The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) is arguing that it will be virtually impossible for it to engage in predatory pricing under the cellular ‘duopoly’ that will result from April’s planned liberalisation, as this would force it to slash prices by between 41-79 per cent.

The incumbent monopoly, in its feedback on the Utilities Regulation and Competition Authority’s (URCA) proposed review and changes to its and Cable Bahamas’ retail price regulations, said it predatory pricing would see it suffer “substantial accounting losses”.

And BTC argued that if it attempted to exploit its incumbency, and undercut its first rival on price to squeeze it out of the market, it would face investigations for anti-competitive behaviour.

Noting that a second cellular operator would enter the Bahamian market after April 6, 2014, the date the sector is supposed to be liberalised, BTC said there would be a duopoly between itself and its rival until a third licence was (possibly) issued.

“The two mobile operators will compete across all mobile services and market segments, which means that even if prices fall below (a definition of) costs in a certain segment, or for a certain service in the market, cross-subsidies will be available to the second operator to match such prices from segments where prices remain above costs,” BTC argued.

“In general, it is very hard to make a realistic case for predatory behaviour in a mobile market with a duopolistic structure. This would require BTC to lower average mobile price below costs in order for the second operator to either leave the market or restrict its growth, followed by BTC benefiting from this behaviour through increased prices or the prevention of price declines.”

As a result, BTC added: “In BTC’s case, this would involve lowering average mobile prices very substantially. Based on the separated accounts, and using the result of URCA’s efficiency study, BTC would need to lower average mobile prices by 41 per cent to get to separated accounts costs and by 79 per cent to get to efficiently incurred costs (taking account of URCA’s assessment of efficiencies in the mobile business).

“Prices would need to drop further for single-market predation in the mobile market to occur. This pricing approach would result in substantial accounting losses (BTC still has the costs URCA deems inefficient in its accounting systems), and investigations under competition law.”

BTC called upon URCA to show what predatory pricing would look like in the Bahamian cellular market, and reflect this in remedies for this, as the latter did “not anticipate competitive entry in the mobile market”.

“BTC is also concerned that URCA takes a view of anti-competition tests that is too narrow by only focusing on the margins of the price points or bundles for which approvals are sought, while ignoring the profitability of the customers who may be affected by such price changes,” the carrier added.