By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The satellite communications provider owned and controlled by billionaire Elon Musk has persuaded Bahamian regulators to slash the original 5 percent turnover-based fee they planned to levy on the industry because it was too onerous.

The Utilities Regulation and Competition Authority (URCA), unveiling the results of its public consultation on the proposed satellite communications regulatory regime it plans to implement for The Bahamas, revealed that it has cut this fee - to be applied to all turnover earned above $500,000 annually - to 3 percent following push back from Mr Musk’s Starlink and others.

URCA, which conceded that the consultation document included a drafting error creating confusion as to whether the planned turnover rate was 3 percent or 5 percent, nevertheless stuck to its goals and rejected the satellite industry’s arguments that the turnover-based fee be eliminated completely on the grounds that it would impose a “materially higher burden” than in other jurisdictions.

“Responses to the proposed hybrid fee structure, comprising a $40,000 flat base authorisation fee and a turnover-linked component of 5 percent of relevant turnover where annual revenues exceed $500,000 were mixed,” the Bahamian communications regulator conceded.

“The majority of satellite operators and industry associations opposed the inclusion of a turnover-linked component. These respondents argued that satellite spectrum is internationally co-ordinated, shared and non-exclusive in nature, and that revenue-based fees are structurally inappropriate for spectrum that carries low scarcity value and minimal opportunity cost.

“Concerns were raised that turnover-linked fees would create barriers to market entry, discourage investment, penalise subscriber growth and ultimately increase costs for end users, particularly in underserved areas. Several respondents also noted the practical challenge of attributing relevant turnover to a single jurisdiction in the context of multi- jurisdictional satellite operations.”

URCA added that the satellite industry’s “preferred alternative.. was a simplified flat fee calibrated to recover” the regulator’s “actual administrative and spectrum management costs”. Mr Musk’s Starlink was seemingly especially vocal about the cost burden this threatened to impose.

“A further concern raised within this group was that the proposed fee, when added to the existing annual URCA fee and the Communications Licence fee, would result in a cumulative revenue-linked regulatory burden materially higher than comparable international benchmarks for satellite markets of similar scale,” URCA said of the feedback it received.

“Starlink submitted a specific calculation indicating that the combined regulatory fee obligation, incorporating the existing URCA fee of 1.448 percent of relevant turnover, the Communications Licence fee of 3 percent, and the proposed turnover-linked spectrum component of 5 percent, would produce a total revenue-linked charge of approximately 9.448 percent where an operator’s relevant turnover equals or exceeds $500,000 in a given licence year.

“Starlink characterised this as unusually high by international standards, and as directly undermining affordability and service expansion objectives, particularly in respect of Family Island connectivity,” the regulator added.

“As an alternative, Starlink proposed that URCA not adopt any additional spectrum usage fee in shared frequency bands, submitting that such an approach would align spectrum charges with the non-scarcity and shared nature of satellite spectrum, avoid duplication of existing regulatory cost recovery mechanisms, support affordable access and service expansion across all islands, and encourage continued investment in satellite broadband infrastructure.

“Starlink acknowledged that the hybrid framework represents a significant structural improvement over the previous per-terminal fee approach, but maintained that a turnover-linked spectrum fee remains economically distortive and inconsistent with the stated policy goals of the electronic communications framework.”

Responding to these concerns, URCA argued: “URCA considers that it is appropriate for the spectrum fee framework to reflect, to some extent, the scale of commercial activity within The Bahamas, while ensuring that the overall regulatory burden remains proportionate and consistent with URCA’s statutory objectives under the Communications Act.”

It countered that “a turnover-based structure can support market entry by ensuring that new or low-revenue operators make lower contributions during the early stages of commercial deployment”, and argued that there would be a limited impact on satellite industry investment. “The main investments of satellite systems are typically fixed and not driven primarily by the number of Bahamian customers served,” URCA added.

“Impact on subscriber growth will not be material. A modest turnover-linked contribution should not materially alter the affordability for end users, wherever there are located. The fee structure will not affect coverage in underserved areas. Unlike terrestrial networks, where extending coverage may require incremental site deployment and backhaul investment, satellite coverage is typically available across wide regions once the satellite system is authorised and operational.”

However, URCA also made a concession to Starlink’s arguments about the total burden when all turnover-based fees are combined. “URCA accepts, however, that the calibration of the turnover-linked component requires careful reassessment in light of the cumulative fee burden identified in submissions,” it said.

“The full revenue-linked regulatory burden applicable to operators comprises the existing URCA annual regulatory fee of 1.448 percent of relevant turnover, the Communications Licence fee of 3 percent, and the proposed turnover-linked spectrum component of 5 percent, resulting in a combined charge of approximately 9.448 percent where an operator’s relevant turnover equals or exceeds $500,000 in a given licence year.

“URCA notes the concerns that this cumulative figure is high relative to international benchmarks for satellite markets of comparable scale, and that it may have the unintended effect of deterring service expansion and investment, including in the Family Islands where satellite connectivity is most socially and economically valuable,” the Bahamian regulator added.

“URCA considers that these concerns are relevant to the calibration of the turnover-linked component, and has taken them into account, together with international benchmarks, the cumulative regulatory cost burden and the Government’s policy objectives on affordable access, in determining the appropriate level of the fee.” As a result, it cut the turnover-based levy from 5 percent to 3 percent.

“The application of the turnover-linked component on a marginal basis ensures that fees increase progressively with the level of activity, while avoiding disproportionate impacts on operators with lower levels of relevant turnover,” URCA said.

“URCA recognises that stakeholders expressed differing views regarding both the appropriateness of the proposed benchmark comparisons and the extent to which the cumulative regulatory fee burden should influence the calibration of the spectrum fee.

“While URCA does not consider that any single benchmark or fee metric should be determinative, it considers that the originally proposed turnover-linked component of 5 percent would not appropriately reflect the principles of proportionality set out in the Communications Act,” the regulator added.

“Having regard to stakeholder submissions, international practice, the cumulative effect of applicable regulatory charges, and the need to support investment, affordability and service expansion, URCA has determined that a turnover-linked component of 3 percent applied only to relevant turnover exceeding $500,000 strikes a more appropriate balance between proportionality, competitive neutrality and efficient spectrum management.”