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RA issues emergency order on North Rock, Logic merger

The new Regulatory Authority overseeing telecoms reform has issued an emergency order on the amalgamation of internet providers North Rock Communications and Logic, saying the merger “raises potentially serious competition concerns”. The merger of the ISPs, which together have nearly all of the local market for internet service, was announced just one business day before the date scheduled for the conversion of the licences held by Logic and North Rock and 19 other licensees into Integrated Communications Operating Licences (ICOLs), which will allow bundling of services, pursuant to the new regulatory framework established by the Electronic Communications Act. The order does not stop the merger in any way, but puts a temporary stop on ICOLs being issued to North Rock/Logic as the RA reviews the internet market again and determines what type of ICOLS they will get and what restrictions should be attached based on the new market scenario and their market power. North Rock provided wireless internet while Logic provided fixed line service. RA chief executive Philip Micallef told

The Royal Gazette yesterday that the order basically tells North Rock to continue giving services as they were doing prior to ICOLS. He said, “The ICOL for North Rock cannot be issued as North Rock no longer exists as a legal entity,” he said. “We would then need to transfer North Rock's ICOL and associated spectrum licenses to Logic.” He said he did not expect the delay in issuing ICOLS to North Rock/Logic to be long. The Regulatory Authority says in its order it was not informed in advance of the intention of Logic parent KeyTech or the parties to amalgamate their businesses. Therefore, the RA says in the order: “In accordance with Regulation 8 of the Public Telecommunications Services (Licence) Regulations 1998, which continue to apply to the Parties pursuant to ECA Section 79, no transfer of North Rock’s Class B public telecommunications service licence could be effectuated without the prior approval of the Minister of Economic Development. The RA went on: “Logic, as a Class C licensee, has no authority to offer Class B services or to utilise North Rock’s former spectrum licences. If the Regulatory Authority were to convert Logic’s Class C licence into an ICOL on the prescribed date, as was originally intended pursuant to the ECA framework, similar complications would arise. Logic would be constrained to provide only the services that it was authorised to provide under its Class C licence as at the date of commencement of the ECA (that is, on 28 January 2013), pending further consideration of the emergency and interim general determination pursuant to which we have deemed Logic to have significant market power in all of the relevant markets in which it operates, as discussed in paragraph 8 below. “The amalgamation of the parties’ businesses has generated a number of issues relating to the status of the public telecommunications service and spectrum licences previously held by the now defunct North Rock. The amalgamation also raises potentially serious competition concerns, including as regards the accumulation of spectrum by the KeyTech Group. The Regulatory Authority has had no opportunity to develop an evidentiary record regarding these complex issues and no time to consider their implications ... “The Regulatory Authority plans to conduct an investigation into the actions of the Parties to determine whether there has been a violation of Section 84 of the RAA. In particular, we will consider whether the Parties’ amalgamation constitutes an action by KeyTech or Logic that preserves or enhances a dominant position in any relevant electronic communications markets in violation of Section 85(4)(b) of the RAA. As part of this investigation, the Regulatory Authority will invite the views of market participants and all interested parties. We expect to commence a consultation on this matter within fourteen days of the date of publication of this Emergency General Determination.” The RA said in order to prevent the disruption of service to former North Rock customers as a result of the probable lapse of North Rock’s Class B licence following the amalgamation, the amalgamated company may, on an interim basis, continue to provide the services that were previously provided by North Rock as at 28 January 2013 pursuant to the former Class B public telecommunications services licence held by North Rock; The RA added: “For so long as the Regulatory Authority is investigating the amalgamation of Logic and North Rock and is considering whether to take enforcement action under the Regulatory Authority Act 2011 (“RAA”) with respect to that transaction, except with the prior written consent of the Regulatory Authority, Logic and North Rock will not take any action which might: (a) lead to the integration of the Logic business with all or any part of the North Rock business; (b) otherwise impair the ability of the Logic business or the North Rock business to compete independently in any markets affected by the amalgamation; or (c) otherwise prejudice or impede the taking of any action under the RAA in relation to the amalgamation of Logic and North Rock.”

Merger concern: ISPs North Rock and Logic have agreed to amalgamate (Photo by Akil Simmons)