C&W Rates Probed

Wednesday, March 10, 2004

Cable & Wireless' (C&W) recent price reductions, in which they slashed their mobile prices by up to 67 percent, have come into question as possibly being anti-competitive.

The Information and Communications Technology Authority (ICTA) has recommended that C&W delay reducing their prices until it has been established that they are acting competitively.

Speaking at the Legislative Assembly on Monday, the Minister of Planning, Communication, District Administration and Information Technology, the Hon Julianna O'Connor-Connolly, reiterated the ICTA's concerns. She said: "While Government welcomes such price reductions, those made by the incumbent must not take unfair advantage of its dominant position in the marketplace. For example, the funding of reductions by cross-subsidies from other services, or reductions below the cost of providing the services, could breach the anti-competitive provisions of its licence."

Mrs O'Connor-Connolly read out a letter from ICTA Managing Director Dave Archbold detailing its concerns to the C&W Head of Government Regulatory and Carrier Services, Rudy Ebanks.

In that letter, the ICTA requested that C&W clarify the precise nature of their new rates by providing imputation test calculations to them by the close of business on Wednesday, 10 March.

The imputation test is a series of calculations that will demonstrate whether or not C&W is selling below the cost of providing the service. If it is found that C&W are cross-subsidising from somewhere else, it would give them an unfair advantage over new providers, Digicel and AT&T Wireless.

Mr Archbold, said, "We are not saying that they are cross-subsidising, but we do have concerns, and we reserve the right to ask them to provide us with figures." 

In his letter Mr Archbold said, "Based on the (ICTA's) understanding of the information currently available, the Authority believes that certain aspects of the new rates, if introduced, may place C&W in breech of these licensing conditions

For example, the new effective per minute rates for the postpaid plans range from 10˘ (for b350) to 3˘ (for b20000). When compared to just one component of the cost of providing mobile services as estimated by C&W itself (i.e. the interconnection rates for terminating mobile calls), these rates are below that cost. An ICT service that is provided below cost, unless otherwise approved or directed by the Authority, is a contravention of Condition 15.2 of the company's Licence."

Once the figures are delivered to the ICTA, it is not expected that the Authority will rule immediately as the calculations will need to be carefully studied and analysed. In the event that ICTA concludes that there is a breach of license conditions, C&W must immediately rectify the situation or its licence could be in jeopardy.

Mr Archbold added, "It may seem confusing to the public, and that we are trying to prevent low prices, but if a company has an unfair advantage. it may serve to drive the competition out."

Acting Chief Executive of C&W, Alee Fa'amoe, said that C&W would bring in their price cuts as planned from Tuesday, 9 March. Mr Fa'amoe said: "We see no reason to delay. We feel confident that we have acted in the best interests of our customers and in the bounds of our licence. We feel certain the price reductions will pass the imputation test requested by the ICTA and we will be delivering that information to them by 10 March as requested."

Mr Fa'amoe added that C&W supported the view that the Cayman Islands need a healthy and sustainable marketplace. He said, "We feel our competitive pricing clearly demonstrates our ability and commitment to compete in Cayman's newly liberalised ICT marketplace."

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