The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Regulators have dismissed the Bahamas Telecommunications Company’s (BTC) argument that forcing it to lower cellular (mobile) call termination rates would cost it $1.5 million a year, arguing that this is essential to fostering “fair competition” at home.

Unveiling its decision on BTC’s call termination charges, the Utilities Regulation & Competition Authority (URCA) refuted the newly-privatised carrier’s contention that reducing its mobile interconnection levy would only benefit foreign communications operators.

Under the Bahamas’ Receiving Party Pays (RPP) regime for the cellular market, in which BTC has a monopoly until effectively 2015-2016, termination rates are levied only on incoming international calls that conclude on the company’s network.

As a result, BTC argued that the cellular call termination fee has no impact on the domestic Bahamian market, and lowering the rate would only benefit foreign carriers.

The newly-privatised carrier said a reduction would cost it $1-$1.5 million a year in wholesale revenues from these foreign carriers and, given that it had to pay them for outgoing calls, BTC would be placed at a “competitive disadvantage”.

URCA, though, disagreed with BTC’s notion that a reduction in wholesale cellular interconnection fees would only benefit foreign carriers. This was because “alternative operators in the Bahamas may wish to compete with BTC on bringing international calls into the Bahamas”.

To do so, these calls would need to “transit... from the international gateway” and terminate on BTC’s cellular network in the Bahamas. This would incur a cellular termination rate, and “to enable alternative operators to compete fairly”, BTC needed to set ‘cost-oriented’ cellular interconnection charges and offer them “on a non-discriminatory basis”.

Noting that the latter “facilitates competition”, URCA added: “Absent cost-oriented termination charges, alternative local operators may not be able to replicate BTC’s pricing offer for the full service. This is because of BTC being able to reflect any difference in the mobile termination rate and its actual cost of terminating the call in its price to the foreign operator.

“However, the alternative local operator will not be able to do so, as the termination charge forms a fixed input to its pricing decisions. As such, in order to match BTC’s offering, the alternative local operator would have to be able to provide the transit element at lower cost than BTC in order to compete on price with BTC. In URCA’s view, this unfairly distorts competition for these services.”

BTC’s traffic volumes and economies of scale, URCA added, meant it was unlikely rivals could compete with it on transit prices.

Elsewhere, URCA also knocked aside concerns expressed by Internet Protocol Solutions International (IPSI) over the fact rival operators had to pay BTC both a call termination/interconnection fee and transit fee.

The regulator said the two charges reflected different services, with interconection dealing with call termination. Transit, on the other hand, referred to BTC transporting calls between two different interconnection points, and URCA said: “As such, these charges cover different conveyance services offered by BTC and thus, may attract separate charges.”

Explaining further why it had decided to switch to a ‘benchmarking’ approach for determining BTC’s interconnection fees, as opposed to its preferred ‘actual costs’ route, URCA said the carrier’s 2011 accounting separation data - the third set to become available - were still “not sufficiently reliable” enough to provide accurate costs for each service provided.

“There remain concerns about some of the key input data, in particular traffic volumes. Further, the unit cost results of several key services continue to fluctuate significantly, relative to those contained in previous submissions,” URCA added.

BTC’s proposed termination rates for 2013, 1.55 cents per minute for fixed-line calls and 7.6 cents per minute for cellular, were 66.7 per cent and 26 per cent greater, respectively, than the levels now set by URCA.