URCA Opens New Spectrum Bands

On Friday, the Bahamas Utilities Regulation and Competition Authority (URCA) published a consultation document to solicit views on the proposed opening of new spectrum bands and to invite expressions of interest for frequency assignments from interested parties.  This consultation is described in the news release as a follow up to the publication of the Bahamas National Spectrum Plan in March 2010.

The spectrum bands under consideration in this consultation are 700 MHz, 11GHz, 12GHz and 40GHz.  According to the consultation document, these frequencies are currently unassigned.  URCA will not mandate the use of any specific technology in these bands, provided that the technology to be used conforms to recognized standards, the National  Spectrum Plan and any specific frequency band plan.   It also proposes general procedural guidelines to be followed by URCA when determining to open new spectrum bands and for the issuance of frequencies in such bands

It remains to be seen whether URCA will receive any concrete proposal for the use of 700 MHz band.  ECTEL conducted similar a consultation on the 700 MHz bands in 2008 and the Cayman Islands' Information and Communications Technology Authority did the same in 2009.  In these consultations, Digicel and LIME expressed interest in utilizing this spectrum at some point in the future.  However, they were reluctant to provide specific proposals with short or medium-term deployment timeframes.  This reluctance was likely due to the embryonic nature (at the time) of the Long Term Evolution (LTE) network being deployed by Verizon in the 700 MHz band, and perhaps also Qualcomm's MediaFLO service.  Telecom vendors including Alcatel-Lucent, Ericsson, Huawei, had yet to roll out 700 MHz LTE gears in real-world environments.  Hence, it appears that Digicel and LIME may have decided to wait for these real-world 700 MHz deployments before making firm commitments on the use of this band in the Caribbean. Two years later, these real-world deployments are now a reality.  Therefore, it will be interesting to see how the Caribbean telecom industry responds to the URCA consultation.

Comments are due on November 1st.

ECTEL Publishes Draft Electronic Communications Bill

On Thursday, the Eastern Caribbean Telecommunications Authority (ECTEL) published on its website a draft Electronic Communications Bill.  According to the explanatory notes, the purpose of the Bill is to update the telecommunications legislation in the ECTEL Member States – Dominica, Grenada, St. Kitts and Nevis, Saint Lucia, and St. Vincent and the Grenadines -  and to promote "liberalized and non-discriminatory entry into the electronic communications sector" while enabling a "robust competitive environment in which there is fairness, transparency and accountability on the part of the regulators of the sector".

Although I have not yet reviewed the Bill in detail, I noticed that it emphasizes the need to create a converged licensing regime.  This appears to be a reference to clause 39(2) of the Bill, which states that "[a] service provider may provide more than one service under a licence in accordance with the terms of the licence".  Therefore, instead of forcing an operator to manage several licences for the various telecom services it offers (for example, in the case of Digicel, one licence to offer wireless voice service, another to offer Internet service, and perhaps perhaps another one for TV service), the legislation would require the operator to manage only one integrated licence. 

This "converged" approach to licensing is an interesting one.  It is similar to the approach taken in the Cayman Islands since 2002 and, more recently, by URCA in the Bahamas.  In addition to simplifying the licence management process for the operators (e.g. payment of fees, quarterly reports, licence renewals, etc), it enables the regulator to focus on the "big picture", rather than micro-managing specific components of the licensees' business. 

The draft Bill is available for public comments, discussions and recommendations and forms part of a wide range of awareness and consultative activities in all the ECTEL Member States. A discussion Board will soon be established to facilitate comments, ideas and suggestions. 

Interestingly, the ECTEL website does not mention any specific deadline for comments, nor does it provide any timeline for the tabling of the legislation in ECTEL countries.

URCA Calls for Comments on CBL-SRG Merger

Yesterday, the Bahamas Utilities Regulation & Competition Authority (URCA) issued a call for comments on a proposed merger between Cable Bahamas Limited (CBL) and Systems Resource Group Limited (SRG).  The Notice of Proposed Merger published on the URCA website does not provide any details on this transaction to assist interested parties in preparing submissions in this proceeding, and neither does the press release issued by CBL on Friday.  The Tribune, however, in an article published yesterday, suggested that CBL intends to exercise a $4.2 million purchase option to acquire 100% of the SRG shares.  This information appears to be based on CBL's 2009 audited financial statements, which include a note referring to a "purchase option which, under certain conditions, allows the company to acquire a portion or all of the outstanding shares in a licensed telecommunications operator".  Anthony Butler, Cable Bahamas president and chief executive, is also quoted in the article as saying that SRG will retain its separate operations, functioning as a wholly owned operating subsidiary of CBL.

This transaction will be an important one for the Bahamian telecommunications sector.  It will combine SRG's fixed-line licence with CBL's Internet and cable TV assets, thus giving the new entity a potential "Triple Play" offering.  This will enable the new entity to compete directly with a privatized Bahamas Telecommunications Company in all of the main industry segments.  Clearly, this is good news for Bahamian telecommunications users.

From a legal and regulatory standpoint, this transaction will also be precedent-setting.  It will be the first opportunity for URCA to apply the merger control provisions of the Communications Act, 2009.  In September 2009, URCA published guidelines to assist in the interpretation of these provisions.  This transaction will be an opportunity for URCA to test the effectiveness of these guidelines in the real world.

Comments are due on Friday October 1st.
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Update:  The deadline for comments has been extended to Tuesday October 5th.  See URCA News Release.

Will Digicel buy Belize Telemedia?

Over the past few months, a number of media outlets have speculated that Digicel is considering a possible acquisition of Belize Telemedia Ltd. (BTL) shares.  Amandala, a newspaper in Belize, noted in an article on Friday "that a Digicel team was given a tour at BTL last week, and they are in the process of exchanging information, under the terms of a non-disclosure agreement between the parties".  

Digicel's interest in BTL is somewhat surprising. Clearly, Digicel is not afraid of political risk.  Indeed, given its presence in markets such as Fiji, Haiti and Honduras (all of whom have faced coup d'états in the not-so-distant past), it is tempting to conclude that Digicel thrives on, and seeks, such risk. However, in the case of Belize, the political risk is different.  While the local parliamentary institutions are relatively stable and democratic, they have an unfortunate propensity to exercise political control over (and interfere with?) the telecommunications industry.  This propensity was at its peak in August 2009, when the Belize National Assembly amended the country’s Telecommunications Act and allowed the Government to seize control of BTL, with shares to be distributed to domestic investors.  This propensity is also demonstrated by the Government's current refusal to sell a controlling interest in BTL to Digicel, thereby limiting Digicel's participation to a minority shareholding.

Besides political risk, an investment in BTL would involve a significant degree of legal risk for Digicel.  As a result of the recent nationalization of BTL, some of the former shareholders of BTL have instituted proceedings before the Belize Supreme Court challenging the constitutionality of the legislation which expropriated their shareholdings.  They argued that there was no legitimate public purpose for the compulsory acquisition of the shares, that it was not necessary to compulsorily acquire the shares in order to achieve the public purpose stated in the legislation, that the acquisition was disproportionate and discriminatory, and that - in reality - the real purpose of this acquisition was to target Michael Ashcroft's alleged interest in BTL. The Supreme Court issued a judgment in this matter in July 2010 dismissing the challenges to the constitutionality of the nationalization, but directing the Government of Belize to pay compensation without delay.  This decision is currently under appeal.

In early September, Digicel received a formal notification by the shareholders' attorneys indicating that:

In the event that any shares in BTL were to be transferred prior to the final determination of our clients' rights on appeal, such transfer would be liable to be set aside in the event that the appeal court finds that the compulsory acquisition was unlawful and invalid.  In such circumstances, the [Government of Belize] would have no title to the shares which could be validly transferred.  

Therefore, in addition to the political risks, as demonstrated by the recent nationalization of BTL, Digicel is also faced with the legal risk that its investment in BTL could be invalidated on appeal.  

Lastly, and perhaps most importantly, this investment does not appear to fit Digicel's overall business strategy of going head-to-head with incumbent telecom operators in recently liberalized markets.  In this case, rather than being an "incumbent fighter", Digicel would become a minority shareholder in the incumbent operator.  This could  restrict Digicel's ability to replicate the formula it used successfully across the Caribbean, Central American and Pacific, namely to target budget-conscious prepaid users with intense local marketing and sponsorship.  It is precisely for this reason that Digicel decided to delay its entry into the Bahamian telecom market earlier this year (see article in the Nassau Guardian).

Clearly, Digicel will have to think twice before making an investment in BTL...

Bermuda Telecom Bill Delayed

In early July, the Ministry of Energy, Telecommunications and E-Commerce (METEC) in Bermuda announced that the tabling of the new telecommunications legislation would be delayed.  METEC Minister Michael Scott had previously told the industry that he would table the legislation prior to the summer recess.  According to a July 2 report in The Royal Gazette, "The Minister will update industry on its new time table as early as possible". 


As previously mentioned on this blog, the telecommunications legislation in Bermuda is in serious need of modernization. The fact that Bermuda does not have an independent regulatory body responsible for telecom and broadcasting regulation is clearly at odds with international best practices.  The International Telecommunications Union, for instance, in its most recent report on Trends in Telecommunication Reform (2009), describes the need for independent regulatory agencies as follows (see page 7 of Executive Summary):

The creation of separate ICT regulators has been one of the main building blocks of regulatory
reform worldwide since the 1990s. Regulators have played a leading role in creating an enabling
environment fostering innovation and investment. They have gradually opened fixed line services to
competition totaling 124 competitive markets for basic fixed-line services as of 2009, almost
inevitably privatizing the national fixed-line incumbent along the way. The overall objective of
regulators has been to ensure that public policy objectives for the sector continued to be met and
even exceeded.

Despite the need for legislative change in Bermuda, METEC's decision to delay the tabling of this legislation appears to be reasonable, given the feedback received from industry stakeholders.  The cost of the new regulatory agency was estimated to be approximately US $9 million per year.  This amount was heavily criticized by industry stakeholder, both in their regulatory submissions and media reports.  Indeed, this amount seems very high when compared to similar jurisdictions such as the Cayman Islands, where the regulator's annual budget is US $1.8 million (see page 269 of this budget document).  In the Bahamas, where the population is 330,000, or five times the Bermuda population, the annual budget of the telecom regulator is approximately $5 million (see page 21 of this draft annual plan).  Hopefully, the Government of Bermuda will rectify these issues in the near future to ensure that Bermuda's telecom regulatory framework is consistent with international best practices.

Bahamas Consultation on Content Regulation

Over the past few months, the Bahamas Utilities Regulation and Competition Authority (URCA) has been conducting a consultation on content regulation. Under the newly-promulgated Communications Act, 2009, URCA is mandated to issue new Codes of Practice for audiovisual media services and to develop complaints-handling procedures for dealing with complaints by the public regarding alleged breaches of the Codes. These Codes are intended to cover areas such as the protection of children, harm and offence, taste and decency, accuracy and fairness, political broadcasts, advertising and sponsorship, and guaranteed access to certain kinds of content and services (e.g. relating to national emergencies and disasters).

In the consultation document, published last February, URCA indicated that it was inclined to delegate this task to an industry Working Group, composed of representatives of the broadcasters, cable operator, independent production companies and the public at large. However, if the Statement of Results published last week is any indication, URCA may have some difficulty in generating sufficient interest from these stakeholders to make this process work. This paragraph from the Executive Summary is particularly revealing:

(...) URCA is disappointed with the low number of responses received to an important consultation that will affect all Bahamian radio and TV broadcasters. It is particularly discouraging that none of the broadcasters took the opportunity to formally respond to the consultation. As URCA is proposing a co-regulatory framework to develop the Codes of Practice, it does not auger well for the proposed framework if the industry did not respond to the public consultation, the first phase of the process. For such a model to be effective, it is necessary for regulated companies to participate actively in the regulatory process, for example by responding to consultations that directly affect them. The fact that no broadcasters responded to URCA’s consultation on developing Codes of Practice highlights the fact that Bahamian companies might not yet be accustomed to playing their required role in the development and implementation of public policy.

Unfortunately, this lack of participation in regulatory proceedings is common across the Caribbean. This is particularly true in regulatory proceedings involving broadcasters. Contrary to the Caribbean companies operating in the telecommunications sphere (e.g. Digicel, Cable & Wireless/LIME, etc), the Caribbean broadcasters are generally quite small and localized. As a result, they suffer from a lack of scale and resources, which prevents them from employing dedicated legal or policy experts – either in-house or through industry groups – to manage regulatory affairs. In smaller countries such as The Bahamas, companies have limited resources, making it harder for them to devote time and effort to regulatory affairs. One solution to this conundrum may be for broadcasters to pool their resources on a regional basis. Perhaps this is a gap that could be filled by the Caribbean Broadcasting Union?

Consultation on Number Portability in Trinidad and Tobago

The Telecommunications Authority of Trinidad and Tobago is currently conducting a public consultation on number portability. Comments are due on May 28th.

After several years of delay (compared to the rest of the world), the Caribbean telecom regulators in the Caribbean are now finally forging ahead with NP. Although the French West Indies (French Guyana, Guadeloupe and Martinique) have already done so, most of the other jurisdictions are expected to follow suit in 2011 and 2012. The Cayman Islands are expected to have NP available for both mobile and fixed telephony within the next few months. Bermuda has completed two separate public consultations on this topic (in 2008 and 2009) and the Bahamas Utilities Regulation & Competition Authority has indicated in its latest annual report that it intends to do the same in Q3 2010. Jamaica has issued a request for expressions of interest from potential vendors.

It will be interesting to see what impact NP will have on Cable & Wireless/LIME dominance in the Caribbean fixed telephony sector.