The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas has admitted that household penetration of pay-TV services plunged by 21 percentage points in seven years because Bahamians now spend more time watching Netflix-type streaming services.

The BISX-listed communications provider, in its just-published response to a regulatory review of the pay-TV, Internet broadband and fixed-voice markets, argued that its position in the TV/video market is “fast receding” due to the growing popularity of streaming and over-the-top (OTT) services and thus it should not be subject to stricter supervision as a significant market power (SMP) operator.

Noting that household penetration of pay-TV services in The Bahamas has plummeted by 21 percentage points, falling from 65 percent in 2017 to just 44 percent in the 2023 second quarter, Cable Bahamas argued that the investments made by itself and the Bahamas Telecommunications Company (BTC) in upgrading their networks have facilitated the success of the likes of Hulu, Disney and Netflix.

The faster broadband Internet speeds offered by the two Bahamian incumbents’ fibre-to-the-premises networks, as well as their upgraded cable and DSL systems, “in turn has allowed OTT providers like Netflix, Amazon, HBO and Disney to ‘go direct’ to customers, bypassing their traditional distribution partners like Cable Bahamas and BTC”.

Cable Bahamas, in its feedback to the Utilities Regulation and Competition Authority (URCA), added: “OTT services fulfill the customer’s need for access to content in an increasingly effective manner, with access offered via multiple platforms and with content available on demand, offering flexibility to customers on how and when to enjoy the content they value.

“The streaming or OTT market is therefore an evolutionary change in the content market and there is no doubt that the traditional market for linear TV will eventually be replaced entirely by these more modern alternatives.” As a result, Cable Bahamas argued that this level of competition meant so-called ex-ante regulation by URCA, which seeks to prevent harmful conduct before it happens, is not needed in pay-TV.

“The entry of new, non-domestic competitors offers additional and effective market constraints on the existing operators, making ex-ante regulation unnecessary,” Cable Bahamas argued. “While consumers have benefited hugely from the increased range of services now available over broadband networks, operators have seen a steady erosion of their revenues, particularly from fixed telephony and pay-TV services.

“In this context, it is worth noting that OTT providers offering services in The Bahamas do not contribute to the development of the sector through investments in access networks or through licence payments to regulate the sector. In addition to legitimate OTT offers, there is also a proliferation of illegal and/or unauthorised alternatives available across The Bahamas.”

The identities of these “illegal and/or unauthorised alternatives” were blacked out in the version of Cable Bahamas’ response released by URCA. However, the BISX-listed communications provider argued that competition in all three markets - pay-TV, broadband Internet and fixed-voice phone services - is sufficiently strong to make the need for ex-ante regulation by URCA redundant.

“In the TV market, there has been a consistent decline in customers.... a decline of 21 percent,” Cable Bahamas said. “There is no other reasonable explanation than the substitution of TV services by OTT alternatives and URCA offers no alternative explanation for this trend, while rejecting the notion that [service] substitution exists.

“OTT viewership hours have no overtaken TV viewership hours in The Bahamas... Cable Bahamas believes, based on the evidence presented in this submission, that demand-side substitution between TV and OTT services exists and, consequently, Cable Bahamas’ position in this market is fast receding.

“Cable Bahamas rejects URCA’s supply side analysis, and its conclusion that there is no supply side substitution between pay-TV and OTT services. Hence there is no SMP in this content market.”

BTC, meanwhile, somewhat backed Cable Bahamas’ assertions on the level of competition in the pay-TV and fixed communications services market while disagreeing with URCA’s argument that the former is limited to just legacy cable and direct-to-home satellite services.

“Like fixed voice, cable and direct-to-the-home pay TV are legacy services that have been experiencing steep declines in consumer demand for years,” BTC said. “As shown in [URCA’s [preliminary determination], household penetration of pay-TV services has dropped from 65 percent to 44 percent since 2017.

“In BTC’s opinion, the rise of online streaming services (both free and subscription-based) is the primary reason for the historical and ongoing erosion of legacy pay-TV services. Mobile wireless services provide ready access to online streaming services and, with mobile penetration exceeding 100 percent, virtually all Bahamians has access to online streaming services.

“In addition, most households have a broadband connection (over 70 percent) implying that fixed broadband access to online streaming services is also widespread. Consequently, BTC disagrees with URCA’s preliminary finding that online streaming services are not part of the same market as pay-TV services.”

BTC added that customer survey results were also “instructive”. It noted that, when asked how they would react to between a 5-10 percent increase in the price of standalone pay-TV services, only 33 percent of Bahamians said they would “do nothing” while the “vast majority – two thirds of respondents – indicated that they would respond negatively by dropping the service, downsizing as well as turn to online streaming services.

“As noted in the preliminary determination, 77 percent of respondents use online streaming services, with the most popular being Netflix. This is clear demand-side evidence that online streaming services are in the same market as pay TV services,” BTC said.

“As the customer survey results also indicate, close to 90 percent of consumers subscribe to multi-product bundles including pay TV. Consequently, here as well, BTC submits that standalone pay-TV services should be seen as falling within the market for bundled fixed services.

“Standalone and bundled fixed services are provided over the same network facilities, and effectively offered in the same way as mobile services. Consequently, there is equally no need or purpose to consider them as separate markets at this stage of the development of the electronic communications sector in The Bahamas.”