By Neil Hartnell
Tribune Business Editor
Regulators have dismissed warnings by The Bahamas’ two communications providers that the imposition of preventative wholesale broadband Internet measures will deter future investment.
The Utilities Regulation and Competition Authority (URCA), unveiling its decision on the imposition of price regulation on what Cable Bahamas and the Bahamas Telecommunications Company (BTC) charge smaller niche operators for bandwidth capacity, said this business only represented a “small share” of their business.
Suggesting that the two companies’ warnings were overblown, URCA said: “Concerning Cable Bahamas (and BTC’s) concerns on the potential adverse impact of the proposed regulation on SMP (significant market power) operators’ investment incentives and the wider economy, URCA considers it unlikely that this would be the case.
“In particular, revenues from wholesale Direct Internet Access (DIA) services constitute only a small share of the SMP operators’ total revenues. As such, any change in the charges for point-of-place-based wholesale DIA services is unlikely to fundamentally change the SMP operators’ financial position and investment decisions.
“This is particularly the case for the latter given the SMP operators’ networks are largely used to support their own downstream retail services, as they self-supply their own wholesale inputs, which means that investment decisions are unlikely to hinge on the prices SMP operators are able to charge other licensed operators for wholesale DIA services (and any associated revenues/returns from these services). More importantly, in line with common practice, any regulated charges should be set at a level to allow SMP operators to earn a reasonable return on capital efficiently employed.”
URCA hit back in response to dire warnings from the two major communications players. BISX-listed Cable Bahamas, in particular, had warned in its push back to URCA’s proposals that the consultation process and findings were”exceptional and therefore well outside the international mainstream”.
Describing the new regulatory measures as “too onerous and heavy handed”, the BISX-listed communications provider warned darkly that URCA’s plans would place its future and present network investment plans “at risk”.
“The impact of such extravagant measures is untested, and URCA itself has not even bothered to carry out an impact analysis. Had it done so, it would have realised that its proposal comes at a potentially high cost to the Bahamian economy and, more specifically, Cable Bahamas’ investment plans,” Cable Bahamas warned.
It added that URCA had failed to properly segment the wholesale broadband Internet market into two. The dominant sector player said there were two types of DIAs - input DIAs for the delivery of services by other ISPs, and “simple resale DIA” which was sold on to clients.
Cable Bahamas argued that treating resale DIA in the manner proposed by URCA is “internationally unheard of” and poses a “substantial risk factor” for its investment strategy. “Regulating resale DIA in the proposed manner is entirely unjustifiable, and a strong push back from Cable Bahamas should be expected. It would also put Cable Bahamas’ current and future investment plans at risk,” the company reiterated.
Undeterred, URCA is now pushing ahead with measures to regulate the wholesale broadband Internet market, which is where smaller Bahamas-based ISPs buy capacity or bandwidth on the two dominant players’ networks so that they can deliver services to their clients.
The regulator moved in response to complaints from smaller operators, who argued that BTC and Cable Bahamas had the ability to make the uncompetitive via excessive pricing and margin squeezes, as well as denying them access.
One niche provider previously said wholesale direct Internet access rates charged by The Bahamas’ two telecommunications giants were “in excess of 150 times” greater than comparable US prices and squeezing out competition.
Theofanis Cochinamogulos, chief executive of Wicom Bahamas, in a May 27, 2020, letter to sector regulators argued that there was “little rationale for these elevated costs” from Cable Bahamas and BTC.
Arguing that these prices had not reduced for ten to 15 years, Mr Cochinamogulos called on URCA to set a fixed rate “at no more than ten times’ the cost” so that niche Internet Service Providers (ISPs) such as himself can compete in the resell market with their larger rivals.
“As a small start-up ISP, monthly recurring costs dictate the success and failure of the business month-to-month,” he wrote. “Because of that fact, early on we sought out DIA pricing locally, regionally and internationally. That research led us to confirm that the cost of purchasing DIA between New York and Japan, some 5,600 miles away, is less costly by 10 times in comparison to purchasing DIA for resale in the Bahamas.
“Furthermore, the cost of purchasing DIA from the Network Access Point of the Americas (NAPS) in Miami varies between $0.22 per Mbps (megabits per second) for a 10,000 Mbps (10G igabit) and $0.30 per Mbps for a 1000 Mbps (1Gigabit) link.
“Currently, Cable Bahamas and BTC’s DIA internet rates stand at a whopping $52 per Mbps and $48.50 per Mbps, which is in excess of 150 times the cost provided to us from providers at the NAPS and other Data Centre Interconnect Facilities in Florida. With these facts in mind, there is little rationale for these elevated costs even when subsea fibre operations, and maintenance are considered.”