Communication Pirates
Honduras with its state monopoly faces a dilemma- how strictly to regulate its VoIP competitors

February 1st, 2007
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[private]

Diagram Assembled with Help From Mitch Cummins

Diagram Assembled with Help From Mitch Cummins

Many Latin American countries concerned about the declining incomes of their state owned telephone companies have imposed restrictions on Voice over Internet Protocol (VoIP)- the routing of voice conversations over the Internet, or made them completely illegal. While VoIP to VoIP phone calls are many times free, VoIP to land phone calls may have a cost that is paid by the VoIP user. With VoIP growing and customers switching to them from regular phones, a Honduran government tendency is to regulate VoIP as they did with regular phones.

In Honduras, until December 25, 2005, Hondutel’s monopoly was diluted. Dozens of companies, including Tropico Telephone & Internet (TTI), applied and received a sub operator license allowing them to issue phone numbers and become a telephone provider to until then, a growing and discontent number of potential landline customers. Until then getting a phone number and a line required putting your name on a list and waiting sometimes months or even years.

Hondutel’s sub-operators infrastructure was to be limited only to the last few kilometers to a customer’s home. The sub operators were not allowed to create their own national infrastructures and had to depend on Hondutel lines for their ‘out of town calls.’

That was the theory. In practice some sub operators found ways of circumventing the system. A pirate phone company in Honduras may receive payment from an international wholesale carrier of IP telecommunications to terminate their phone calls in the country. Instead of 16 cents that Hondutel would charge them, the pirate company would charge only 12 cents. The calls are disguised and charged as national phone calls and Hondutel receives a payment of around 2 cents.

Honduras has one of the least inviting and ‘open for business’ attitudes in the Americas. For example Honduras has the highest Skype-Skype Out rate in Latin America of $0.364 per minute as compared, for example, to $0.021 per minute in Chile.

Part of the reason for the widespread telephone piracy in Honduras is the government’s inflexibility to allow widespread availability of VoIP and competition with Hondutel’s monopoly. Several efforts at privatizing Hondutel failed, primarily because of the exuberant price demanded by the state. “The restrictions on VoIP strangulate the country as no foreign business can operate here without efficient telephone connections and the only way to get that is through VoIP,” said a Canadian businessman from Coxen Hole.

In 2004 in Honduras, according to International Telecommunication Union, there were twice as many cell phone subscribers then land line owners. Changes and shifts in Honduras from land lines to cell phones will not stop there. “By 2010, all voice traffic will be over IP networks,” said Tom Evslin, chief executive officer of ITXC, the largest wholesale carrier of IP telephony traffic in the world. [/private]

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