The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas has warned that failing to rebalance the Bahamas Telecommunications Company’s (BTC) fixed-line voice tariffs prior to creating a Universal Service Fund (USF) could result in its newly-privatised rival receiving more compensation than is warranted.

Responding to the Utilities Regulation & Competition Authority (URCA) consultation on the communications industry’s Universal Service Obligations (USO), the BISX-listed company said BTC’s unbalanced tariffs (no charging for local calls) meant the charges it incurred in providing fixed-line services to unprofitable customers could be inflated.

URCA is proposing to set up a USF to compensate Bahamas-based communications operators, chiefly BTC and Cable Bahamas, for the cost of providing services to so-called “unprofitable customers” - chiefly remote Family Island settlements and dwellings.

Given that BTC’s fixed-line cost data has not been published, and the ‘access deficit’ - subsidising ‘free local calls’ from other products - not calculated, Cable Bahamas has expressed to URCA its fears that its rival could exploit the situation to claim more USF compensation than is warranted.

“URCA’s proposals have overlooked the fact that the tariffs of the Bahamas Telecommunications Company Limited remain seriously imbalanced, and the impact that this could have by artificially inflating the calculation of BTC’s actual USO-related costs,” Cable Bahamas said.

“Cable Bahamas is seriously concerned with the complete absence of any discussion in the consultation document of the need to rebalance BTC’s tariffs for fixed telephony services prior to considering the need for any form of subsidy mechanism for its basic telephony service.

“Without a full tariff rebalancing process, there is a significant risk that an ongoing and disproportionate financial burden could be placed on the sector that would create inefficiencies, distort market competition and have other negative consequences.

“In Cable Bahamas’ view, any attempt to create a USF without first resolving the serious and on-going competitive distortion created by BTC’s unbalanced tariff structure would be a serious omission by URCA.”

Noting that URCA’s latest consultation did not deal with the need to rebalance BTC’s fixed-line tariffs, the BISX-listed communications provider said the regulator had failed to differentiate between the access deficit resulting from the ‘free local calls’ imbalance and the funding requirement that would result from BTC’s USO obligation.

“Absent a rebalancing process, Cable Bahamas is seriously concerned that BTC could potentially claim compensation for its basic telephony service USO where any such compensation would otherwise be unnecessary or, if necessary, the level of compensation would be overstated,” the BISX-listed company said.

“In 2009, URCA had set out a process that was based on the guidelines for accounting separation and cost accounting that would allow URCA to obtain costing information from BTC to determine if an access deficit exists.

“Cable Bahamas understands that BTC has submitted two years of accounting separation results to date. Cable Bahamas believes that this information should provide a reasonable basis for URCA to determine whether an access deficit exists.?”

And the company added: “Accordingly, Cable Bahamas is strongly opposed to any USO financing mechanism that would contribute to any claimed access deficit by BTC that results from unbalanced tariffs.

“Cable Bahamas urges URCA and the Government to apply and implement the stated preferred policy option that tariff rebalancing is the most appropriate policy response to the issue of access deficits.”