The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) fears proposals to lower its mobile call termination rate will slash its international revenues by up to $1.5 million annually, reducing its ability to invest in infrastructure and benefit Bahamians.

Arguing that the rate for terminating cellular/mobile calls on its network should be left at their current 7.24 cents per minute for 2013, rather than slashed to 5.52 cents as proposed by the Utilities Regulation and Competition Authority (URCA), BTC said the move would only benefit foreign carriers and their clients.

This, it argued, was because the Bahamas “almost uniquely” in the Caribbean used a ‘receiving party pays’, rather than ‘calling party pays’ for calls to cellular phones.

And, given BTC’s current cellular monopoly, this meant there were no wholesale/interconnection charges levied between it and rival Bahamian operators. With no local call termination rate, the only such charge BTC currently levies is on international carriers - and their customers - for calling a Bahamian cell phone from outside this nation.

Explaining all this via a letter written by Felicity Johnson, it vice-president for legal, regulatory and interconnection affairs, in response to URCA’s consultation on proposed interconnection charges, BTC said the mobile termination rate (MTR) slash was in effect a wealth transfer from it to rival foreign carriers.

“In other words, lowering the MTR in the Bahamas has the potential to lower call tariffs in the country of origination for calls to the Bahamas,” Ms Johnson said.

“It is clear..... that URCA’s activities to lower the MTR in the Bahamas will benefit retail customers in markets outside the Bahamas, and will lower wholesale revenues accruing to operators in the Bahamas [BTC only] by an estimated $1-$1.5 million per year.

“This would lower the ability of operators in the Bahamas to invest in infrastructure, to pay dividends to their shareholders and to pay taxes to the Government. This is therefore the exact opposite of what URCA should be aiming to achieve.”

Ms Johnson and BTC said that by proceeding with the planned 23.8 per cent MTR cut, URCA would be acting against the Communications Act and sector policy, which called for the interests of Bahamians - and the sector’s competitiveness - to be furthered and maintained.

BTC added that the MTR situation worked both ways, as it faced charges from foreign carriers for terminating calls originating in the Bahamas on their networks.

“By lowering MTRs in the Bahamas aggressively, URCA puts BTC at a disadvantage relative to carriers in such countries, and again this goes against the interest of the Bahamian telecommunications industry and the country’s balance of payments.” Ms Johnson wrote.

“An example would be Haiti, where the government has imposed a five cents per minute surcharge on all inbound international traffic.

“BTC pays between 24 and 30 cents per minute to terminate calls on mobile networks in Haiti (depending on the operator), and this puts BTC’s existing charge of 7.24 cents for calls coming in the opposite direction in its international context.”

As a result, BTC argued that its MTR should be based on internationals benchmarks “so as not to disadvantage the Bahamas relative to its international trading partners for voice traffic”.

Ms Johnson, meanwhile, urged that Caribbean regional benchmarks, rather than BTC’s accounting separated data, be used to determine its 20134 interconnection rates.

Apart from maintaining its MTR at 7.24 cents per minute, BTC is urging that URCA set its 2013 same-island and inter-island rates at 1.38 cents per minute and 1.85 cents per minute, respectively.

These are some 34 per cent and 13.5 per cent higher, respectively, than URCA’s target same-island and inter-island rates of 1.03 cents per minute and 1.63 cents per minute.

Meanwhile, Ms Johnson also called upon URCA to “urgently” deal with interconnection rates set by other operators, particularly Cable Bahamas.

Arguing that Cable Bahamas had “market power” over its termination charges, she added: “Unless URCA brings these on to a regulated basis and reviews these regularly, BTC considers that it cannot negotiate interconnection charges on a fair and equitable basis, with resulting damage to its ability to generate profits for investment in its network.”

Ms Johnson said Cable Bahamas had accepted a ‘reciprocal termination arrangement’ during 2010 negotiations with BTC, in a bid to speed up completion of a deal.

“BTC is very concerned that there is now no incentive for the other operators to agree to change their termination rates in line with any changes proposed for BTC’s termination rates,” Ms Johnson wrote.

“The asymmetry of rates between operators will result in an increasing deficit on BTC’s call termination account, directly affecting BTC’s profit and its ability to fund future network investments.

“BTC is of the view that URCA is discriminating unfairly against BTC by not reviewing the interconnection charges of the other operators at the same time as it is reviewing BTC’s rates.”

Doing it at the same time, Ms Johnson said, would ensure interconnection rates were renegotiated once, not twice.