The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Utilities Regulation & Competition Authority (URCA) anticipates licensing one new cellular operator in 2014, as it admits that competition has been “somewhat slow” to develop in the Bahamian communications market.

Unveiling its draft annual plan for 2014, the sector regulator said it was giving “the highest priority” to facilitating the long-awaited liberalisation of the cellular/mobile market.

URCA conceded, though, that with the Bahamas Telecommunications Company’s (BTC) three-year cellular monopoly post-privatisation coming to an end on April 6, 2014, the liberalisation agenda and timetable would be set by the Government.

This, in turn, could be linked to Prime Minister Perry Christie’s much-trumpeted ‘agreement’ with BTC’s majority owner, Cable & Wireless Communications (CWC), over his government’s desire to regain a 51 per cent interest in the incumbent operator.

The Christie administration has spent its first 19 months in office trying to work out a formula to achieve this, and the Prime Minister has repeatedly alluded to a proposal he has to put before his Cabinet colleagues.

Apart from who has Board and management control under a revised agreement with CWC, one of the ‘trade-offs’ the latter is likely to seek in return for giving up majority control is an extension of the cellular monopoly beyond 2014.

CWC, though, has been preparing BTC as if cellular competition will arrive in 2014, casting doubt on whether it would actually seek a monopoly extension. The Prime Minister himself told the House of Assembly that CWC appeared to have accepted competition will arrive post-April 2014.

And URCA noted that the Government, in its draft communications sector policy, had urged it to facilitate cellular market competition in the Bahamas as rapidly as possible.

URCA’s draft 2014 annual plan emphasised that it had “been directed by the Government in its draft revised [sector] policy to take all necessary steps to introduce competition in the cellular services market in the Bahamas as expeditiously as possible following the expiry of BTC’s exclusivity period.

“The Government further exhorted URCA to take steps to equip itself with the necessary regulatory tools which would be required to effectively regulate a competitive cellular market in the best interests of the Bahamas, after the expiry of BTC’s exclusivity.”

Taking its cue from this, URCA pledged that it would “work assiduously towards ensuring that a robust and effective regulatory framework is in place for a liberalised cellular mobile market, and also to expedite the activities which are necessary to introduce competition in the sector”.

Among the tasks the regulator has set itself are determining the criteria for selecting a second cellular operator, who will compete with BTC, and how the wireless spectrum required by this operator is licensed and allocated.

URCA also promised to ensure that mobile number portability was in place “from day one of mobile competition in the Bahamas:”, thereby allowing BTC customers to switch to the new rival while keeping the same number.

And it is also focusing on the build-out of new network infrastructure and systems that will be required of a second cellular operator.

“The construction of new cellular mobile networks will likely necessitate the construction by the new operator of towers for the accommodation of cellular radio equipment,” URCA said.

“This creates significant challenges in relation to public safety, disaster preparedness, environmental and aesthetic concerns, and public health.

“URCA will adopt a comprehensive approach to minimising any harm or perception of harm whilst allowing networks to be built in a timely and business friendly manner. This will necessarily involve a combination of URCA regulatory action, as well as coordination with the various responsible Governmental and other agencies.”

This initiative ties into another key URCA objective, that of reducing “barriers to entry” to the communications sector, and particularly the significant costs new operators incur in constructing their networks.

To remove this impediment, URCA is aiming to develop regulations governing facilities sharing, where rival operators use each other’s infrastructure and systems - and pay for doing so.

“In seeking to address the somewhat slow pace of development of competition in the electronic communications sector,, URCA is seeking to further reduce barriers to entry into the sector,” the draft annual plan added.

“One of those barriers is the high level of investment required. A strategy undertaken in various jurisdictions to address this is the mandated and regulated requirement that operators share their existing facilities, at regulated prices, with other operators.

“This reduces the need for new operators to build or acquire facilities, thereby reducing the investment required to enter the market.”

In promoting such a policy, URCA acknowledged it had to ensure operators were “not entirely disincentivised from the construction of new facilities”.

To provide it with the financial wherewithal to make all this happen, URCA’s total operating expenditure is projected to increase by 10.7 per cent year-over-year to $5.482 million.

This will largely come from fees levied on its licensees, particularly the larger ones. In a move unlikely to please the likes of BTC and Cable Bahamas, operators with an annual turnover greater than $500,000 have seen their URCA Fee rates rise from 1.075 per cent to 1.368 per cent. Operators below the $500,000 threshold will continue to pay the flat $3,000 rate.

URCA’s total income from fees is thus anticipated to rise 9.6 per cent to $6.193 million, compared to $5.649 million in 2013. The regulator itself concedes that fee income is set to grow $540,000.

“In preparation for issuing one mobile licence in 2014, URCA plans to use additional consultancy services and increase the publicity of the process for the issuance of the licence. Therefore, there are additional amounts included in the 2014 budget to facilitate the liberalisation of the mobile market,” URCA said.

“Professional services expenditure is anticipated to significantly increase by 43 per cent, due to allocation of significant funds for mobile liberalisation, regulatory projects set to commence in 2014, financial/internal audits and continuing legal matters.”

Elsewhere, URCA said its 2014 consumer education and public relations budget would rise 73 per cent, while those for information technology and general and administrative expenses were set to increase by 17 per cent and 18 per cent, respectively.

While a second cellular licence may well be awarded in 2014, many communications industry observers believe that with network build-out likely to take another year, actual competition may not reach Bahamian consumers until 2016.