The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas’ chairman has accused the Utilities Regulation and Competition Authority (URCA) of allowing its application for a 27 per cent basic pay-TV price increase to “languish with no end in sight”.

Gary Kain said that by ‘sitting’ on its price increase application, URCA was creating “difficulty” for Cable Bahamas by preventing it from offsetting rising programming costs, which grew by 12 per cent in 2014.

Writing in the company’s 2014 annual report, which was published yesterday, Mr Kain said: “In the Bahamas, we continue to face regulatory, macroeconomic and competitive pressures.

“In the face of increasing costs, we applied this year for a basic cable television rate increase, which would have been the first rate increase in the 20 years of our history.

“It is unfortunate that this application remains languishing in the offices of the regulator with no immediate end in sight. This is difficult for us as we are facing significant increases in signal and operating expenses.”

Cable Bahamas relaunched its bid for a first -ever increase in the $30 per month basic TV price in December 2014, but nothing has been heard from URCA on whether the application will be approved.

The only subsequent activity was the staging of a ‘Town Meeting’ on New Providence where, not surprisingly, consumers beset by Value-Added Tax (VAT) and high living costs expressed strong opposition to Cable Bahamas’ price increase demands.

Since that January 2015 event, URCA has been silent on the basic-pay TV price application for almost five months.

Mr Kain’s comments, though, may further stoke tensions between the BISX-listed communications provider and URCA at an extremely delicate time in their relationship.

URCA, on the Government’s behalf, is due to run the delayed spectrum auction that represents a key stage in the bidding process for the Bahamas’ second mobile licence.

Cable Bahamas is competing with Virgin Mobile (Bahamas) for the licence, and it remains to be seen whether its fragile relationship with URCA has any impact on the spectrum auction’s outcome.

The two sides are already embroiled in a public dispute over the BISX-listed communications provider’s recent tower construction activities.

URCA recently accused Cable Bahamas of breaching its order to cease construction of its new tower network, which the latter has consistently argued are to provide wireless Internet services - something it is fully licensed to do.

Meanwhile, Cable Bahamas argued that failure to obtain the basic pay-TV price increase, and offset rising signal and programming costs, was partially responsible for a 37 per cent year-over-year increase in expenses to $95.1 million for 2014.

“Programming costs in the Bahamas increased by 12 per cent to $18.6 million over the previous year,” the company said. “Combined with the Florida operations, programming costs added $13.2 million or a 70 per cent cost increase, incorporating a full year of Florida operational expenses in 2014.”

Cable Bahamas also blamed “the increasing cost of doing business in the Bahamas” and several one-off expenses for the $33.9 million rise in total expenses, which slashed its 2014 net income by 19 per cent or $2.7 million.

Maintenance expenses for 2014 were up 9 per cent year-over-year, while administrative costs grew by $14 million or 91 per cent due to increased taxes, regulatory and government fees in the Bahamas.

“Unfortunately, the impact of these increases would have been partially offset if the application for a rate increase for basic television to the regulator was successful,” Cable Bahamas added. “We have once again submitted an application to the regulator for an increase and await a response to our application.”

URCA previously rejected the same 27 per cent basic TV price rise application in early 2013, on the grounds 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 the Utilities Appeals Tribunal (UAT).

It subsequently withdrew this appeal in favour of the revised December 2014 application submitted to URCA which, at the time, seemed to have won over the regulator.

In applying for the same 27 per cent increase, which would increase the monthly price for residential and commercial customers by $8 and $14 respectively, Cable Bahamas also offered to launch a new pay-TV service called ‘Prime Local’.

This initiative, priced at $10 per month, will feature six channels and was clearly designed to counter the rationale that URCA employed in its February 2013 rejection of Cable Bahamas’ first bid.

Mr Kain, meanwhile, argued that Cable Bahamas was “the natural provider” to win the Bahamas’ second mobile license, given its “established” position in the Bahamian communications market.

“We are 100 per cent Bahamian, have an innovative history and provide reliable, affordable products,” Mr Kain added.

“We have committed and dedicated staff who continue to pledge to excel at customer service in all respects. In addition, we have the pedigree to win the license and we intend to prove it.”

The company itself added: “Success with this could fundamentally change the company. The second cellular license offers massive revenue and customer growth, [and] technological innovation.”