1. NICTA’s Role in Wholesale Pricing Regulation
It is important to clarify that DataCo does not independently determine its wholesale
internet pricing. The National Information and Communications Technology Authority
(NICTA) is responsible for regulating and setting wholesale pricing for DataCo.
Therefore, any discussion about reducing DataCo’s wholesale internet prices must
consider NICTA’s regulatory role and the broader costs associated with operating and
maintaining the national telecommunications infrastructure.
2. Understanding Who Invested in PNG’s Digital
Infrastructure
Australia’s investment in the Coral Sea Cable System provides international connectivity
between Australia and Port Moresby. However, it is important to distinguish this
investment from the other major telecommunications infrastructure investments
undertaken by DataCo.
DataCo secured a loan from China Exim Bank to finance the Kumul Submarine Cable
Network, which connects 14 coastal provincial towns across Papua New Guinea. In
addition, DataCo invested its own capital to develop terrestrial fibre-optic networks
connecting towns across all seven Highlands provinces and 50 of PNG’s 89 districts.
These investments were not funded by the Australian Government. They represent
significant financial commitments by DataCo to expand domestic connectivity and
bring telecommunications services closer to people across the country.
3. DataCo Bears the Ongoing Operations and
Maintenance Costs
Beyond the initial capital investment, DataCo is responsible for the ongoing operations
and maintenance of these telecommunications assets, including the Coral Sea Cable
System. The cost of maintaining the Coral Sea Cable alone is approximately K5 million
annually.
These recurring costs must be considered when assessing DataCo’s wholesale pricing.
Building and maintaining telecommunications infrastructure across PNG is expensive,
particularly given the country’s challenging geography, dispersed population, high
transportation costs, and logistical difficulties.
It is also important to recognise that PNG’s connectivity needs extend far beyond Port
Moresby. Having an international cable landing in the capital is not enough. Reliable,
quality, and affordable internet must also reach the majority of Papua New Guineans
who live outside Port Moresby, including those in remote and rural communities.
Achieving this requires substantial investment in domestic backbone infrastructure,
regional connectivity, and ongoing maintenance
4. Wholesale Pricing Is Only One Component of Retail
Internet Costs
Another important consideration is the cost structure of retail internet service
providers such as Digicel, Vodafone, and Telikom.
Wholesale internet costs are estimated to account for only around 10% to 15% of
the total costs incurred by retail service providers. The remaining 85% to 90% is
attributable to other operational and business expenses, including:
- Network infrastructure, deployment, and maintenance.
- Electricity and power supply.
- Security and protection of telecommunications assets.
- Labour and staffing costs.
- Transportation, fuel, and logistics.
- Regulatory compliance, administrative requirements, and other costs associated
with doing business in PNG.
The cost of doing business in Papua New Guinea is not cheap. These factors must be
considered when evaluating the overall price consumers pay for internet services.
5. Will a Reduction in Wholesale Prices Guarantee
Lower Retail Prices?
Even if NICTA reduces DataCo’s wholesale internet prices, there is no automatic
guarantee that retail service providers will pass those savings on to consumers.
Wholesale pricing and retail pricing are two different matters. While NICTA regulates
DataCo’s wholesale pricing, the retail prices charged by internet service providers are
not necessarily subject to the same direct price regulation.
This raises a critical question:
What regulatory measures are in place to ensure that any reduction in DataCo’s
wholesale internet prices is passed on to end users through lower retail internet
prices?
Without an effective mechanism to ensure that wholesale price reductions translate
into retail price reductions, consumers may not experience any meaningful benefit.
Retail service providers could retain the savings to offset their other operating costs
rather than reduce the prices charged to their customers.
6. The Need for a Balanced Regulatory Approach
The objective should not simply be to reduce DataCo’s wholesale prices without
considering the financial sustainability of the infrastructure that supports PNG’s
digital connectivity.
A balanced regulatory approach should consider both the need for affordable
internet services and the substantial capital investment, operational expenses, and
maintenance obligations borne by DataCo.
At the same time, there should be appropriate regulatory safeguards to ensure that
any wholesale price reductions deliver tangible benefits to consumers. These could
include greater transparency in retail pricing, monitoring of retail service providers’
pricing practices, and clear mechanisms for measuring whether wholesale savings are
passed through to end users.
Ultimately, the goal must be to ensure that Papua New Guineans receive reliable,
quality, and affordable internet services, regardless of where they live, while ensuring
that the national telecommunications infrastructure remains financially sustainable
and capable of supporting the country’s long-term digital development.
Authorised by:
Paul Kombol, OBE, GCL
Chief Executive Officer
