The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas has relaunched its bid for a 27 per cent increase in the price of its basic pay-TV package, after unveiling a compromise that seems to have (for the moment) won over the regulators.

The BISX-listed communications provider, which has been smarting ever since the Utilities Regulation & Competition Authority (URCA) rejected its December 11 application for this exact same increase, is offering to launch a new pay-TV service called ‘Prime Local’.

This initiative, priced at $10 per month, will feature six channels and is clearly designed to counter the rationale that URCA employed in its February 2013 rejection of Cable Bahamas’ first bid for price increases related to its basic TV package.

URCA’s logic was founded on the fact that Cable Bahamas had failed to comply with its legal obligations to provide ‘affordable basic television services to all populated areas and specified institutions’.

Cable Bahamas, though, argued that the regulator was mistaken to link its universal service obligations (USO) to the basic pay-TV price increase bid, with the BISX-listed company appealing the decision to a recent hearing of the Utilities Appeals Tribunal (UAT).

The outcome of that hearing has yet to be revealed, but yesterday’s developments - and documents - suggest that Cable Bahamas has been pursuing a ‘twin track’ approach to achieving its basic pay-TV price increase goal.

The business plan for ‘Prime Live’, written by Cable Bahamas’ senior vice-president of finance, Barry Williams, discloses that the basic pay-TV price rise application was sent to URCA on August 18, 2014.

The ‘Prime Live’ plan was submitted on October 7, 2014, and Mr Williams said Cable Bahamas hoped to launch it on November 1 “or as soon as possible thereafter”.

The fact we are now seven weeks past that date suggests there has been much discussion between Cable Bahamas and URCA executives over the revised applications, prior to yesterday’s public consultation launch.

No Cable Bahamas executive responded to Tribune Business calls seeking comment yesterday, while head of marketing, David Burrows, was in Trinidad and unable to respond.

However, it appears that ‘Prime Live’ is the carrot, or bait, being dangled in front of URCA to overcome its USO-grounds resistance and achieve the main goal - a basic pay-TV package increase.

This seems to have made some headway, as URCA said in its consultation: “Under the circumstances, and without prejudice to URCA’s concerns on affordability and Prime Local channel line-up, URCA is minded to accept Cable Bahamas’ partial compliance with the [universal service] obligation.”

URCA added, though, that it ultimately expected Prime Local “to be made accessible to all remaining population areas consistent with Cable Bahamas” USO obligation.

The current strategy is for Prime Local to be launched into the four islands where Cable Bahamas is seeking the 27 per cent basic pay-TV price increase - New Providence, Grand Bahama, Abaco and Eleuthera.

Together, these islands comprise 91 per cent of the Bahamian population, and Cable Bahamas’ market/island segmentation strategy means that the current monthly basic prices of $30 and $50, respectively, for business and commercial customers would remain unchanged on Andros, Bimini, the Berry Islands, San Salvador, Great Inagua and Long Island.

However, Bahamian consumers in the four biggest population centres will be less than pleased about the prospect of $8 and $14 monthly increases in the cost of basic pay-TV services, especially with Value-Added Tax (VAT) on the horizon. It is likely that, as in 2012 and 2013, there will be much public opposition to the price increases, which will also attract more in VAT payments.

Outlining the need for an increase in the basic pay-TV price, Cable Bahamas argued that the losses incurred in providing the service will continue to grow and threaten “the economic viability of the service”.

“In setting out its justification for the price increase, Cable Bahamas opined that without any price increase, the current ‘revenue shortfall’ in its ‘basic TV business’ segment would continue to grow and jeopardise the economic viability of the service,” URCA said.

“Cable Bahamas presented relevant financial information to demonstrate that it is earning less than its regulated rate of return on the service... It should be noted that Cable Bahamas has argued that it would still have a ‘revenue shortfall’ after the price changes.”

Cable Bahamas has consistently argued that the monthly basic pay-TV price has remained unchanged since 1994, and that increased programming costs make it impossible to comply with URCA’s requirements when it comes to the regulated cost of capital employed on the service.

Prime Local’s line-up, though, may not be sufficiently attractive to Bahamians. It will only offer ZNS, Jones Communications (JCN), a weather channel, PBS, the Parliamentary Channel and the Bahamas Christian Network.

While agreeing that the monthly $10 charge for Prime Local appeared affordable, URCA said Cable Bahamas needed to offer more flexible payment arrangements for one-off, upfront costs such as security deposits and installation.

The issue now goes to public consultation.