North Rock claims Transact is in breach of licence
Lawyers for Internet provider North Rock are calling on Government to declare competitor Transact in breach of its licence which would effectively stop it from carrying on business.
Digicel acquired ISP Transact in September and has since launched lower-priced long distance service and now Internet.
In a letter on Monday to the Attorney General and two ministers on behalf of North Rock, lawyer David Kessaram of Cox Hallett Wilkinson wrote that “Digicel has been granted favourable treatment which was denied to North Rock” when it sought permission to carry on business as a local company owned and controlled by a non-Bermudian company.
“Unless the conditions of Transact’s s 114B licence are enforced North Rock will suffer further immediate financial harm,” the letter said.
A copy of the letter was obtained by
The Royal Gazette after it was referred to by Government’s lawyer at a hearing Monday in the dispute over the launch of Digicel long distance - which was halted by the court last month.
North Rock’s action is the latest salvo in a costly legal battle over new services launched by Digicel ahead of Government’s planned telecoms regulatory reform expected to allow universal licences and bundling.
Government, with TBI and CellOne are already fighting Digicel and Transact over their new long distance service, while Digicel - which insists it’s acting legally and with Government’s okay - is battling CellOne over its refusal to offer interconnection. The disputes were set down for trial next month before Chief Justice Richard Ground.
The letter revealed North Rock could soon launch its own legal action arising from Digicel’s acquisition of Transact if Government does not act against Transact.
Mr Kessaram said the AG is “entitled to seek a declaration from the Supreme Court that Transact is carrying on business in breach of its s 114B licence (the Minister would also be entitled to a declaration that by virtue of such breach its licence is void.)
“An injunction would lie to prevent such breach (or indeed, the carrying on of any business by Transact).”
Alternatively North Rock said it could bring an action itself to seek a declaration Transact is in breach of its licence and possibly get an injunction.
North Rock’s letter to the new Environment, Planning and Infrastructure Minister Marc Bean disclosed that in the five years to May 2010, North Rock had sought similar deal, but was denied.
“...North Rock sought permission from your Ministry,” Mr. Kessaram wrote Mr Bean, “ under s.114B Companies Act 1981 for permission to carry on business in Bermuda as a local company owned and controlled by a non-Bermudian entity (the acquirer).
“The acquirer was (and still is) a company licensed to provide long distance telephone and internet services pursuant to a Class A licence. The combination of the economic resources of North Rock and the acquirer would have resulted in substantial financial benefits to North Rock and the acquirer. The permission sought by North Rock was refused pending the development and implementation of a new telecommunications regulatory structure by the Bermuda Government. As a result of North Rock’s delay in obtaining s114B permission the opportunity for this combination has now been lost.”
The letter said it was “with shock and surprise” North Rock learned the Ministry had granted Transact a s 114b licence allowing it to be acquired by Digicel Group.
“The difference in treatment has favoured Transact in its business and has resulted in unfairness and prejudice to North Rock,” the letter stated.
Mr. Kessaram said the grant of Transact’s licence is being “examined to see if there are legal ground on which to challenge the decision to grant it”.
He continued: “The grant of Transact’s s 114B licence has permitted Digicel to position itself for the eventual change of policy ahead of North Rock...”
He said it did not matter that conditions were attached to Transact’s licence - since the “mere grant of a s114B licence to Transact by itself gives Digicel a head start when the policy is eventually changed.”
A copy of Transact’s licence shows that on September 1 acting Minister of Business Development and Tourism Kim Wilson granted Transact a licence to carry on business as a local company subject to several conditions including it “shall not bundle services” offered by Digicel and Transact.
North Rock’s letter stated: “We believe the conditions attached to Transact’s licence were intended to prevent the amalgamation of Digicel’s and Transact’s operations. It was not simply to prohibit the bundling of their telecommunications services; but also the combination of their ancillary customer, sales and administrative services and by extension the rebranding of their respective telecommunications products under one banner.”
In branding Transact’s internet service as “Digicel Internet” and moving Transact’s retail service to its locations, the letter said it appeared Digicel and Transact “interpret these conditions differently and narrowly in order to gain a further head start” in the new regime.
“By combining their customer sales and administrative services, Digicel/Transact are able to achieve cost savings which have enabled Transact to reduce its prices for internet services to its customers...,” the letter said.
“In order to stay competitive, North Rock will be forced to consider lowering its prices. If it does its profit margins will be reduced; whereas Transact will be able to maintain its margin of profitability by reason of the fact that it has reduced its costs by combining its ancillary services with those of Digicel.”