business case, there are currently two subsea cables that connect the Cayman Islands into the international network of telecommunications systems: MAYA-1 and CJFS. MAYA-1 is a major cable system in the region that provides subsea connectivity to the Cayman Islands. It began service in 2000, with a landing station in Half Moon Bay on Grand Cayman, as well as landing stations in Mexico, Honduras, Costa Rica, Panama and Colombia. It is owned and operated by a consortium. The landing party in the Cayman Islands, Flow, is owned by Cable and Wireless (C&W).
The Cayman-Jamaica Fibre System (CJFS) is a subsea cable connecting Grand Cayman and Cayman Brac to Jamaica, which began service in 1997. It is repeaterless, meaning that it is technically less complex than MAYA-1. It is 870km long, and owned by C&W Networks.
The business case further states that both systems are aging, and the Cayman Islands Government (CIG) has no certainty or control over the future of either of the existing cables. The CIG considers subsea cables critical national infrastructure, and the lack of certainty about their future introduces various risks to the islands and represents a threat to their future.
However, there appears to be a lack of competitive tension in the market for international connectivity from the Cayman Islands. Specifically, the barriers to entry regarding new international connectivity—including, primarily, the high capital costs associated with new infrastructure—appear to be too high to support meaningful competition in those markets, given the relatively low number of consumers (and hence demand) on the islands. The incumbent operator, therefore, appears to benefit from a natural monopoly.
The existence of a natural monopoly for international digital connectivity on the Cayman Islands means that a new private sector competitor landing an international cable in the Cayman Islands while the existing infrastructure is operative would be unlikely to be able to compete with the incumbent (who benefits from existing infrastructure) on price, given the likely need of a new private sector competitor to recover the capital invested and a commercial rate of return. This situation would change, however, in the event that one of the two existing systems were decommissioned.
While various new subsea cables have been discussed and proposed, there appears, therefore, to be no certain prospect of a private sector operator bringing competition to the Cayman Islands. This situation represents market failure, as it means that the people of the Cayman Islands are not certain to benefit over the long term from the benefits that competition can typically bring, including reductions in pricing, innovation, service flexibility and high-quality service levels.
The business case states that there is a valid argument for CIG to intervene to provide new international subsea connectivity for the Cayman Islands, in order to assure and deliver resilience for the country’s international connectivity. This is because the decommissioning of an existing cable before its replacement by an entirely commercial enterprise would lead to a situation where the Cayman Islands’ international connectivity possesses no resilience to system faults.
CIG commissioning a new cable could assure the continuity of at least Level 1 resilience. In seeking to assure national resilience, CIG may reasonably want to act in the way that has the best prospect of improving competitiveness in the Cayman Islands communications market, including by minimizing the possibility of a future market participant controlling the market for international connectivity.
Based on this argument, there appears to be a strong case for CIG to continue intervening to deliver new connectivity. The case report recommends that CIG proceeds with the project to secure new international subsea
cable connectivity, making its intentions publicly clear. It also recommends that the CIG establishes and staffs a government-owned ‘Cable Co’ to act as Client for the project. Once Cable Co has been established, it will be highly important that CIG maintains oversight and appropriate control of it.
A further element that CIG will need to consider in order to mandate Cable Co effectively is its preferred approach to the funding and financing of the infrastructure. The approach taken will directly affect the price that Cable Co finds it necessary to charge for use of the cable,
The report further states that this domestic revenue requirement could be substantially reduced if Cable Co is successful in persuading a third-party jurisdiction to use the Cayman Islands as a ‘hub’
It is also recommended that Cable Co. develop a Full Business Case covering the details of the proposed contract with the preferred provider, its approach to project management, permitting and licensing, and ongoing commercialization. This will support an investment decision in the developed solution from CIG.
Once the new cable has been constructed and accepted into use, it will be the role of Cable Co to manage its ongoing operation and maintenance, balancing the social and financial requirements of the CIG’s project mandate and reporting to CIG on the cable’s performance, financial position and risk on an ongoing basis. This could include actively seeking third-party jurisdictions who may wish to land on the Cayman Islands to make use of the new cable for onward connectivity, which could bring significant financial benefit to Cable Co. This role of Cable Co is anticipated to endure for the full life of the cable, which is assumed in this OBC to be 25 years.
The business case is accessible to the public, inviting everyone to delve into the project's strategic vision and participate in the journey toward a digitally connected future. It highlights the Ministry's proactive governance approach, embodying principles of openness and inclusivity.
The document will be posted on the Ministry's website at www.gov.ky/PAHI/ and on its social media channels, FB & IG. Also, see below:
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