Cayman Islands E-Commerce:

The Internet has yet to have much direct impact on the conduct of offshore business from the Cayman Islands, but as with all other aspects of business activity, no one can doubt that there will be an impact, that it will be soon, and that it will be substantial.

In June, 2002, the Cayman Islands Bankers' Association presented a report on e-commerce development to the government's E-Business Advisory Board.

The Board requested the report in order to gain a better understanding of the role of e-business for the banking sector in particular and business in general, and the CIBA has welcomed the opportunity to be able to contribute:

The report featured feedback from banking professionals from various banks located in the jurisdiction, including the Cayman National Bank, the Bank of Butterfield, and Bank Austria. International consulting firm Deloitte and Touche also contributed.

Also in June, and after a long-drawn out birth process, the Cayman Islands Information and Communications Technology Authority (ICTA) finally came into existence.

ICTA is responsible for regulating all ICT networks and services, including telephony, broadcasting, radio and e-business, and was established under the Information and Communications Technology Law 2002.

"The enactment of the ICTA Law and the establishment of the authority are the culmination of a lot of hard work by many people in the public and private sectors," said Managing Director Dave Archbold.

Minister for Planning, Communications, Works and Information Technology, Linford A. Pierson, who was responsible for the passage of the Law, said: "The creation of the ICT Law and the authority is a significant step forward for the development of e-business and telecommunications in the Cayman Islands. It will be a great asset to have all information and communications technologies regulated under the same law and by the same body."

In May, 2005, Cable & Wireless launched a VoIP broadband telephony service in the Cayman Islands, branded 'NetSpeak', based on Net2Phone’s managed and hosted IP platform.

The new service enables residential customers with high speed internet access to make unlimited international calls at a low monthly rate using their home internet connection instead of the traditional fixed line network. The NetSpeak service includes pricing plans for unlimited calling to the United States, Canada and Western Europe fixed lines. Friends and family of NetSpeak users can call using a variety of local and international phone numbers available in the Cayman Islands, the United States, Britain and Canada. The basic plan includes standard features such as call waiting, caller ID, call forwarding, and voice mail with new Web-based account and feature management tools.

NetSpeak customers will be provided with a NetSpeak terminal adaptor that connects to their modem and a telephone handset. The device converts telephone calls into packets of digital data that can be carried over the Internet.

NetSpeak is the second VoIP-based product that Cable and Wireless (Cayman Islands) Ltd. has launched in conjunction with Net2Phone, whose fully-managed, hosted platform enables value-added retail products with low-cost options for local and long distance calling.

"As the leading communications provider in the Cayman Islands, Cable & Wireless is excited to break ground with our offering of high quality broadband telephony service throughout the country," said Timothy Adam, Chief Executive of Cable & Wireless Cayman Islands. "With the launch of NetSpeak, our customers can now access a low cost, high-quality phone service with the versatile features and functionality that VoIP offers."

"At Net2Phone we are increasingly seeing local operators use VoIP to grow revenue and offer new services," said Jonathan Reich, Chief Executive Officer of Net2Phone Global Services. "Cable & Wireless' rollout of digital telephony with Net2Phone showcases our value as a provider who can accelerate operators' time to market with robust solutions."

Net2Phone, Inc. and Cable & Wireless Cayman, Ltd. agreed in June, 2004 to offer retail VoIP services powered by Net2Phone in Cayman. Under the three-year agreement, Net2Phone empowers Cable & Wireless of Cayman with the capability to offer a full suite of VoIP services. "Our agreement with Cable & Wireless of Cayman demonstrates the value that Tier 1 telecom operators see in using Net2Phone to help support their VoIP solutions. Our ability to seamlessly integrate into their existing systems and infrastructure is one of Net2Phone's significant competitive advantages," said Jonathan Reich, CEO of Net2Phone Global Services. "As the fourth Caribbean operator to sign an agreement with us, this is one more step in our strategy to enable service providers with retail VoIP services in the region."

In July, 2005, London-based Foreign Direct Investment (fDi) magazine, a Financial Times publication, recognized the Cayman Islands as the Caribbean state with the best IT and Telecommunications infrastructure.

For the 2005/06 Caribbean States of the Future awards, the Cayman Islands was also the runner-up in the following categories: Best Human Resources, Best FDI Promotion Strategy, and Best Transport System.

Among this year’s competitors were Montserrat, Jamaica, Bermuda and Trinidad & Tobago, as well as others from Central America.

“Recognition in these categories demonstrates a strong commitment to maintaining a successful economy in today’s competitive market,” commented Charles Clifford, Minister for Investment and Commerce.

“All persons in Cayman should feel proud that we are considered the best in these areas amongst our regional colleagues. Earning these awards makes us even more marketable to foreign investors and should encourage us to push the envelope further than ever," he added.

In June 2005, fDi invited Caribbean and Central American investment promotion agencies to nominate their countries for recognition as an attractive locale for foreign direct investment (FDI). The Cayman Islands Investment Bureau submitted the Cayman Islands nomination.

In August, 2006, Savvis Inc., a global provider of IT infrastructure services for business applications, entered into a comprehensive distribution agreement effectively giving TeleBermuda and TeleCayman exclusive rights to offer select Savvis services in Bermuda and the Cayman Islands.

Under the terms of the agreement, TeleBermuda and TeleCayman, leading international telecommunications carriers in Bermuda and the Cayman Islands respectively, will leverage Savvis's industry-leading global private financial network to develop and market products and services to clients, primarily in banking and finance, insurance and reinsurance, and hedge fund industries.

As part of the agreement, Savvis's global private network infrastructure will be connected directly to TeleBermuda’s and TeleCayman’s Network Operation Centers in Bermuda and the Cayman Islands. Savvis says that this will complement the voice, private lines, dedicated Internet, DSL and hosted business continuity products and services that are already offered by TeleBermuda and TeleCayman.

The agreement will also enable thousands of customers already connected to Savvis’s Financial Extranet to access Bermuda and the Cayman Islands’ lucrative financial markets to submit a variety of trade-related messages, including indications of interest, order routing, and trade executions, and carry out other Financial Information eXchange (FIX) and non-FIX transactions.

Bermuda and the Cayman Islands have emerged as jurisdictions that specialize in insurance, re-insurance, banking and hedge funds, and the partnership will cater specifically to these industries with innovative products and services.

Savvis's global financial extranet provides application connectivity to all the major exchanges, market data feeds, and the ability to connect to over 4,700 financial community end-points. These represent buy and sell-side institutions, market data and software vendors, exchanges and alternative trading venues around the world. The company's IT infrastructure today extends to 45 countries and includes 25 data centers in the United States, Europe, and Asia with more than 21,000 fully-managed network end points.

“Savvis brings a heritage of innovation and proven managed IT services for financial markets,” stated Raul Nicholson-Coe, President and Chief Operating Officer for TeleCayman.

“Savvis's’ ultra low latency financial extranet and global hosting services opens a myriad of IT solutions and opportunities for our customers," he added.

“Any institution connected to TeleBermuda and TeleCayman will now be able to access one of the world’s leading global financial networks through a single managed connection, eliminating the need to manage multiple providers,” noted Gregory Swan, Executive Vice President and Chief Operating Officer for TeleBermuda.

“SAVVIS enhances TeleBermuda’s and TeleCayman’s breadth of services, opens new business opportunities in the marketplace, and strengthens our position for future growth," he concluded.

Cayman Islands Offshore Activities:

The natural bonding of the Internet and Offshore stems from the fact that both, of their nature, manage to avoid tax. Businesses which can operate on the Internet without, so to speak, touching ground in a high-tax jurisdiction will naturally migrate to offshore jurisdictions; while business that already have offshore existence will find it highly convenient to be able to use the Internet to trade with their high-tax customers without having to make a landing in their countries.

As a major offshore jurisdiction with tens of thousands of offshore enterprises already installed, including many investment funds and banks, it is only a matter of time before Cayman becomes a centre of e-commerce activity. The island's geographical location, its good telecommunications links and its sophisticated business infrastructure add to the inevitability of an e-future for the Cayman Islands.

By locating websites in Cayman to carry out functions previously based in high-tax jurisdictions such as sales and marketing, treasury management, supply of financial services, and most of all, the supply of digital goods such as music, video, training, software etc, businesses can take advantage of low rates of taxation for increasingly substantial parts of their operation.

In many countries, the distribution of goods from a warehousing facility does not constitute the carrying on of a trade or business in that jurisdiction, so that even for physical goods, in many case it will be possible to avoid a permanent establishment (taxable presence) altogether in many high-tax jurisdictions where trading activities currently take place.

Version date: 07.05.06