LIME, Digicel at odds over OUR's proposed $5 termination rate

Sunday, February 19, 2012

BITTER telecoms rivals LIME and Digicel have given sharply contrasting responses to an Office of Utilities Regulation (OUR) proposal for a $5.00 termination rate on cross-network calls.

LIME says it supports the proposed rate, but hopes that it will be lower when a final decision is taken, while Digicel insists that the regulator is not yet in a position to recommend a rate.

The OUR proposal is outlined in a brief on the contentious issue of the acquisition by Digicel of mobile provider Claro, a copy of which was obtained by the Sunday Observer.

According to the OUR, one of the likely effects of the acquisition is that subscribers on other networks are likely to pay more to call the combined entity due to Digicel's high termination rates.

Based on that assessment, the OUR recommended that Digicel implement "an interim per minute termination rate of $5.00".

The OUR argued that despite the fact that the interim rate is a per minute charge, it is expected that mobile calls will be billed on a per second basis. "This condition will prevent undue discrimination against other networks and removes an obstacle to fair competition," the OUR said.

Responding to a Sunday Observer query on the document, LIME's managing director for Jamaica and the Cayman Islands, Garry Sinclair, said LIME has always advocated the establishment of interim rates on the advice of the OUR.

"As the industry regulator, the OUR would have conducted extensive research to arrive at interim rates to be implemented under the emergency legislation committed to by the minister and we are willing to work with their recommendations," Sinclair said.

"In principle, we would be supportive of an interim $5 termination rate as it would undoubtedly deliver some savings for consumers. But we would hope that the final determination could be even lower so consumers can reap even greater benefits," he said, adding that LIME was encouraged that Technology Minister Phillip Paulwell appears set to facilitate this course of action.

However, when the Sunday Observer sought a response from Digicel, Richard Fraser, the company's head and legal and regulatory affairs, said: "The OUR is currently undertaking a cost consultation process for the assessment of mobile termination rates for the entire industry, and as far as Digicel is aware, it would be premature for the OUR to make an assessment or recommendation on what termination rate it thinks ought to apply since they are yet to determine the type of cost model which ought to be built for this purpose. Importantly, the OUR is yet to gather the industry information and data to perform the requisite analysis."

Fraser said Digicel was aware that LIME had previously submitted that $5.00 is an appropriate mobile termination rate for the industry. However, Digicel, he said, does not share this view.

He said that Digicel had heard various rumours that months ago, the OUR may have indicated that a termination rate of $5.00 could be possible and more recently, that once the OUR completes its cost consultation process, termination rates are likely to range between $6.50 and $9.00.

"Regardless of these rumours and alleged premature estimates, the fact remains that there is an established regulatory cost consultation process that is being undertaken, and it is only through this process that the OUR can conclude what would be an appropriate termination rate for the industry," said Fraser. "Anything otherwise would amount to pure guesswork and would be wholly inconsistent with regulatory best practice and existing regulations."

Digicel's agreement to acquire Claro has created a firestorm of protest from LIME ever since it was announced last March.

Under the deal, Claro's parent America Móvil would sell its local operations to Digicel and, in return, acquire 100 per cent of Digicel's operations in Honduras and El Salvador.

The deal will allow Digicel to further solidify its place atop the local mobile telecommunications sector where it already claims in excess of two million subscribers among the Jamaican population of 2.8 million.

But in December last year, the Fair Trading Commission (FTC) filed a lawsuit in the Supreme Court to prevent the deal from being finalised, arguing that the transaction would likely result in higher prices and a slowdown in technological advancements.

The FTC's suit followed a failed attempt in the Supreme Court by LIME to have then Prime Minister Bruce Golding's approval of the merger overturned. In a ruling against LIME, Justice Bryan Sykes said that Golding's approval was done in accordance with the respective regulation.

LIME had said that it would appeal Justice Sykes' ruling, but it was not clear how the filing of the FTC lawsuit would affect that decision.

LIME had contended that Golding's decision to approve the merger "is unlawful and/or was affected by an improper exercise of his power".

Additionally, the then-Opposition People's National Party had expressed concern that the deal would put Jamaica in danger of reverting to the highly undesirable situation of a monopoly provider of voice telecommunications services.

At the time he announced his approval of the merger in Parliament, Golding described as unimpressive Digicel's offer of a reduction of $3.00 from the peak rate (from $17.70 to $14.70) and $2.00 from off-peak rate (from $15.80 to 13.80) in relation to interconnection retail charges with LIME.

Do/Would you disclose details of your salary with your spouse?
	Yes
	No

View Results
Results published weekly in Sunday Finance

Username:
Password:

Notorious 'mountain man' arrested in parking lot

LIME, Digicel at odds over OUR's proposed $5 termination rate