The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company’s (BTC) main rival last night said it was “not in the market’s interest” for its appeal against a regulatory ruling, which found it guilty of anti-competitive behaviour, to succeed.

David Burrows, Cable Bahamas’ head of marketing, told Tribune Business there would be potentially worrying implications for cellular liberalisation should BTC’s appeal to the Utilities Appeal Tribunal (UAT) succeed in overturning the Utilities Regulation and Competition Authority’s (URCA) July 2014 verdict,

URCA, as communications industry regulator, found that BTC’s ‘exclusive’ phone card supply agreements with wholesalers broke the law, excluding rivals from up to 60 per cent of the market.

The regulator sided with a complaint filed by Cable Bahamas’ subsidiary Systems Resource Group (SRG), finding that “the material harm and financial loss to competition..... would potentially be significant” if BTC’s behaviour was “not deterred”.

Cable Bahamas alleged that BTC had breached the competition safeguards in the Communications Act and abused its dominant market position.

The complaint focused on the ‘two-stage’ long distance calling card market, and Cable Bahamas/SRG’s efforts to break into it by having wholesale distributors supply its ‘IndiGo’ cards to retail vendors.

Cable Bahamas alleged that when it approached the wholesalers, they replied they were unable to sell the SRG cards because they had signed exclusive distribution agreements with BTC. These prevented them from selling a competitor’s phone cards.

This was deemed anti-competitive conduct by URCA in its ruling, and it ordered BTC to immediately amend the ‘Master Distributors Agreements’ with its wholesalers and eliminate the offending exclusivity provisions.

However, an advertisement in Tribune Business yesterday revealed that BTC is appealing URCA’s ruling to the UAT, hoping the latter will overturn it.

In just the second case that will be heard by the UAT, BTC is alleging that URCA’s judgment should be repealed “in its entirety” or, in the alternative, the $243,443 fine it was ordered to pay be reduced.

BTC’s grounds for appeal are that its ‘Master Agreements’ with phone card wholesalers did not contravene the key sections 67 and 69 in the Communications Act, which deal with anti-competitive behaviour and the abuse of dominant market positions.

The incumbent carrier is also arguing that URCA “incorrectly defined” the market, and that its analysis was flawed in finding BTC was “abusing its dominant position in the upstream supply of calling cards and the retail supply of long distance, two-stage dialling services”.

Mr Burrows, on Cable Bahamas’ behalf, told Tribune Business that the BISX-listed operator “disagrees” with BTC’s grounds of appeal, as it suggested their main rival believed it was not at fault.

“What they’re doing is trying to have a monopolistic approach to the dealers, trying to stop the dealers from doing business with anyone else,” he said.

“That will not only have an impact on existing phone cards, but on the cellular market going forward. They’re saying that you can only sell their cards, if all the dealers have monopolistic contracts.”

Analysing the implications of BTC’s appeal, and if it were to succeed, Mr Burrows told Tribune Business: “It leaves everybody else out of the market, that portion of the market, and says you can only do business with BTC. And if you don’t, your business will be closed down.”

A successful BTC appeal, he added, would have implications for the newly-launched cellular liberalisation process, as the incumbent carrier would then be able to employ the ‘Master Agreements’ to squeeze the second operator.

“That’s what this is all about,” Mr Burrows said. “It’s one thing to allow another cellular operator to come in, but to allow a cellular operator to come in with their hands tied is not the best thing to do.

“This is why URCA came up with that ruling. I think that is really what they’re looking at. It’s certainly not in the market’s interest to overturn the ruling.”

The notice of the BTC appeal was published to allow other interested parties to intervene. Cable Bahamas would certainly fit this definition, as would other bidders on the second cellular licence, and Mr Burrows did not rule out the presence of the company’s legal representatives at the hearing.

In its original ruling, URCA said: “BTC has agreements with 20 master distributors. The agreements prohibit these distributors from selling pre-paid airtime for another carrier that originates in the Bahamas. The Master Distributor agreement has minimum volume requirements.”

URCA said BTC’s market share gave it clear dominance, and as the incumbent provider with a vertically integrated structure, the regulator found it presented major barriers to market entry for rivals.

BTC had attempted to argue that its wholesalers had ‘buyer power’, but URCA dismissed this, noting that the carrier had “steadily reduced the commission” it paid them since 2011.

And the fact that BTC generated between 25 per cent to one-third of its pre-paid calling card revenues itself or via its franchisee stores also limited the negotiating/buying power of its card wholesalers.

“URCA estimates that the agreements that BTC has with its Master Distributors could account for between 45 per cent and 60 per cent of total market revenues,” the regulator said.

“A further 18-24 per cent of total market revenues are supplied direct by BTC (including vis its franchisees).”

URCA said BTC’s market share meant it was likely “an unavoidable trading partner”, and there was evidence it had sought to enforce the exclusivity clauses in its agreements with wholesalers .

BTC also argued that its wholesale contracts affected only 2,000 of 7,000-8,000 ‘points of presence’ where Bahamians could access the cards, but URCA said a wholesale network - which Cable/SRG had been excluded from - was necessary for successful distribution.

“URCA concludes that the exclusive contracts that BTC has with its Master Distributors are likely to have an appreciable effect on trade in the calling card market in the Bahamas by distorting, restricting or preventing inter-brand competition in the upstream market for the supply of calling cards, and the related retail market for the supply of ‘two-stage’ long distance calling dialling services,” the regulator said.