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By Robert Keith-Reid.

Islands Business Magazine

SUVA, Fiji (September) - The American owners of a Fiji- based
international telephone callback business scheme plan are threatening the Fiji
Government with a US$100-million damages action for attempting to shut their
business down.

Texas-born former investment banker Tim Gibbons and his business
partner, Steve Reid, a longtime United States resident of Fiji, and their
locally-registered company, TELPAC Ltd, are attacking the monopoly control of
Fiji’s telecommunications services by Telecom Fiji, operator of domestic
telephone services, and Fiji International Telecommunications Ltd, (FINTEL), a
joint venture of the Fiji Government and Britain’s Cable and Wireless Plc.

Gibbons told Islands Business that since beginning business four
months ago, TELPAC had brought its telephone charges to an average of 44 percent
below FINTEL’s rates and picked up 15 percent of market share in the way of
about 1,000 large Fiji corporations, including some government agencies.

Gibbons said his company had a deal with the Kiribati government
that would greatly reduce the cost of international calls. It intends to spread
its business to other Pacific Islands countries.

TELPAC uses a digital Internet access message online delivery
system to switch local outbound international calls at cheap rates through a
callback switch in the United States, so bypassing the FINTEL service.

A government statement issued after a November cabinet meeting
declared that since FINTEL held an exclusive telecommunications service license,
the TELPAC service could not be allowed to continue.

Telecommunications rules would be amended to ban TELPAC, the
statement said.

It added that since consumers naturally wanted lower prices,
FINTEL and Telecom Fiji should immediately address "their short, medium and
long-term strategies to reduce the current telecommunications services price
packages they levy."

After the cabinet meeting the government published a new
telecommunications regulation to ban unlicensed callback schemes. It sets
penalties of a maximum F$5,000 (US$2,300) fine and up to three years jail for
illegal operators and empowers a court to order the confiscation of an operator’s

Gibbons said his company had instructed its lawyers to battle
the government decision.

"TELPAC will not only trample the regulation, it will also
expose the crooks who are behind the monopolistic price gouging which this
regulation is intended to protect."

Gibbons claimed his company’s pricing could have saved Fiji
F$40 million (US$17.4 million) of the F$92 million (US$43.2 million) in outgoing
call costs last year. It would eventually cut its charges to 80 percent of
FINTEL rates, he said.

According to one report, FINTEL’s estimated revenue lost
totaled about F$6 million about four months after TELPAC’s advent. FINTEL is
anxious to protect its investment in a F$60 million Southern Cross fibre optic
cable link to Fiji that opened in November 2000. This is running at a minute
fraction of its capacity.

Fiji Telecom and FINTEL have a deal in which they share
international telecommunications revenue. Gibbons claims FINTEL has already
recovered its investment and should now lower its charges.

International and to a lesser extent domestic telephone charges
are under mounting attack by the Fiji business community, which regards them as
being exorbitantly high. A Fiji tourism industry convention in November
complained that international charges were a serious impediment to economic

The government is on record as supporting calls for lower
charges, but it is in a dilemma because of the need to support the
F$2200-million Fiji National Provident Fund. This is the source of most of its
local borrowings and is built with compulsory contributions from workers and
their employers.

In December 1998, the Fiji National Provident Fund paid F$253
million (US$116.4 million) for 49 percent of Amalgamated Telecom Holdings Ltd (ATH),
owner of Fiji Telecom and manager of the government’s 51 percent stake in
FINTEL. It later bought two percent more of ATH.

Telecommunications business commentators claim the FNPF had paid
F$100-F$150 million more for ATH than it needed to.

The United States owned company believes it can defend its Fiji
business by invoking sections of the telecommunications laws that require the
telecommunications minister to put consumer interests before those of
telecommunications business, block monopolistic practices and encourage
competition and efficiency.

TELPAC is also relying on anti-monopoly sections of a fair
trading act. The company, which says it is prepared to spend heavily to defend
its business, starting with a F$2 million allocation, went to court in December
initially to ask for protection against its business, located in the old Burns
Philp headquarters building in Suva, from being arbitrarily shut down.

Jo Turaganivalu, the telecommunications regulator, told Islands
Business it was his personal view that a developing country couldn’t allow an
entirely free telecommunications market until it had reached an appropriate
level of national development.

"TELPAC can’t tell us to just go jump. Gibbons is trying
to confuse the people," he said.

He didn’t mean FINTEL and Fiji Telecom were being left to
charge what they liked.

Turaganivalu said both businesses were under pressure to lower
their charges and they could not avoid doing so. He has asked the International
Telecommunications Union (ITU) to recommend a framework for charges he hopes
will be ready soon.

"If they want their monopoly preserved, then they will have
to accept that I will set the charges."

Turaganivalu said he had first warned telecommunications
businesses of the emergence of callback services competition in the early 1990.
"Really, there is no regulator in the world who can hold them back,"
he said. "It really is a matter of capitulation."

Ultimately, the course was to work, not fight, with them, he

September 25, 2003

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