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RA: likely tacit co-ordination in telecoms

What do you think: the Regulatory Authority is seeking feedback on its consultation document review of the island’s electronic communications sector (File photograph)

It is likely that One Communications and Digicel engaged in “tacit co-ordination” in the past, which would have impacted the electronic communications marketplace in Bermuda.

That is the view of the Regulatory Authority of Bermuda, which is seeking feedback from the public and stakeholders, to a number of intervention proposals aimed at promoting competition that furthers “the interests of Bermuda consumers and residents”.

It is doing so through a consultation document that was released on February 18. Feedback submissions were to have been made by the end of tomorrow, but the deadline has now been extended to March 29.

The RA’s review is to consider whether there are operators in the electronic communications sector who hold a position of market power, such that it is necessary for the authority to intervene and impose regulations to prevent or deter anti-competitive effects.

It noted that One Communications and Digicel, together, accounted for more than 90 per cent of total revenues in the sector in Bermuda in 2017.

The RA has looked at six service categories, namely broadband, mobile, fixed voice, subscription television, business connectivity and off-island connectivity, and suggested remedies in areas of concern.

The consolation document follows a preliminary consultation in 2017, and concludes with a handful of questions on which the RA seeks feedback.

Improvements within the sector have included the roll-out of network upgrades, with internet speeds above 100 Mbps available to customers, and extensive 4G mobile coverage.

However, the RA has concerns where there is significant market power, or SMP. By its definition, this is a position of economic strength that can allow a company to individually, or jointly with others, “behave independently of competitors, customers and ultimately consumers”.

Where it identifies that such a situation exists, the RA said it “is keen to ensure any remedies proposed are effective and strike a balance in terms of competition and investment incentives”.

It said it recognised the concern that two major competitors, or more, can “adopt a uniform conduct or common policy”, that does not benefit customers.

The RA said that a joint SMP “does not require, or imply, that the sectoral providers are engaging in illegal collusion, but refers to whether they constitute a collective entity relative to their competitors, trading partners and customers in a particular market”.

In its assessment of the retail broadband market in Bermuda, the RA said: “The evidence presented suggests that OneComm and Digicel Group are likely to have engaged in tacit coordination in the past.”

The RA welcomed the investment in fibre networks that have been undertaken by both companies, but added that it “remains concerned that, despite the improvement in the price/speed ratio received by consumers, overall prices may still not be aligned with costs, and OneComm and Digicel Group continue to have the incentives and ability to coordinate and sustain such an outcome”.

It added: “The continued alignment in pricing on the new, faster networks is clear evidence of tacit coordination. Therefore, despite the investments in fibre networks, the Authority is not confident that the market conditions are such that the risk of tacit coordination in the future has been eliminated.”

Broadband is one of six categories reviewed by the RA; the others include mobile services, subscription TV and landline telephone services.

The 152-page consultation document includes the RA’s observation and proposed remedies in eight market areas where it has identified one or more SMP providers. In some cases, it proposes that services include a stand-alone option separate from bundled offerings; that there is accounting separation; that prices are “cost orientated”; and that there is fair and reasonable wholesale access for other companies that seek to enter the market.

In the broadband category, the RA has also proposed a definition of a 20 per cent differential on upload and download speeds, whereby if a service falls 20 per cent below its stated speed, a customer would have the right to exit the contract with that provider.

This article has been updated to include today’s announced deadline extension for submissions. The new deadline is March 29.

Feedback submissions must be made by 5pm on March 29. Feedback can be e-mailed to: consultation@rab.bm. The consultation document can be viewed by clicking Related Media, or on the RA’s website at https://tinyurl.com/y4b3pf3k