The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas has urged regulators not to link its proposed 27 per cent basic cable TV fee increase to the company’s universal service obligations (USO), warning that to do so would “be a breach of natural justice” and open URCA to “scrutiny of its integrity”.

Responding to the Utilities Regulation & Competition Authority’s (URCA) key concerns over the application to increase its basic monthly cable TV rates from $30 to $38, Cable Bahamas said the product’s price would be “lower in real terms” than when it was first launched in 1995.

URCA had expressed “affordability” concerns, namely that the proposed price increase would push basic cable TV out of reach for low income Bahamian families, but URCA’s in-house legal counsel, Judith Smith, said this concept was not defined in the Communications Act or any other statute/regulations. Nor was there any definition or test for it.

And, in her May 11, 2012, letter, only just made public now, Ms Smith suggested that URCA may have misinterpreted data it used to support its ‘affordability’ concerns.

The regulator had referred to Bahamian households with monthly incomes of less than $238, something Ms Smith suggested may have been taken from the 2004 Bahamas Living Conditions Survey, given that the figures were the same.

She pointed out, though, that the Survey referred to a ‘per person monthly income’, whereas URCA had described its $238 figure as a ‘per household’ monthly income.

“Therefore, while the precise basis for URCA’s choice of income threshold is unclear, the $238 figure does not properly reflect per household incomes for those below the poverty line as defined in the Bahamas Living Conditions Survey,” Ms Smith said.

Given that the basic monthly cable TV rate for Bahamian households had remained unchanged since 1995, Ms Smith argued that with aggregate inflation growth of 37 per cent over that time, and per capita GDP having increased, the product was “even more affordable today”.

“There is no reason to believe that the affordability of a good or service for which the ‘real’ price had declined should become a concern today,” Ms Smith said.

“In the case of SuperBasic, the proposed $8 increase would leave the price of the service lower in real terms, while at the same time per capita GDP in the Bahamas has grown significantly since 1995.”

Based on Department of Statistics data, which showed that in 2011 there were 106,120 Bahamian households earning an average $38,512 per year, Ms Smith said the proposed rate increase would take the “annualised cost” of SuperBasic from 0.93 per cent of household income to 1.18 per cent. This was a “minimal share” either way.

And she hinted that, if URCA denied Cable Bahamas’ application on ‘affordability’ grounds, it might have to invoke Section 43 of the Communications Act and seek compensation for “revenue shortfalls” via funding from the proposed Universal Service Fund.

“Were URCA to assess and potentially deny Cable Bahamas’ application solely on the grounds of ‘affordability’ considerations, an unfair, onerous regulatory burden would be placed on Cable Bahamas - a burden that would jeopardise Cable Bahamas’ continued ability to provide SuperBasic service,” Ms Smith warned.

As for URCA’s USO worries, Cable Bahamas is arguing that this is a separate issue and should not be linked to the rate increase application.

Ms Smith said the company understood URCA viewed its basic cable TV service as the ‘default USO’ offering, and that it should ensure Cable Bahamas met this obligation.

But, describing this as “irrational and not fair”, Ms Smith said linking the rate application to the USO obligation “opens URCA to a claim of breach of natural justice and scrutiny of its integrity”.

Pointing out that the USO issue was being addressed separately, Ms Smith said it did not require Cable Bahamas to operate its pay TV business at a loss.

“Cable Bahamas’ USO may not be stretched beyond recognition to effectively require that Cable Bahamas must operate its pay TV business without earning a reasonable return overall,” Ms Smith said. “This does not empower URCA to require Cable Bahamas to provide pay TV services at an overall loss......

“Cable Bahamas believes that its proposed rate increase is cost-justified, affordable and long overdue.”