Possible Conflict of Interest Delays Spectrum Auction in Costa Rica

It has emerged that Costa Rica’s first mobile spectrum auction has been delayed due to an enquiry into a possible conflict of interest regarding a law firm and Irish-owned mobile operator Digicel. According to Business News Americas, George Miley, the head of SUTEL, has confirmed that local legal firm BLP was hired by U.S. consultancy TGM, which at the same time advised the regulator in drawing up the bidding rules, but had previously worked with Digicel, one of the operators that is planning to participate in the auction, when the company was registering its brand in the country several years ago.

Miley said that the operator is under no legal obligation to stop the auction, but it felt that "it would be in the best interests of transparency to call a halt while the attorney-general and comptroller carry out their probe”. The enquiry could take anywhere from three to 20 weeks.

Outlook and Implications

SUTEL announced in a public hearing on 18 January 2010 that it was going to publish the rules for the auction of spectrum blocks in the 850-MHz, 1,800-MHz and 2,100-MHz bands on 5 February 2010. However, this process was cancelled by SUTEL last week due to “administrative and technical problems” (see Costa Rica: 5 February 2009: Costa Rican Regulator Postpones Wireless Market Liberalisation). It is not clear when Sutel will resume the auction process as the enquiry could take several weeks. However, it is very likely that the licences will not ready by September 2010 as first expected.

On 14 May 2008, Congress approved the liberalisation of the local telecoms market as part of the implementation of the Central American Free-Trade Agreement (CAFTA-DR) with the United States. The legislation defined the framework for opening up the telecoms sector to new entrants to compete with state-owned monopoly Instituto Costarricense de la Electricidad (ICE) in the fixed-line, mobile and internet markets (see Costa Rica: 15 May 2008: Costa Rica Approves Telecoms Market Liberalisation). So far, ICE has been the sole operator with a licence to offer fixed, mobile and internet services. In order to prepare itself for competition, ICE has taken several measures to enhance its service offerings, including expanding its ADSL network, launching WiMAX-based services in the capital (San José), and increasing the number of new GSM lines and 3G services. However, these efforts are not sufficient to satisfy local demand for mobile services; thousands are still awaiting a mobile line. As part of the liberalisation process, SUTEL approved six new licences in 2009 to operate fixed-line, internet, cable TV and VoIP services (see Costa Rica: 25 June 2009: SUTEL Approves Six New Telecoms Licences in Costa Rica).