Wednesday, November 11, 1998

Bashing the consumer

Once again we are in the midst of a debate about the allocation of a concession for a cellular telephone operation. One part of this debate is relative to whether the law to be applied in this case is the Telecommunications Law of 1941 or the Concessions Law of 1994.

As usual, most of the arguments are a direct function of the commercial interest involved. In this particular case, however, it is even more surprising to find that the General Director of the National Telecommunications Commission (CONATEL) is of the opinion that neither of the two apply, holding the singular view instead that cellular communications are not to be classified a public service.

Again, as is tradition, the debate does not cover the entire communicational spectrum. Once again, the end user of the service is conspicuously absent.

In 1991 Israel bid and allocated a cellular telephone concession to the investor that offered the most amount of lines and agreed to charge the lowest tariff. In Venezuela, however, concessions and privatizations are designed to maximize the income for the State. Results come fast and hard. Recent calculations support the fact that one minute of cellular communications in Venezuela costs ten times what it costs in Israel.

Quality and low tariffs for public services such as electricity, water, communications and transportation are some of the critical elements that must be present in order to maintain the country’s competitiveness. This fact should be taken into consideration by entities such as Fedecamaras and other influential groups that, like any court jester, have in the past applauded a privatization process that must, for all intents and purposes, be classified as fiscally oriented.

The Telecommunications Law, as no other, is evidence of this trend. There is absolutely no mention whatsoever of any obligation or duty of an operator or carrier to provide a good public service at a reasonable tariff. What’s more, when the moment comes to address the regulation of tariffs, apart from the fact that the Law calls for respect for existing agreements, it establishes with utmost clarity that any regulation must consider the “interests of the National fiscal system”.

Don’t think that the Concessions Law is much different. While it logically states that “the concessionaire must be allowed to obtain sufficient income to cover costs and that is fair and equitable”, there is no mention about the need, or even the intent, to structure the concession in such as was so as to minimize the cost to the end user of the service to be offered.

It is high time that we begin to differentiate in a more rational manner between sane economic policies and those that, simply because they are being applied to what has been loosely classified as a “market”, are believed to be the quick road to an economic miracle and are consequently implemented indiscriminately. Much care must be taken when a “market” simply does not exist. This is specially true in the case of public services, which are mostly structured as monopolies, public or private.

Public service companies traditionally offer workers employment stability and therefore also pay salaries that are below the average. Recently, faced with the threat of a national strike, a representative of the national monopoly identified by the initials CANTV, expressed surprise, arguing that the latter was paying salaries over and above the national average. Without wishing to belittle the individual aspirations of its workforce, I remember asking myself who had authorized CANTV to pay its employees salaries above the national average, probably at the expense of a higher tariff for the service offered.

The government, as well as many of the Presidential hopefulls, has announced a new wave of privatizations, specifically in the energy sector. As a result, it is of utmost importance that they remember that a high price obtained for the sale of a publicly owned company like SIDOR is beneficial for everyone, while a high price obtained from the sale or concession of a public service is simply a tax paid in advance to the State, which all of us must then repay via unnecessarily high tariffs for per secula seculorum.

I have read about the supposed “advantage” of tendering and allocating a few megahertz (50 to be exact) at which any investor must then throw an additional US$ 200 million in project development funding. First of all, Conatel hopes to land a US$ 180 million windfall. Then the State wishes to obtain US$ 325 million in income taxes and US$ 470 million in sales taxes between now and the year 2009.

In other words, the tariff structure needed to award the investor a “fair and equitable” income must contemplate not only the US$ 200 million development cost, but also the payment to the State of US$ 975 million. Where the dickens does this leave the end user?

Daily Journal, Caracas, November 11, 1998