Printed in the Business Monday newspaper on February 28th, 2011
This year marks the 10th anniversary of the existence of the Fair Trading Commission. As such this article will discuss some of the developments, at least as far as telecommunications is concerned, that occurred during this period.
In 2001 most countries in the Commonwealth Caribbean, including Barbados, had been served by a single telecommunications provider for many decades. However, the overhaul of the international trading system led to new arrangements for trade globally. The General Agreement on Trade in Services required countries to facilitate the free flow of goods and services and the removal of trading obstacles. It meant that countries could no longer protect their service industries, telecommunications included. The new landscape was Darwinian in character, as survival of the fittest was the new rule which determined who would survive in the market place. As a result of these developments, the Barbados Government had to reform its telecommunications industry.
Most of the changes which the Government of Barbados undertook to liberalise the market were policy oriented and included the issuance of new non-exclusive licenses to the incumbent Cable & Wireless (C&W) companies, the deregulation of customer premises equipment and revisions to the Telecommunications Act, Utilities Regulation Act and the Fair Trading Commission Act. The telecommunications sector is regulated by two bodies - the Ministry responsible for Telecommunications through the Telecommunications Unit and the Fair Trading Commission. The Minister is responsible for, among other things, setting telecommunications policy, licensing and determining which telecommunications services are regulated. The Fair Trading Commission is responsible for enforcing the policies established by the Minister, determining the type of regulatory tariff mechanism used to govern the regulated telecommunications services of the dominant provider C&W, standards of service and interconnection. The Commission also hears and determines complaints when customers have tried and failed to resolve their complaints with C&W.
The process of liberalisation began with the mobile sector and reguired Cable & Wireless’ issuance of the first Reference Interconnection Offer (RIO) - Mobile on August 22, 2003. This was followed by the RIO - Domestic Fixed Wireless filed January 22, 2004 and RIO - International filed July 30, 2004. Each RIO marked a stage in the gradual liberalisation of the telecommunications market. These RIO’s were important in that they governed the process of interconnection of newly licensed telecommunications service providers to Cable & Wireless’ public network.
It was the Commission’s responsibility to review each RIO to ensure fairness and transparency, and that there were no discriminatory provisions within the RIO or subsequent interconnection agreements which are based in the RIO. The market has grown to the extent, that it is more practical to have one RIO with terms and conditions governing the interconnection to all telecommunications service providers. So, more recently, the Commission issued a decision on the C&W Consolidated RIO 2010.
In a competitive environment the cost associated with interconnection is very important and the Commission instituted Interconnection Guidelines – Accounting Costing and Pricing Principles in 2003 to be applied by C&W in the determination of interconnection charges. The interconnection tariff influences the rates charged for mobile phone usage. As such it continues to be an area of contention, as highlighted in the consultation on the Consolidated C&W RIO. The Commission is aware of this situation and, with the assistance of external consultants, will through consultation be establishing guidelines for Long Run Incremental Costing (LRIC) to be used by C&W to develop an LRIC model. The results of the model will be reviewed and, if warranted, will be used as a basis for new interconnection tariffs. LRIC methodology is more widely used to determine interconnection rates than the current historical costing as it is forward looking.
The move toward incentive based regulation was also part of the liberalisation process and the Commission determined that the Price Cap type of incentive based regulation was to be implemented. The rate of return regulation was found not to be effective in encouraging telecommunications utilities to improve efficiency whereas the Price Cap promoted efficiency and was considered to be better suited to the new competitive environment. The Commission issued its first decision regarding Price Cap Regulation for Cable & Wireless in 2005. The second Price Cap decision was issued in 2008 and the price cap review is scheduled for 2012.
The Commission also introduced standards of service regulation. The first Standards of Service Decision was issued in 2006 and the second was issued in 2010 with duration of 3 years. Standards of Service were implemented to ensure that Cable &Wireless service quality did not deteriorate as a result of the introduction of Price Cap regulation and competition in the market. Guaranteed Standards designated target parameters for each standard (including fault repair and installation) and breaches of these parameters resulted in compensation to customers. Overall standards were designed to set a target for the overall performance of the company.
The telecommunications sector is very dynamic with rapid advances in technology. There is now greater choice in terms of the services customers receive and from whom; as a result, consumers benefit. Barbadians have seen new entrants into the market, particularly in the mobile, international and ADSL segments. Most Barbadians have taken advantage of these offerings, so much so that mobile penetration in the telecommunications market is technically over 100%. In addition ADSL is used by several Barbadians for retail purchases, payment of bills and education. The Telecommunications Unit Website at www.telecoms.gov.bb provides more statistical data in this area.
These advances and consequential innovations contained in products and new services are expected to continue, to the benefit of consumers. This will result in greater challenges which the Commission will have to address. This includes the convergence of telecommunications with entertainment services which we are now seeing. The offering of telecommunications services along with television content, removes the industry lines between telecommunications, broadcasting and the entertainment media.
Barbados has moved from a paradigm where the monopoly provider dominated the telecommunications sector, to one where there is competition. It has done so without significant disruption in the marketplace. The Commission has managed this process reasonably successfully over the past decade and will continue to fairly balance the interests of industry providers, customers, government and other stakeholders to promote an efficient and competitive telecommunications market.