By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) has demanded that industry regulators tax “disruptive” providers of over-the-top (OTT) services to counter their “onslaught” on local carriers.

Responding to the Utilities Regulation and Competition Authority’s (URCA) draft 2022 annual plan, BTC urged the authority to follow the Government’s lead by taxing providers such as Netflix and Hulu who are making huge profits while enjoying a “free ride” by using its network infrastructure to deliver services to Bahamian consumers.

BTC, while not outlining just how such taxation should be imposed, argued that the current Bahamian regulatory regime prevented it from more rapidly responding to the competitive threat posed by OTT streaming services in a fast-evolving communications market.

“BTC’s view is that the current regulatory regime which BTC is subject to impedes its ability to respond rapidly to industry changes brought on by OTTs. BTC therefore looks forward to a review of the OTT policy that contemplates the impact of the current local regulations on operators’ ability to innovatively compete with international OTTs,” BTC, which is 49 percent owned by government, said.

“BTC also recognises that the industry has changed where traditional electronic communications infrastructure providers, especially in the US, have focused on mergers and acquisitions with established content providers to keep pace. The realities and scales at which BTC and other local communications providers operate does not lend itself to this model.”

OTT operators, who also include the likes of HBO Now, Amazon Video, You Tube and SlingTV, offer services direct to consumers via the Internet while bypassing traditional TV/video content distributors such as cable, broadcast and satellite television platforms. BTC and Cable Bahamas fit into the latter categories, with OTT providers now cutting into their market share and customer numbers.

BTC, in making its taxation call, told URCA: “This is not a novel concept as the Government of the Bahamas formed agreements with Facebook and Airbnb for the realisation of tax revenues for services rendered here in the Bahamas.

“As URCA is aware, the onslaught from OTTs is two-fold. There is direct competition with services offered by traditional service providers such as pay TV and telephony services. Secondly, investment in infrastructure brought on by the exponential growth in traffic by OTTs constrains budgets.

“It is BTC’s view that URCA should investigate and advocate for a licensing regime where disruptive OTTs are taxed. As it is now, operators are saddled with OTTs who are making huge profits while enjoying a ‘free ride’ on networks that are costly to maintain while under no regulatory obligations. BTC asks that URCA hastens its regulatory intervention to prevent further defunding of electronic communications infrastructure by OTTs.”

Tribune Business, though, has previously been presented with evidence by subscribers that VAT is already being levied on Netflix services consumed in The Bahamas.

Cable Bahamas, in its own response to the URCA consultation, said it was seeking a “fast-paced” move to further deregulate the Bahamian pay TV market through the removal of its designation as the operator with significant market power (SMP) in this niche.

“The croup awaits the results of the electronic communications market surveys on pay TV as it has made no secret that its overarching objective is a deliberate and fast-paced move towards deregulation of the pay TV market with the removal of the SMP designation (particularly given the competition with OTT services),” the BISX-listed communications provider said.

It also called for “a focus initially on ex-post (after the event) regulation, followed only by wholesale regulation and evolving to a regulatory regime which does not impede the commercial freedom of licensees and allows for nimbleness and flexibility to respond to the demands of consumers as per the [TV channel] repackaging exercise”.

“Indeed, the entire pay TV industry is in flux, with the owners of content now developing direct channels to market in competition with their traditional distribution partners, the TV operators,” Cable Bahamas said. “The distribution of content is also not part of a ‘fixed market’ as defined by URCA.”

“Content is now accessed across multiple platforms, including mobile. It is the group’s view that even a cursory review of the evolving supply chain of content services will reveal that the real market power is in the hands of the content owners, not the traditional distributors of content in TV form.

“The revolution around the flexible viewership habits of consumers, and the changes being made by programmers unilaterally, causing further dilution of the TV product, must be recognised by URCA, and URCA must address the steady decline of traditional TV viewership in the face of competition from external and unlicensed players who, when included in the count with licensed operators, provide proof that significant competition does exist and that consumers do have multiple choices,” it added.

“The losses incurred in the pay TV market by URCA licensees demands the removal of the dominance label, and a completely new approach by URCA in order to level the playing field.”