The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) has begun battle with its new mobile rival more than a month before the latter launches, with the two differing sharply over its initial termination rates.

BTC, in feedback to industry regulators, is urging that NewCo2015’s termination rates be set at “the same level” as its own, arguing that to do otherwise would harm Bahamian consumers and distort the newly-liberalised mobile market.

But NewCo, for which Cable Bahamas has Board and management control, is arguing that it should be allowed to charge termination rates that are 25 per cent higher in the short-term to enable it to “establish market position”.

To back its case, NewCo produced a benchmarking study of the termination rates employed by new mobile market entrants in 12 European nations from 2005.

This produced the ‘25 per cent higher’ average for mobile operators with less than 20 per cent market share, a proportion that NewCo will initially take as it builds its business from scratch.

The new operator, which is due to begin delivering services on New Providence and Grand Bahama from October 1, 2016, said the benchmarking exercise showed new operators maintained “asymmetric” termination rates - charges higher than the incumbent operator - for some 9.8 years.

BTC, not surprisingly, opposed NewCo2015’s bid for higher short-term termination rates. It argued that should the Utilities Regulation and Competition Authority (URCA) permit this, the length of their existence should be determined by market share, not time.

The incumbent operator argued that “asymmetrical” termination rates should end when either NewCo2015’s market share hits 15 per cent, or at 15 months from the issuance of its licence on July 1, 2016 - whichever comes first.

Setting out its case, NewCo2015 said European regulators had allowed new mobile entrants to levy higher mobile termination rates than incumbent rivals as a way to cover “additional costs” stemming from their market entry.

“In the Bahamas, the predecessors to BTC launched their mobile network about 20 years ago, and this has allowed BTC to achieve economies of scale that are not immediately available to NewCo and to recover its investments,” the new operator argued.

“NewCo supports the principle of asymmetric termination rates while NewCo’s market position is being established.”

It added that should URCA accept its 25 per cent ‘asymmetry’, NewCo2015’s termination rate for calls received from other mobile phones would be 3.10 cents per minute, compared to $2.48 cents for BTC.

Termination rates for calls from international numbers would be 5.76 cents per message, compared to 4.61 cents for BTC, while NewCo2015’s message termination rates would be 1.75 cents per message as opposed to its rival’s 1.40 cents.

BTC, though, countered by arguing: “The setting of symmetric call termination charges provides predictability and promotes competition. Conversely, asymmetrical rates lead to distortions in the market and suboptimal outcomes.

“Reciprocal termination rates will ensure both allocative and productive efficiencies in the market, and prevent distortions like excessive wholesale charging, high or inefficiently structured retail rates and inefficient market entry.”

BTC said NewCo2015’s expectations of quickly winning market share, plus the existence of number portability, suggested its rival had no barriers to expansion.

“Without prejudice to the arguments that BTC has advanced in support of symmetrical termination rates, in response to URCA’s question on time period of any asymmetry in mobile termination rates, BTC is of the view that any transitional arrangement for asymmetrical rates should be based on market share and not exclusively time based,” BTC told URCA.

“Consistent with URCA’s parameters of market threshold for minimum efficient scale of 15-20 per cent market share, the company is of the view that any transitional arrangement for asymmetry of mobile termination rates for NewCo should be removed once NewCo has achieved 15 per cent market share, and/or not more than 15 months following the issuance of licence, whichever comes first.”

BTC added: “The setting of symmetrical termination rates should be based on the URCA-approved mobile termination rate (MTR) for BTC. In direct response to URCA’s question in this section, any consideration for asymmetrical rates should not only be based on market share - 15 per cent market share threshold, or not more than 15 months from the date of the issuance of the licence, whichever is achieved first - but the level of asymmetry should be between 1.4 to 1.5 of BTC’s mobile termination rate; between 40 per cent to not more than 50 per cent higher than BTC’s mobile termination rate.”