The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Regulators are proposing to place the Bahamas Telecommunications Company (BTC) on a ‘level playing field’ with its main rivals on fixed-line call termination charges over a 90-day period, “promptly removing” a long-standing complaint of the incumbent carrier.

The Utilities Regulation and Competition Authority (URCA), in its initial determination on fixed-line call termination charges, is proposing a series of steps to bring the rates charged by Cable Bahamas and Internet Protocol Solutions International (IPSI) in line with BTC’s.

“URCA is of the preliminary view that the existing asymmetry in termination rates of other SMP (Significant Market Power) licensees should be promptly removed and that, going forward, Cable Bahamas and IPSI’s call termination charges should be set in line with the termination rates set out and approved by URCA in BTC’s RAIO(Reference Access and Interconnection Offer),” the regulator said in a consultation document released yesterday.

URCA’s initial position is likely to delight BTC, but be less well received by BISX-listed Cable Bahamas and IPSI, which are likely to argue that as new fixed-line voice market entrants, they will be less able to compete with BTC.

But BTC has long complained that the 113 per cent call termination “premium” enjoyed by Cable Bahamas has placed itself at a competitive disadvantage, allowing the latter to offer consumers ‘below cost’ pricing.

“Other licensed operators (OLOs) charge a significant premium for fixed local call termination on their networks compared with BTC (1.98 cents per minute versus 0.93 cents per minute, which represents a premium of 113 per cent for OLOs),” BTC said in previous feedback to URCA.

“This rate premium will allow an OLO to obtain higher wholesale revenues from a fixed-line customer than BTC would, which in turn allows the OLO to lower retail prices below costs without incurring an economic loss. This anomaly, while it is allowed to persist, should be reflected in any margin squeeze tests applied to BTC.”

Describing the situation as “asymmetric”, BTC added: “When an OLO competes for a fixed-line customer, it will therefore do so in the knowledge that any wholesale revenues related to that subscriber will be significantly higher than BTC’s wholesale revenues relating to the same customer.

“This puts BTC at a competitive disadvantage, and it allows the OLO to charge lower retail tariffs than BTC without incurring economic losses as a consequence of the available cross-subsidy from the call termination service.”

URCA’s proposals released yesterday disclosed that Cable Bahamas’ termination rates, $1.98 cents per minute for on-island calls and $2.65 cents per minute for off-island, were the same as BTC’s initial RAIO.

However, BTC is now on a “glide path” to reduce its on-island and off-island termination rates to $0.75 cents and $1.13 cents per minute by 2014-2015. Its current charges are $0.93 cents per minute for on-island calls, and $1.4 cents for off-island.

Noting the “asymmetry” between BTC’s rates and those of its rivals, URCA said there was no basis to justify this. It added that BTC’s existing termination charges were 53 per cent and 47 per cent, respectively, below those of Cable Bahamas.

“BTC is further required to reduce its fixed call termination charges to $0.83 cents per minute and $1.26 cents per minute, respectively, (which will increase the asymmetry relative to their current level) in early 2014,” URCA added.

The regulator is thus proposing a phased approach where Cable Bahamas first brings its fixed-line call termination rates in line with BTC’s existing ones within one month of its final decision.

BTC, at the same time, will reduce its termination rates to the already contemplated $0.83 cents per minute and $1.26 cents per minute, for on-island and off-island calls, respectively.

Then, finally, Cable Bahamas and IPSI will have to bring their termination rates into line with these charges three months from the date of URCA’s final decision.

“Thereafter, BTC and all other licensees with SMP in fixed call termination will be subject to the same price control for these services,” the regulator added.

URCA is giving all participants until April 8 to give feedback on its plans. If all goes well, its decision should aid competition and Bahamian consumers as the prime beneficiaries.