• Regulator wary of ability of providers to abuse dominance

• Concerns over affordability for customers with limited options

By Fay Simmons

Tribune Business Reporter

jsimmons@tribunemedia.net

Regulators have assessed the competition within retail fixed electronic communications service market and determined “excessive pricing” was a common anti-competitive concern for each retail market.

The Utilities Regulation and Competition Authority (URCA) said it is concerned with the ability of powerful providers “to abuse their position of dominance to the detriment of consumers”.

URCA was reporting in its preliminary determination on the assessment of significant market power in the electronic communications sector, addressing providers with significant market power (SMP).

The regulator’s report said all of the markets reviewed had identified a provider with “exclusivity or a very strong market position” which may serve as an incentive to overcharge consumers or shut out competition.

“URCA is concerned with the ability of SMP operators to abuse their position of dominance to the detriment of consumers. In all the markets considered in this market review, URCA has preliminarily found an SMP operator which has exclusivity or a very strong market position and is therefore not subject to constraints arising from competition or potential new market entries,” said the regulator.

“In these circumstances, an SMP operator may have an incentive to engage in behaviours that exploit its position of market power by either extracting economic rent directly from consumers or by aiming to harm or prevent competition from emerging within the market, either by making it more difficult for existing alternative operators to compete fairly, using predatory pricing or margin squeezes, and/or by preventing any potential new operators to enter the market.”

The Bahamas Telecommunications Company (BTC) was identified as the SMP for retail fixed voice services and the major competition concern was the provider’s ability to raise its retail prices to an extent it would result in “affordability concerns” for consumers that only want that service.

URCA said they are not concerned about BTC increasing its prices to earn excessive profits from the service but rather the continued affordability of the service to users with limited options.

“URCA recognises that the market for standalone fixed voice services is a declining market with an increasing number of end users purchasing fixed voice services as part of bundled plans rather than on a standalone basis,” said the regulator’s report.

“However, URCA considers that it is important to ensure that those customers who continue to purchase standalone fixed voice services receive adequate protection from, without limitation, excessive price increases, particularly as these customers are likely to belong to vulnerable social groups, sensitive to price increases. There is currently no alternative, similarly priced services available to meet their needs.”

For the retail fixed broadband service market, the regulator identified Cable Bahamas Limited (CBL) as the SMP in “geographic market 1” which includes New Providence, Grand Bahama, Abaco and Eleuthera, the islands where BTC and CBL offer broadband services.

BTC was identified as the SMP in “geographic market 2” which includes all remaining islands where only BTC has deployed network infrastructure to offer fixed broadband services.

The regulator said that there were concerns of “excessive pricing and anti-competitive customer lock-in” noting that CBL has been able to “consistently” charge consumers higher prices than its competitors and was “concerned about BTC’s ability to price excessively in absence of ex-ante regulation”.

“In the market for retail fixed broadband services, there are concerns around excessive pricing and anti-competitive customer lock-in. This product market is divided in two geographic markets. In Geographic Market 1, CBL as the SMP operator has been able to consistently charge higher prices than its competitor(s). The concern for anti-competitive customer lock in arises from the notable lack of awareness among customers regarding alternative providers,” said URCA.

“In Geographic Market 2, BTC is the SMP operator and URCA is concerned about BTC’s ability to price excessively in absence of ex-ante regulation.”

For retail pay TV services and multi product bundles, URCA identified CBL as the SMP and said that excessive pricing is the main concern in both markets.

“In the market for (standalone) retail pay TV services, CBL is currently the only provider offering pay TV on a standalone basis. Therefore, as in the market for standalone retail fixed voice services, URCA’s main concern is that customers who want to consume this service on a standalone basis may be threatened by excessive pricing,” said URCA.

“In the market for multi-product bundles URCA is concerned about CBL’s ability to price excessively in absence of ex-ante regulation. Similarly to the market for retail fixed broadband services, this market is also subject to anti-competitive customer lock-in from the lack of awareness among customers regarding alternative providers.”