Digicel, Verge blast C&WJ on request for extension on termination rates implementation

Business reporter

Sunday, July 16, 2017

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Telecommunication companies Digicel and Verge Communications Ltd in responding to Cable and Wireless Jamaica's (C&WJ) request for an extension for the implementation of termination rates has described the application as 'unacceptable'.

On Friday, the Office of Utilities Regulation (OUR) published on its website responses from Digicel, Verge and the Consumer Advisory Committee on Utilities on C&WJ's June application to the OUR for the review of the cost model for fixed termination rates, implementation of which would lead to cheaper phone calls for subscribers.

The OUR in its determination notice has ordered a six month implementation timeline for the reduction in the fixed termination rates, with 44 per cent of the reductions effective immediately on July 1, 2017 and 100 per cent of reductions effective in six months' time on 1 January 2018.

Flow Jamaica which is owned by C&WJ is the largest fixed line provider on the island reported earnings of $5.08 billion in revenues over the nine months ending December 2016 from termination services.

It's in that context that the service provider reckons that the timeline given for implementation and the magnitude of the reduction that the OUR has prescribed would significantly impact the immediate cashflow of the company.

Additionally, the company argues that this immediate reduction will affect working capital and investment incentives potentially the long-term welfare of the society itself.

In siding with Flow, the Consumer Advisory Committee on Utilities also noted that the reduction in the rates for the Incoming International Call Termination Service on public switched telephone network, will also impose irreparable harm on Flow's Wholesale Carrier Services operations.

Local call wholesale rates are expected to fall from $0.41 to $0.25 per minute in July and $0.09 by 2020. Additionally, national calls will fall from an average $1.15 per minute to $0.62 in July and will see a further decline to $0.10 for both national and international calls in 2020.

C&WJ has requested a 23 day notice of the first reduction.

Verge, a telecoms start-up, in responding to C&WJ's application said the service provider was given ample notice of the alteration of the fixed termination rates contrary to what has been stated by C&WJ and that it has, in fact, enjoyed and benefitted from the operation of the old rates for over a year, which is longer than the company ought to have benefitted, since the original implementation date was postponed from 2016 to 2017.

“In light of this, should C&WJ continue to gain material financial and commercial advantage to the detriment of other stakeholders?” Managing Director of Verge, Austin Brown questioned. “By postponing the revised rate, C&WJ would continue to keep its competitor's costs high, thus giving it a huge commercial advantage, as is clear from the findings of the LRIC model.”

Brown has some experience with Cable & Wireless, as according to his LinkedIn profile, he was previously the regional head of transmission and customer solutions at Cable & Wireless Communications from 2011 to 2014, and was the vice-president of planning and development for Cable & Wireless Jamaica from 2005 to 2009.

According to Brown, the long run incremental cost or LRIC modelling clearly demonstrates that operators currently interconnected to the C&WJ are being significantly overcharged. He added that there is no legal basis on which the OUR can continue to allow the overcharging of interconnected operators as it is detrimental not only to the operators but also to the public.

“Maintaining these excessive rates in contravention of the Telecommunications Act serves to undermine the business of small operators who would be able to increase traffic volumes if the rates were reduced to LRIC levels as set out in the law.

“Essentially, the OUR, while recognising that other operators are being charged excessive termination rates, and having taken a decision to put a stop to this overcharging, which really ought to have ceased in 2016, has nonetheless taken a decision to allow the overcharging to continue at a somewhat lesser level for the remainder of 2017. Verge views this position as unacceptable,” he continued.

Verge submitted that should the OUR accept C&WJ's proposal of a timeline of minimum of two years or a maximum of three years for the implementation of the reduction of fixed termination rates, it would exacerbate the financial harm already suffered by interconnected operators.




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