The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas has warned that imposing price controls based on Bahamas Telecommunications Company (BTC) related benchmarks would slash its phone call termination revenues by 50 per cent, creating an “unjustified negative impact” on its finances.

The BISX-listed communications provider, in its response to the Utilities Regulation and Competition Authority’s (URCA) consultation on fixed-line phone call termination, also objected to the regulator categorising it - and other new market entrants - as having Significant Market Power (SMP).

URCA’s initial determination is that Cable Bahamas, Internet Protocol Solutions International (IPSI) and Last Mile Communications all have SMP when it comes to terminating calls, initiated by subscribers of a competitor, on their own network.

Cable Bahamas argued that if URCA persisted with this determination, it needed to acknowledge that the SMP enjoyed by itself and other new entrants was “significantly less” than what BTC enjoyed.

Meanwhile, the BISX-listed communications provider is also “strongly opposed” to URCA’s plans to impose price on every operator’s call termination rates.

Calling for a ‘light handed’ regulatory approach, Cable Bahamas not surprisingly urged URCA to impose wholesale price controls on BTC due to its advantages as the incumbent, but not on itself or others.

It suggested that URCA had failed to investigate this option, the ‘status quo’ in the Bahamian communications market, and instead opted for an ‘all or nothing’ approach where either no, or every, operator would be price controlled.

As to how call termination price controls would be set, Cable Bahamas noted that BTC’s accounting separation data was still “too unstable and unreliable for wholesale termination rate setting purposes” when it came to the newly-privatised carrier.

The benchmarking approach was also described as less than ideal and, while Cable Bahamas agreed that any price controls imposed upon it should be “cost oriented”, it warned that they should be based on each operator’s own expenses - not those incurred by BTC.

“Cable Bahamas considers that imposition of a call termination price control on new entrant operators based on either one of these two approaches (BTC’s results or the BTC benchmark exercise conducted by URCA) would amount to little more than an arbitrary rate setting exercise in the case of the new entrant operators, including Cable Bahamas,” the BISX-listed communications provider told URCA.

Warning that this would breach the Communications Act’s stipulation that carriers be allowed to earn a reasonable rate of return on capital efficiently employed, Cable Bahamas added: “Mandating such arbitrary reductions in Cable Bahamas’ call termination rates would effectively represent an unlawful confiscation of Cable Bahamas’ revenues and return on investment.

“In fact, the contemplated rate reductions, if implemented on a flash cut basis, would have the effect of cutting Cable Bahamas’ wholesale call termination revenues by roughly 50 per cent, which would have a significant and unjustified negative impact on Cable Bahamas’ financial position.

“There are important factors that would suggest that ne entrant operators’ call termination costs are higher than those of BTC – economies of scale and additional IP conversion costs.”

BTC, the BISX-listed communications provider added, “enjoys numerous market advantages stemming from its incumbency, scale, market influence and countervailing buying power, among other factors”.

To illustrate the point, Cable Bahamas said it “already incurs additional IP conversion costs to interconnect and exchange voice traffic with BTC, due to BTC’s reliance on legacy TDM network technology.

“Indeed, Cable Bahamas has requested that BTC provide interconnection on a Session Initiation Protocol (SIP) basis, but BTC has refused to do so.

“BTC’s response in this respect could potentially be interpreted as a violation of its Section 40(4)(c) obligations. But, at a minimum, it is another example of its ability to dictate market conditions.”