C & W Rebalancing does not mean rate increase

With reference to an article appearing at page 4 of the Advocate News of Wednesday 27 th October 2004, entitled "C&W: rebalancing will lead to lower international rates", it is time that this myth of international rates subsidizing domestic rates be put to rest.

To do so does not call for any rocket science degree, just some simple common sense and observation. If it was that many moons ago international rates were used to prop up domestic rates we will not know for sure. We have to take C&W's word for it.

If there was solid proof of this claim, why did Government not simply accept what C&W brought to the table? Why was it necessary to create an FTC? Instead, Government simply hammered out an MOU with C&W and then set the FTC experts to investigate and ascertain their claims.

Of course where the investigation proved C&W's claims to be baseless, to that extent the MOU starts to erode. If it was C&W's understanding in negotiating the MOU that rebalancing equates to a rate increase that is only a perception. For the FTC experts and the intervenors, the word rebalancing must now be defined and not limited to the one-track (blinkered) perception of C&W.

C&W Already Collecting increases

Prior to internet and cellular, C&W was making a profit even if with high international rates. With Cellular and Internet making a contribution to the network, profits must be soaring because without any significant investment to the network of landlines C&W started collecting additional revenue for use of its landlines to access internet.

The bottom line is that those who subscribe to internet pay twice for the use of their phones. They pay C&W and then they pay their provider who in turn pays C&W. Even if you subscribe to C&W internet service you still pay twice and for C&W that is twice as nice because the entire fee goes to them. No in-between provider here.

Similarly, with cellular, the other providers of this service pay C&W for interconnection. Those who have internet and cellular accounts pay for the use of the same network three times and that in itself is an increase.

Ask yourself the question why C&W have not sought an increase for so long? Obviously, because they were making a profit. Further, it seems that the only reason they are seeking an increase now is to capitalise on liberalization.

Who use it should pay

If you happened to have read the FTC decision in the Rate Hearing or even followed reports in the press you would have seen where the intervenors kept arguing that all sectors which use the network should contribute accordingly.

Here the question to be asked is whether it is fair to have consumers absorb all the costs of providing the network without reference to the other services which C&W is offering through the same network. Cost based to them is for the consumer to pay the cost of the network; again this is their definition.

Additional revenues are also collected when consumers are charged extra for voice mail, call forwarding, call waiting, three-way calling, etc., which could not work without first having a phone. How much does it cost to turn on these features or is it that C&W turns them off and then charges the consumer to turn them back on?

Not being an engineer I could not tell you that but how much could it cost when most of these features are now standard with a cellular account and do not impact on your bill?

Once upon a time you had to go into C&W and pay a deposit to get roaming if you had a post-paid account. Now roaming too is becoming standard with both pre-paid and post-paid accounts.

Decrease in Phone Rates warranted

With all this income being generated through the same network, does it not sound to you that the landlines should be decreased? All of these other services are more than taking up the slack. Yet C&W has gone on a public campaign to gain public sympathy for an increase.

Do not be fooled that rebalancing means a rate increase. Rebalancing is about taking a look at the company as a whole to see what is a fair share for landline consumers to pay. If it is discovered that the consumers are paying too much resulting in high profitability for the company then the rate should be reduced.

If there is one assumption that could be made about the FTC's decision it is that consumers are not paying too little for landlines and that the present rate does not take away from the profitability of C&W.

If there is a secondary assumption that could be deduced from the decision it is that C&W refused to put all their cards on the table and the FTC therefore was hesitant to fix a rate that could very well be lower but they did not have sufficient information to make that judgment.

We are not seeing C&W closing down as a result of the decision. We are still seeing C&W's sponsorship of sports, Crop-Over and other activities. They are spending the most money on advertising.

The wonders of Competition

I wonder if the public understood what the CEO of C&W meant when he said that they are trying to recover lost income with the liberalization of cellular? I certainly don't think that he meant that cellular is no longer profitable.

It would seem more obvious to conclude that the level of profit dropped but not that the company is making a loss. When a company makes a decision as C&W did, to cut its rates by 53% in anticipation of competition, it seems reasonable to conclude that they were knowingly taking advantage of the consumer before and the impending competition forced them to set a more reasonable rate.

If there was no competition to date, we would still be paying C&W astronomical prices for cellular. The proof of the pudding is that the rates dropped some more since then. No company goes into business to make a loss and certainly if the losses were commensurate to the cries of the CEO, C&W would have folded up and left these shores a long time ago.

Still Holding Barbados To Ransom?

So what is Mr. Austin saying? Is he saying that he is holding Barbadians to ransom and will not reduce international rates unless C&W gets a rate increase? Is he trying to invoke political pressure on the FTC? Is he trying to get public sympathy for a rate increase?

The best advice that Mr. Austin could take is to prove his case before the FTC. Stop moaning and groaning because that is not proof and while he is at it he should open the technology to the consumers and stop charging "an arm and a leg" for services which are cheap to deliver. Technologically, you are holding back both this country and the region. If you can't deliver or don't want to deliver, give it up.

Next week we have for you a dish called "C&W Blocking"; open letter to the Governments and People of the Caribbean.

Roosevelt O. King
Secretary General - BANGO
admin@bango.org.bb