The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A rival telecommunications provider yesterday said it was “100 per cent behind” plans to cut the Bahamas Telecommunications Company’s (BTC) call termination rates by up to 60 per cent, telling Tribune Business the proposed 2 cents per minute slash for 2013 was “a beautiful thing”.

Leslie Pindling, managing director of downtown Nassau-based Jazztell, said that given call volumes totalling millions of minutes, the “2 cent differential” created by cutting BTC’s cellular call termination rates from 7.24 cents per minute to 5.52 cents for 2012-2013 was “large” for his company’s profit margins.

Calling on the Utilities Regulation & Competition Authority (URCA) to force BTC to lower its rates more rapidly, especially for cellular, Mr Pindling said Jazztell and other operators would not be able to compete without the regulator’s help.

Acknowledging that “Rome wasn’t built in a day”, and that the Bahamian communications market’s transition from its former monopoly status would take time, Mr Pindling also gave Tribune Business an insight into the ‘hidden’ fees new operators are charged by BTC, and how they are used to squeeze the competition.

He explained that besides the 7.24 cents per minute BTC charged rival operators for terminating calls on its cellular network, the former incumbent also levied a transit (interconnection) fee to link to its system.

This, Mr Pindling said, took the total charges levied on his company and others to 8.28 cents per minute, a figure much higher than that levied in rival Caribbean jurisdictions.

For example, states in the eastern Caribbean - Dominica, Grenada, St Kitts and Nevis, St Lucia and St Vincent and the Grenadines - were required to implement mobile call termination rates ranging from 2.24 to 2.817 cents per minute as of April 1, 2011.

Even stripping out the transit fee, BTC’s current cellular call termination rate is up to three times’ as much as fellow Caribbean territories, something that could inhibit competition and, in turn, harm consumer choice and prices.

Pointing out that URCA’s planned call termination rate cuts, to be phased in over three years for landline services and five years for cellular, would bring the Bahamas “more in line” with the region, Mr Pindling told Tribune Business: “We are 100 per cent behind URCA.

“We just would like them to implement it better, and not have BTC put it on a three-year spread. But we are in total agreement with URCA relating to the cutting, reducing of fees, because all across the Caribbean the fees are more in line with what they should be.”

Telling Tribune Business that Jazztell had been informed the new BTC call termination rates would take effect from October 2012, Mr Pindling added: “If that does happen, it’s a beautiful step to getting it to where it should be.

“A two cent differential is large when we’re talking about these high volumes, but if they [URCA] reduced them by 60 per cent that would put them in line with the rest of the Caribbean and the rest of the world. Two cents is beautiful, but if the rate reduction was implemented all the way........

“Without that two cents we will be unable to achieve those numbers for 2013, and everything we save from BTC will go back into our infrastructure. Jazztell cannot do it without URCA. The two cent differential next month means a lot to us. If it was six cents, it would be perfect.”

A two cent increase in profit margins on one million minutes worth of calls translated into a $20,000 profit margin increase, Mr Pindling pointed out.

URCA’s current proposal is for BTC to lower international cellular call termination rates from their current 7.24 cents per minute to 5.52 cents per minute for 2012-2013, with further cuts to 4.80 cents and 4.15 cents planned for 2013-2014 and 2014-2015 respectively.

While Mr Pindling acknowledged that BTC’s landline call termination rate, at 1.98 cents per minute, was “more reasonable”, he suggested that the former incumbent was seeking to buttress - and exploit its cellular monopoly while it still had it through relatively high fees.

The Jazztell managing director told Tribune Business that 80 per cent of calls coming into the Bahamas went to cell phones, thus making them subject to BTC’s high termination fees plus the transit (interconnection) fee.

“A two cents differential is very good, but it puts them [BTC] three to four cents over the rest of the Caribbean,” Mr Pindling said of the 2012-2013 call termination rate. “The biggest thing is that we will receive a larger profit margin once the rate is reduced.”

As the incumbent, all calls have to cross and terminate on BTC’s network, and apart from the fees, Mr Pindling said rival operators seeking to break into the market also had to pay equipment rental fees to BTC.

These included fees to rent T1 joining circuits, set at $420 a month with a $17,000-18,000 security deposit per T1 required.

“We’ve got $80,000 in deposits tied up in the market alone,” Mr Pindling told Tribune Business.

“There are a lot of over and above charges one has to make to BTC. BTC has made the benchmark for what the termination rates are, so in order to do business we have to lower rates compared to them. This reduction will help to fuel the growth of our termination market.”

He added that Jazztell was also waiting for T1 and other equipment rental rates to drop.