[jamaica observer] TELECOMS industry experts say there is a good chance that consumers will get cheaper call rates as a result of a ruling last week by the Telecommunications Appeals Tribunal that clears the way for the Office of Utilities Regulation (OUR) to set termination prices.
Termination prices are the prices operators pay to connect calls to other networks. The Telecommunications Appeals Tribunal last week dismissed an appeal from Digicel against a September 2004 OUR determination that declared the Irish-owned telecom and other mobile public voice carriers dominant in call termination services.
"The decision means the OUR, in exercise of its statutory functions dealing with dominant public voice carriers will now be better able to assess market behaviour to determine if these carriers have impeded the maintenance or development of effective and fair competition in the market," said the OUR in a press release last week.
In the OUR's determination, mobile providers are classified as dominant on their own individual networks because calls coming into their networks from outside networks have no choice but to terminate on their system. The industry regulator had said, "If this remains unchecked, a profit maximising monopolist is expected to maintain high prices or increase its price in excess of cost, over time."
Immediately after the determination, Digicel had filed an application for reconsideration (AFR), with its main point of contention centred on defining the market, which Jamaica's largest mobile provider said in a response to the original determination was "blurred". Digicel said that the OUR ignored "other possibilities such as the prospect of a level of users owning more than one phone or that they can receive most of their calls at home or at work where it might be possible to receive calls on a fixed line instead".
The OUR dismissed Digicel's claim and rejected its application, noting that "only an estimated 11 per cent of mobile subscribers subscribe to two or more networks". Moreover, the very need for multiple handset ownership could be cited as evidence of market distortion," said the OUR in its response to Digicel's claim at the time.
Subsequently, Digicel brought the matter to the Telecommunications Appeals Tribunal in an effort to overturn the OUR's determination. However, the tribunal, in its ruling handed down last Monday, said it had considered all the evidence and the submissions of both parties and has concluded that the determination made by the OUR that Digicel and other mobile public voice carriers were dominant was not made in error.
Digicel, in a statement last week, said it is currently assessing "the underlying rationale of the decision and our right to appeal same".
"To be clear, Digicel continues to believe that competition - of which there is plenty in the market -- is the best form of regulation, as it provides the most immediate and tangible benefits to consumers. We would also like to assure customers across Jamaica that our focus as always continues to be on providing them with the very best value and that this ruling will not have any impact on our ability to deliver that," said the firm which is owned by Irish billionaire Denis O'Brien.
On the other hand, Digicel's two main rivals - LIME and Claro - have expressed pleasure with the ruling, with both signalling that the decision may lower calling rates.
"LIME is extremely pleased that, after a series of protracted delays driven by Digicel, the Telecommunications Appeals Tribunal has upheld the Office of Utilities Regulation's (OUR)'s 2004 determination," said that company in a press release.
"LIME has long contended that Digicel was dominant in the mobile market and has abused this dominance particularly with the setting of wholesale charges for calls from LIME's landline network to Digicel's mobile phones," the firm added.
Indeed, the issue led LIME to file a complaint to the Fair Trading Commission and to file suit against Digicel in the Supreme Court for abuse of dominance. The British-owned telecom filed a $100-million lawsuit against Digicel last year, claiming that Digicel unfairly priced its landline-to-mobile rates by as much as $2.48 per minute below the rate it charges LIME to terminate its landline calls.
Geoff Houston, LIME's managing director for Jamaica and Cayman, told Sunday Finance that lower calling rates are likely to arise from whatever the OUR chooses to do.
Some industry insiders believe that there is a huge possibility that the OUR may decide to set termination prices based on cost, a move Houston said would cut calling rates for a wide range of customers.
"If the OUR mandates that mobile termination rates be cost-based, this will further facilitate competition within the mobile market and could have the effect of customers on a given mobile network being charged lower rates to make cross net (off-net) calls to customers on a competing mobile network," said Houston, adding, "LIME continues to try to publicise the fact that the rates that Digicel charges its customers -- especially prepaid customers -- to make calls to LIME's network is too high, especially when compared to what it charges its customers to make calls within the Digicel network."
Claro marketing manager Joseph Oates said, with certainty, that calling rates will be lowered as a result of the ruling.
"Claro is delighted with the decision. Mobile call rates will fall, which will again be a win for the consumer," said Oates. "It gives the OUR the power to control pricing and in so doing act as a guardian of the consumer, so as to ensure that only true and fair costs are passed on to them."
However, ICT & Control Engineering Consultant Dr Patrick Dallas refrained from drawing any conclusion to the likely impact on consumers, noting that call rates may rise, fall or even remain at existing levels, depending on the OUR's findings.
"So the OUR can now exercise its statutory function in determining what ought to be fair market prices. Whatever the process(es) that the OUR will use to come to this determination, the general practice is to share information on the methodology, analysis and the findings with the service providers and in other public consultations," said Dallas, adding, "At the end, we will have, courtesy of the OUR, an agreement on termination rates in relation to public voice carrier networks in Jamaica.
"Interestingly, too, speculations are rife -- mainly due to the marketing strategies of the mobile providers -- that calls originating and terminating within a provider's network (on-net calls) are currently being subsidised by cross-network calls," added the consultant. "This possibility arises more easily when interconnection rates and terms and conditions escape the remit of the regulator. Perhaps we will now be moving to getting a clearer picture of this situation as well, as the OUR moves to establish a clear and straightforward nexus between call charges and the costs incurred by the service providers to facilitate the calls."
OUR director of consumer and public affairs Michael Bryce said the regulatory body cannot say how consumers will be affected one way or the other. But he referred Sunday Finance to Sections 30 and 33 of the Telecommunications Act 2000 which speaks to what a dominant public voice carrier shall do and what are the principles that should guide the OUR in the determination of prices if the Office is required to make such a determination.
Under Section 30, a dominant public voice carrier is required to provide, amongst other things, interconnection on a non-discriminatory basis with charges being cost- oriented. Among the guidelines for the OUR to determine prices in Section 33 is the fact that costs shall be borne by the carrier whose activities cause those costs to be incurred.
Consumers expected to get cheaper call rates following Appeals Tribunal ruling