The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Regulators yesterday shot down as “anti-competitive” a Bahamas Telecommunications Company (BTC) proposal that customers be charged for switching to rival operators.

The Utilities Regulation & Competition Authority (URCA), in its initial ruling on the implementation of phone number portability in the Bahamas, said BTC’s proposal would work against consumers’ interests by creating “high barriers” to switching communications providers while keeping their existing numbers.

And URCA also dismissed Cable Bahamas’ suggestion that ‘common industry costs’ incurred in implementing number portability be determined by the amount of phone numbers each carrier has.

This, if adopted, would have left BTC incurring the majority of industry costs given its dominance as the fixed-line voice market incumbent.

Recognising this, URCA sided in this instance with BTC’s call that number portability services fees be shared equally among market operators “irrespective of size and market position”.

URCA moved in after Cable Bahamas and BTC were unable to agree on how the costs associated with number portability implementation should be shared.

It is common for BTC and Cable Bahamas, the two dominant players in the Bahamian communications market, to disagree, the main thing they have in common being to try and leverage their competitive positions to the maximum when it comes to URCA consultations.

But number portability is vital to fostering competition and choice in the Bahamian communications market, as it will allow consumers to keep their existing numbers when switching to another operator - something they will be able to do from September 3, 2013, for fixed-line services only.

This will be especially valuable to Bahamian businesses, who no longer will have to spend time and money on informing customers of phone number changes.

URCA divided number portability implementation costs into four categories. These included ‘one-off costs’ incurred by individual operators on information technology (IT) and other network upgrades, plus staff training costs.

BTC argued that as the incumbent operator, its number portability costs were likely to be higher than its rivals.

As a result, while agreeing that it was “standard industry practice” for individual operators to bear their own number portability costs, BTC argued that the Bahamas should follow the Cayman Islands’ approach. There, customers were charged for switching providers by the communications carrier they were leaving.

“It is URCA’s position that any cost recovery scheme for number portability must ensure that there is a level playing field across the industry for sustainable competition to flourish and optimise benefits for customers,” URCA said.

“Therefore, as a matter of policy, URCA considers that any proposal that would result in customers incurring a porting charge when switching to another service provider would not be acceptable to URCA.

“URCA is aware that there is a direct correlation between charging for portability and the level of demand for the service.”

In what amount to a flat-out rejection of BTC’s proposal, URCA said such charges would deter “price sensitive subscribers” from switching to rival carriers, even if the prices and service quality were better.

While acknowledging that number portability costs were higher on a per subscriber basis, in comparison to larger countries, URCA said porting charges would undermine competition and prevent carriers from offering “the most cost efficient solutions”.

Noting that carriers bore their own costs in markets such as the Channel Islands, Hong Kong and the Isle of Man bore their own number portability costs, URCA added: “URCA reiterates its opposition to any cost sharing scheme that would permit the donor operator (who will lose the customer) to impose a cost on customers requesting number porting.

“As previously stated, URCA believes the imposition of such a charge on customers by the donor operator undermines the economic objectives to promote effective competition and minimise cost, thereby weakening the competitive and switching effects of number portability.”

The Bahamian regulator added that accepting BTC’s proposal would be “counter-productive”.

It concluded: “This is because the cost of porting might be too high (especially where set-up costs are high)and borne mostly by those subscribers requesting number portability.

“In that situation, very few, if any, subscribers would port, thereby maintaining high barriers to switching, and weakening competitive pressure among operators.

“It is also URCA’s view that the option proposed by BTC would raise anti-competitive concerns in the marketplace. This is because the imposition of a cost on customers requesting number portability would have the effect of blocking (‘locking in’) customers from switching to alternative services, technologies or networks.

“In URCA’s view this would create a barrier to exit (prohibit customers switching or migrating to other service providers), and would directly undermine one of the key benefits of number portability.”

But Cable Bahamas did not have it all its own way, especially when it came to sharing ‘common industry’ costs, such as those incurred in providing administration services for number portability.

Cable Bahamas’ argument that costs be based on the amount of phone numbers a carrier holds was dismissed by URCA, which said it could undermine the effectiveness of number portability.

It explained that using Cable Bahamas’ plan, carriers would have to reconcile the numbers/customers ported between them, potentially resulting in “inter-operator disputes and controversy”.

“More important for URCA is that a cost sharing scheme based on [number] assignments could undermine the distribution of benefits principle, as BTC would contribute a disproportionate share of the common industry system costs given the size of BTC’s fixed and mobile customer base,” the regulator said.

“No single operator or group of subscribers should bear a disproportionate or unfair share of the common industry system costs, as would be the case if Cable Bahamas’ proposed cost allocation method were to be adopted.

“This principle also ensures, in URCA’s view, that the business risk associated with the introduction of number portability in the Bahamas is equally shared across participating fixed and mobile operators.”