FTC wins right to pursue legal action against the Digicel-America Movil swap - Game of Thrones as Mobile Data Candyshop beckons

Looks like I did not have to wait very long for this ball to drop, faithful followers of my blog, who had read my prediction of the FTC (Fair Trading Commission) case dogging Telecom Provider Digicel all the way to the London 2012AD Olympics as per the ending of my blog article entitled “Digicel to shut down CLARO's Voice Network in HSDPA+ Push - The Louisiana Purchase of Spectrum”.

This as the Supreme Court Justice Ann Marie Hayneson Wednesday May 15^th 2012AD has now given the FTC (Fair Trading Commission) the green light to challenge the legality of the Digicel/America Movil swap as stated in the article “FTC can now challenge Digicel/Claro merger”, published May 18, 2012 - 7:50 pm, The RJR News Online and “Court dismisses Digicel claims against FTC”, published Tuesday May 15, 2012 12:59 pm, The Jamaica Gleaner.

When the FTC had originally made its challenge last year as stated in the article “Digicel, LIME stake out positions on FTC challenge”, published Sunday January 8, 2012, The Jamaica Gleaner, Telecom Provider Digicel’s CEO Mark Linehan’s response was atypical aggressive and pointedly making it clear that the FTC had no jurisdiction and thus no case, quote: “Firstly, Digicel has yet to be served with this claim by the FTC. Secondly, the FTC is seriously misguided in its thinking that our acquisition will be detrimental to consumer welfare, and we have no doubt that its claim does not stand a chance given the fact that the deal has already been completed and took effect from 30 November, 2011. The positives to come out of the deal are manyfold and the FTC, in any event, lacks jurisdiction to regulate mergers and acquisitions”.

Rather long winded but Oh how the tables have turned against Telecom Provider Digicel in the space of four (4) months, gentle people reading my blog!!

The FTC’s Case was argued by Attorneys Wendy Duncan and Sashawah Newby with Dr Delroy Beckford for the FTC along for the ride with the defendants Telecom Provider Digicel being represented by Michael Hylton, QC, and Georgia Gibson Henlin.

Supreme Court Justice Ann Marie Haynes’ ruling as reported in the article “Way cleared for FTC to challenge Digicel/Claro merger”, published Wednesday, May 16, 2012 by PAUL HENRY Crime/Court desk co-ordinator, The Jamaica Observer effectively states the following:

1.      Fair Competition Act 1993 does apply to the agreement between Telecom Provider Digicel and CLARO Jamaica as CLARO's assets are effectively property of Telecom Provider Digicel, which means a monopoly is forming, an area of law that the FTC is appointed guardian based on a DIRECT interpretation of the Fair Competition Act 1993.

2.      The FTC has jurisdiction in relation to the transactions based on her interpretation of the Fair Competition Act 1993 and the Telecommunications Act of 2000 as albeit a deal involving companies, customers are involved and as such FTC can intervene

For those keeping score, this is technically the first time that the FTC has won a case based solely on merit as opposed to direct word of Law, as NEITHER of these arguments are enshrined DIRECTLY in either law. In fact the words of Beckford from the FTC are historic and should be framed, quote: “This is the first time the FTC has prevailed on a jurisdiction point whereby its jurisdiction is challenged with respect to alleged anti-competitive conduct”.

Good to note that back in January 2012AD as stated in the article “Digicel, LIME stake out positions on FTC challenge”, published Sunday January 8, 2012, The Jamaica Gleaner, Dr. DelroyBeckford has argued on behalf of the FTCthat, quote: “We are seeking a declaration from the Supreme Court that the underlying agreement between Telecom Provider Digicel and CLARO Jamaica would have, or is likely to have, the effect of lessening competition substantially in the telecommunications market, and that the agreement is, therefore, unenforceable under Section 17 of the Fair Competition Act, 1993”.

But the FTC’s anti-competitive arguments had support a long time ago from – surprise! – Telecom Provider LIMEas stated in the article “Digicel, LIME stake out positions on FTC challenge”, published Sunday January 8, 2012, The Jamaica Gleaner.Telecom Provider LIME Jamaica's Managing Director, Garry Sinclair spoke, saying thus: “We fully support the FTC as we have always believed that the merger is detrimental to competition in the telecoms market and has the potential to reverse much of the gains of liberalization”.

In fact on January 30th 2012, Telecom Provider LIME had also filed an application similar to that of the FTC, claiming that the Telecom Provider Digicel/CLARO merger was indeed anti-competitive. Again Dr. Delroy Beckford weighs in stating that Telecom Provider LIME’s application is “an appeal against a decision refusing leave to seek judicial review regarding the decision of the PM exercising his discretion under Section 17 of the Telecommunications Act on the question of the transfer of Claro's licence and of the action of the FTC in the conduct of its investigations regarding the underlying agreement”.

For once I agree with Telecom Provider LIME, as this is a fight by the FTC, a Government body, against a FDI (Foreign Direct Investor) thinking to bully its way in a Telecoms Market that is evolving away from Voice and towards Data as stated in my blog article entitled “OUR Records Voice Decline for the Fourth Quarter of 2010 - Postpaid, Data Services and Fixed Line Mobile and Landline Saturday Night Fever for Telecom Providers”.

One could even argue that the FTC is fighting on behalf of the displaced 517,000 CLARO refugees ….er…...I mean customers left stranded by the shutdown of CLARO Jamaica by Telecom Provider Digicel as stated in my Geezam article entitled “CLARO’s Freeness ends 5th January 2012 – Digicel’s Bigger, Better with Data and Cloud”.

These  CLARO customers, albeit small in number,  have become targets of both Telecom Provider Digicel and Telecom Provider LIME in a JA$1.5 billion promotional credit and SIM Card swap fight as stated in the article “Fight for Claro customers”, published Sunday, January 15, 2012, The Jamaica Observer and “The value of Claro talkers: J$1.5b” Published Wednesday January 18, 2012, The Jamaica Gleaner.

Something for Students of FD13A at the University of the West Indies can argue ad nauseum!

Lawyers for Telecom Provider Digicel argued in their petition that:

1.      The Fair Competition Act 1993 does not apply to the agreement between it and Claro or any results thereof (legal language folks!!)

2.      Only the Telecommunications Act of 2000 governed the agreement and not the Fair Competition Act of 1993

For those of us with short memories, my blog article entitled “Digicel buys CLARO Jamaica - Jumanji Exchange is no Robbery” indicates when this whole thing started back on Friday March 11^th 2011AD and was finalized on December 2^nd 2012AD, an event also faithfully recorded in my blog article entitled “Digicel and America Movil complete Telecoms Swap - Telecom Regulators to get their Pound of Flesh”.

Since then it has become crystal clear that Telecom Provider Digicel was only purchasing CLARO Jamaica in order to get it hands on CLARO valuable 3G Licenses and 850MHz/1900MHz Spectrum. This in order to build out their HSDPA+ (High Speeds Downlink Packet Access) Release 7 Network!

A deal folks that resulted in Telecom Provider Digicel paying mere pennies for this acquired Spectrum and Licenses that conveniently dropped in other laps without them having to continue building out CLARO’s Network as per America Movil’s Bilateral Trade Agreement with the Government of Jamaica  with the as noted in my blog article entitled “Digicel to shut down CLARO's Voice Network in HSDPA+ Push - The Louisiana Purchase of Spectrum” .

So what to come folks? I clear my crystal ball for you yet again:

1.      Years of back and forth tit-for-tat appeals to the Court of Appeals and eventually the CCJ (Caribbean Court of Justice) by Telecom Provider Digicel until about 2015AD (sigh!)

2.      During that time it’s expected that the New Telecom Regulator and the new Telecommunications Act will come on stream as stated in my blog article entitled “Phillip Paulwell broker's Telecom Deal - Telecom Regulator and Mobile Number Portability Coming”.

3.      By then Cross Network Flat Rate Calling and MNP (Mobile Number Portability) and the resulting Flat Rate Calling Plans will be a part of the Telecom Landscape as per the article “Call rates to drop”, published Wednesday May 2, 2012, The Jamaica Gleaner

4.      More Competition in Wireless Broadband Data, Specifically Municipal Wi-Fi and WiMaX, aside from Telecom Provider Digicel, as WiMaX is Open Architecture.

5.      More advance smartphones will be coming into the market as Jamaicans are increasingly leaning towards having an Apple iPhone or Android phone as opposed to a Blackberry as stated in the article “Jamaican loyalty to BlackBerry wanes”, published Sunday May 20, 2012, The Jamaica Gleaner.

Stay tuned folks as Telecom Provider Digicel now gets ready to play a Game of Thrones (TV Series 2011) against the FTC, with Telecom Provider LIME in their corner. As for customers, the coming liberalization of the Telecom Sector and the emphasis on Data, Postpaid and Fixed Line services means that we’ll be taken to 50 Cent and Olivia’s Candyshop  after having been given a taste of what CLARO 3G’s got!