The Tribune

By NEIL HARTNELL Tribune Business Editor THE two major industry players are "extremely concerned" with the communications regulator's proposed 2012 budget, warning that financing this through a licence fee increase to 2.22 per cent will be passed on to Bahamian consumers and make investment in the sector cost prohibitive. Responding to the Utilities Regulation & Competition Authority's (URCA) public consultation on its three-year strategy and annual plan for 2012, both the Bahamas Telecommunications Company (BTC) and Cable Bahamas were united in their reservations about the additional cost burden this would impose on the private sector at a time when the industry was supposedly shrinking. Responding on behalf of BISX-listed Cable Bahamas, Judith Smith, the company's in-house legal counsel, noted that URCA was proposing to increase staff costs by 7 per cent in its 2012 annual budget, despite the fact that the regulator's workforce had decreased by 31 per cent between 2009 and 2011. Noting that URCA's first annual operating plan, published in 2009, estimated that the communications industry generated $500 million in revenues the previous year, a sum equivalent to 6.6 per cent of Bahamian gross domestic product (GDP), Ms Smith said the regulator revised these figures downwards to $460 million or 6.2 per cent of a $7.42 billion GDP in 2009. Then, for 2010, URCA estimated the industry had contracted further to $428 million in revenues for a 5.7 per cent share of a $7.53 billion GDP. "The figures indicate a declining trend in the size of the sector," Cable Bahamas' feedback noted. "Between 2009 and 2012, the staff complement of URCA has generally been in decline, while the budget continues to grow. Between 2009 and 2011, the staff complement has decreased 31 per cent. It is difficult to reconcile the 7 per cent increase in staff costs being due to an increase in staff complement and cost associated with various human resource initiatives/programmes." Ms Smith, on Cable Bahamas' behalf, said URCA's 2012 budget represented a 2.1 per cent increase on its 2011 counterpart, and an 11 per cent and 69 per cent increase, respectively, on its 2010 and 2008-2009 budgets. Noting the proposed 2012 increase in licence fees payable to URCA by Cable Bahamas and other operators to pay for this budget, Cable Bahamas added: "While URCA is intent on supporting the socio-economic well-being of the residents of the Bahamas and become the harbinger for ICT (information and communications technology), its increasing budget puts economic pressure on the operators in the sector to finance these endeavours. "The result of these pressures is felt in increased costs to the consumer. It is therefore incumbent on URCA to manage its internal costs so as to reduce the economic pressure." For once, Cable Bahamas was united with its main domestic rival, BTC. The newly-privatised carrier emphasised that it was "extremely concerned" with URCA's proposal to again raise operating licence fees on the sector, this time from 1.165 per cent to 2.22 per cent of operator gross revenues. Noting that URCA's executive compensation was reduced by $92,000 in the 2012 budget, BTC questioned whether any provision had been made for a new chief executive. Querying why this post remained open, some six months after the previous incumbent, Usman Saadat, left office, the carrier added: "The CEO position is a vitally important position to set the tone, take the lead and provide a communication avenue for operators." Emphasising that BTC minimise its regulatory costs, the newly-privatised carrier added: "BTC has consistently upheld the position that the cost of doing business in the telecoms sector is prohibitive, given the 3 per cent Communications Fee due to the Government and the various URCA licences and administrative fees. "Operators need to see a regulator demonstrating cost efficiencies and not coming to the industry every year with increasing costs. Indeed, with the ever-present public mumblings that URCA's remit will be expanded shortly to the regulation of other utilities, namely electricity and water, it is extremely important that telecoms revenues are not used to subsidise the establishment of regulations for those sectors. "It would be useful to have the assurance that the professional fees in URCA's budget (which represent 18 per cent of the total operating budget in 2012 and approximately 20 per cent of the operating budget in 2011) is entirely for the regulation of electronic communications sector, and not subsidising the framework for regulating the other sectors."