Digicel critical of new model to set mobile rates

Published: Sunday | January 20, 2013 Comments 0

Possible plans to drop mobile rates even further by the Office of Utilities Regulation (OUR) would result in Jamaica offering the lowest global calling rates, according to Digicel in a multi-page critique of a proposed rate-setting model.

The OUR has countered by labelling Digicel's statements surprising and premature.

The lower rates would stymie investment and eventually reduce the network size, argued Digicel in its response to the OUR's 'Management Accountability Framework Business Plan and Budget', posted on the OUR website.

rates already down

"The office (OUR) seems most keen to regulate mobile termination rates to the lowest level that it can based on its latest actions. The rates we have seen suggested in the latest model would represent by far the lowest mobile termination in the world in a calling-party-pays environment; something of the order of one-fifth of the lowest rate in any other country. In fact, the office's proposal seems to be very close to a policy of bill and keep," stated Digicel in its 12-page response, which offers Chief Operating Officer Richard Fraser as contact.

Calling rates already dropped since last summer based on the Government setting an interim wholesale termination rate of J$5 a minute, down from J$9.

Mobile termination rates are the fees mobile companies charge other carriers to transfer calls on their networks. It was a legislative quick fix to a near decade-long legal fight, and mobile providers slashed rates in response by up to two-thirds.

The power to set the interim rate was conferred on OUR with the passage and signing of the Telecommunications (Amendment) Act 2012.

The OUR is currently in the consultation process on the Long Run Incremental Cost Model (LRIC), which could result in even lower rates. Rival provider LIME previously stated that it anticipates further reductions.

LIME, the former monopoly but now the smaller mobile provider, welcomes the reduction as it would further level all calling rates—a key step in growing its market share.

But said Digicel of the LRIC study: "If implemented in its latest iteration, [it] guarantees under recovery of investments for termination for a real (full size) network and incentivises mobile operators to reduce the size of their networks."

A recent World Bank study indicated that Jamaicans spend 3.0 per cent of their income on a basket of mobile rates in 2010 compared with 4.3 per cent in 2005, indicating the trend of lower rates.

The basket involves core calling rates and even costs for SIM cards. Even without adjusting for the sharp drop last summer, the level of spend ranked Jamaica within the midpoint at 15th among some 29 Caribbean and Latin American nations captured in the survey.

The cheapest mobile basket of rates in the region in 2010 were Costa Rica at 0.6 per cent, Trinidad and Tobago at 0.9 per cent, Bahamas at 0.9 per cent, and Barbados at one per cent.

The OUR, in a response this month, argued that Digicel's response prejudged the results of the LRIC study.

"The office is surprised that the brunt of Digicel's comments on the 2013-14 Work Plan concerns a project that is scheduled to be completed within this fiscal year and on which no decision has yet been made," said the OUR.

The LRIC model has been sent to all major operators, including Digicel, for comments.

"We will treat Digicel's comments as a partial response to the consultation but would also ask Digicel to include them in its formal response to the consultation so that other stakeholders can have the opportunity to comment on them," said the OUR.

Digicel's mobile subscriber base is over two million. LIME avoids disclosure on subscriber figures, but said it added some 150,000 customers in the last three months.

steven.jackson@gleanerjm.com





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