Contribution to Debate on the Communications Act 2009 by Education Minister, the Hon. Carl W. Bethel, M.P., 4th May 2009

Mr. Speaker,

I rise to express my support for this Bill for an Act to provide Communications Services, the Short Title of which is the Communications Act, 2009.

Mr. Speaker,

The word ?telecommunications? has the same stem as other words associated with an ability to almost instantaneously cover distances of time and space. Hence we use a telephone, watch telecasts on the television, observe the stars with a telescope, send telegrams over the telegraph, hear about the ability to move objects without touching them by means of telekinesis and hope, one day, to be able to teleport to other parts of the world or other planets. The word ?tele? comes from the Greek word meaning ?far off?.

In today?s world, the prevalence of global communications at the speed of light makes the use of the prefix ?tele? both otiose (being without any practical purpose), and superfluous.

Now it is all about communications. It is axiomatic and, indeed, taken for granted, that communications will involve more than merely one form of communication over vast distances.

Mr. Speaker,

There are three ?Cs? which stand out in any discussion of modern communications: Convergence, Competition and Consumerism. There is the technological reality of Convergence; the need for Competition and also for Consumer Protection.

This Bill when enacted will be a landmark piece of legislation which will catapult the laws governing the communications sector in The Bahamas to a world-class standard. The new Act will bring our laws into the 21st Century, and will make The Bahamas poised to receive and to embrace the brave new world of the highest and most efficient technologies.

CONVERGENCE

Mr. Speaker,

The cell phone today is no longer merely a telephone; it is a communications device. It is also a portal to the Internet from which streaming videos, data, e-mails, radio programming, musical downloads, and even television can be received in real time.

The personal computer is no longer merely a modern day type-writer and adding machine. With the ?Skype? and other such systems it is possible to have Internet-based telephony (called ?VOIP? ? voice over internet protocol); but more than this, it is now possible for the average computer user to have video telephone calls in real time, so that one can actually see the other persons on the computer screen as one speaks with them. Indeed, modern computers now have in-built video cameras as standard features.

Internet services are commonly bundled into the ordinary services provided by cable companies. Satellite radio and television programmers also offer Internet services.

Any law which seeks to merely regulate telecommunications without also providing for the regulation of television, radio, the Internet or, indeed, all forms of distance communications would be an exercise in futility. Any law which fails to anticipate the possibility that there will be many other forms of communications, over many other devices, as yet unimagined, would be short-sighted in the extreme. The speed of developments in the communications sector can be mind-boggling.

Mr. Speaker,

Any law which seeks to preserve or protect the market position or advantages enjoyed by any existing communication services provider is destined to failure; as has been more than amply demonstrated by the amendment which was made to the Bahamas Telecommunications Act in the mid-1990s (which sought to outlaw and ban the use of the emerging VOIP technology provided by companies like ?Vonage? so as to protect BTC?s revenue from long distance phone charges). The business community ?voted with their feet? or more accurately with their phones and used Vonage anyway. The law was a dismal failure. Nowadays there is the ?Magic Jack? system which has also reduced long distance phone charges to pennies per call.

Under the Bill the Utilities Regulatory and Competition Authority (URCA) will have responsibility to regulate all forms of ?electronic communications? which term is described in the definitions clause of the Bill as: ??the convergence, by the use of electrical, magnetic or electro-magnetic energy, of signals of any description.? URCA will also have the responsibility to regulate broadcasting, which is defined as: ?a service which consists in the provision of (a) television programming (b) radio programming or (c) teletext services.? A broadcaster can perform any of all of these functions by the use of what we call today, ?multimedia?.
Hence the law, when enacted, will give the Regulator, URCA, the ability to regulate all forms of communications whoever the service provider may be, and whatever the nature of that service is the main business of the provider.

COMPETITION

The critical requirement for a modern telecommunications sector is the development of a regulatory structure and institutions which are free of any possibility of bias and special treatment.

Our earlier attempts at reforming the communications sector were embodied in the Telecommunications Act and The Public Utility Commission Act. Both Acts were defective in that they presupposed that for several years Batelco would, itself, apart from being a major participant in the telecommunications business, would also be a regulator of that business, with some regulatory functions being assigned to the PUC over time. Further, the technical experts in the PUC were largely former Batelco management or staff, and so, could have been perceived as having some residual degree of institutional bias in favour of Batelco.

The very name ?Public Utilities Commission? seemed to pre-suppose some stature to utilities owned substantially by ?the Public?, meaning the Government.


The communications industry can only prosper in an atmosphere of market-driven free competition, a ?level playing field? where all providers of communications services will have equal opportunities to provide services to the general public at competitive rates, and where historical advantages of size or accumulated market position, wealth or, in commercial terms, goodwill, are reduced so that new entrants into the business can have a fair chance of succeeding.
While recognition is given to those providers of communications services who enjoy a dominant market position because they own much of the hard infrastructure which underpins a viable system of communications technology, the clear and most important statutory duty of the new regulator will be to seek whenever possible to ensure that free market fair competition prevails. Where, however, the free market would, by itself, be unable to ensure that the public policy of free and fair competition can be achieved, then the regulator URCA, can intervene, as will be shown.

Mr. Speaker,

It is a well known fact that it is impossible to achieve a market-based system which, by itself, can ensure that there is free competition.

Economists speak about systems which can only achieve ?imperfect competition?. Then there is what is known as ?oligarchic competition?, more commonly called ?crony Capitalism?, where the leaders of industry get together, figuratively, in a ?smoke filled room? to set prices and make sure that in the fake competition they pretend to engage in that ?everybody wins?. Everybody, that is, except the general public and the consumer.

A classic example of crony capitalism or oligarchic competition is the big four Oil companies. Their only real competition is over the ?get up? or look of their gas stations; or the colour of the additives that they put in their gasoline; they never really compete over the prices that they charge.

It is also a fact that some participants such as BTC and Cable Bahamas are household names in various aspects of the communications sector, and have in-built advantages over any new competitors.

Section 4 of the bill sets forth essential elements of the policy of the government and the legislature (Parliament) which will govern the communications sector of the economy once the Act is brought into force. (Read). The critical part, in my view, is the intention to:

??further the interests of consumers by promoting competition and, in particular ?
(iii) to encourage, promote and enforce sustainable competition??

Section 5 of the Bill provides, under the heading ?Guidelines for regulation and Government measures?, that:

?All policy measures, decisions and laws to take effect in the electronic communications sector?shall be made with a view to implementing the electronic communications policy objectives and shall comply with the following guidelines ?

(a) market forces shall be relied upon as much as possible as the means of achieving the communications policy objectives.?

As indicated above, a critical element of the communications policy objectives, is ?sustainable competition? in order to further the interests of consumers.

The Bill recognizes the imperfect realities which impinge against and inhibit genuinely fair competition even in a free market, and also recognizes that ?market forces? alone might not be enough to ensure that competition can be ?sustainable?.

For this reason Section 5(b) immediately after the reliance upon ?market forces? states:

?(b) regulatory and other measures shall be introduced ?

(i) where in the view of URCA market forces are unlikely to achieve the electronic communications policy objectives (among them, ?sustainable competition to further the interests of consumers?) within a reasonable timeframe??

Free market competition is essential to the protection of consumers from price gouging and to further their interests in having affordable access to the highest and most efficient communications technology. The first cell phones cost thousands of dollars and were bulky and cumbersome. Over the years, competition in the free market has led to enormous reductions of the prices of cell phones, vast improvements in the size, functions and capabilities of mobile phones which function now, not just as telephones, but also as ?communications devices? with many bundled services such as voice, texting and data (e-mail) services, and now even Internet connection.

That is what free competition and market forces have achieved over the short period of just over twenty (20) years.

The Communications Bill starts with the implicit assumption that due to the past history of State-owned, or State sponsored, Monopolies in various parts of the communications sector of the economy, a system of perfect competition would be impossible to expect. The Bill, therefore, sets a goal of fostering ?sustainable competition?.

The way that this is achieved is to impose special conditions upon those existing service providers who are declared by the Bill to be presumed to have SMP (Significant Market Power). The Fourth Schedule to the Bill declares that BTC is presumed to have SMP in the area of fixed voice telephony (land-line based telephone services) and mobile voice and data services; and Cable Bahamas is presumed to have SMP in the provision of high speed data services and connectivity; and pay TV services.

By Section 39 of the Bill a licensee with SMP is a licensee which: ?enjoys a position of economic strength which enables it to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors, consumers and subscribers.?

Determinations as to which other licensees might be considered to have SMP are set forth in sub-section (3) of Section 39, such as market share, the ability to influence market conditions, and the licensee?s experience. It would, for example, be for the immediate consideration of URCA whether or not the Broadcasting Corporation of The Bahamas (called ?the Corporation? in the Bill) should also be added to the list of those service providers who have SMP.

Section 40 of the Bill gives URCA the power to impose ?special conditions? upon licensees determined to have SMP. These special conditions include price controls; retail price regulations; sharing of infrastructure (such as telephone poles, or access to fibre optic cables through which most of the high speed and broadband data, Internet and cable TV services pass); offering services to all businesses (including businesses which own the licensee) on a non-discriminatory and commercial basis, and so forth.

Before imposing any special conditions URCA must ensure that prices charged promote efficiency, sustainable competition and maximizes consumer benefits; that due account is taken of the investments made (and costs, perhaps on-going costs) of any infrastructure invested in already (such as telephone poles, or fibre optic cables, and so forth); and that before price controls are imposed there is prepared and made available to the public the details of a cost accounting system which will be the basis for determining the extent and impact of price controls.

Section 67 of the Bill prohibits any ?Anti-competitive Agreements? between any licensees. Anti-competitive agreements are defined by section 67 (1) (a) as agreements which ?(a) may affect trade within The Bahamas; and (b) have as their object or effect the prevention, restriction or distortion of competition in markets in The Bahamas?

Such agreements are those which directly or indirectly fix purchase or selling prices, limit and control markets or technical development, place other trading partners of the parties to the agreement at a competitive disadvantage, or which require that either party to the agreement agree to enter other contracts having to do with other matters unconnected to the subject of the agreement.

Under section 68 of the Bill, URCA can, however, review the proposed agreement and grant an exemption to it, even though it would, strictly speaking, remain an anti-competitive agreement, where URCA is satisfied that it would result in some counterbalancing improvements in the production or delivery of services or that it would ?promote technical or economic progress in The Bahamas, while allowing consumers a fair share of the resulting benefit??.

Such an exemption by URCA would, however, be unlawful if it could be shown that the agreement which was exempted by URCA imposed non-essential restrictions or was one which allowed for the possibility of eliminating competition in the provision of the service or products in question.

By Section 69 of the Bill any ?abuse of a dominant position? by a licensee is prohibited. Such abuse is defined in sub-section (2) of that section as conduct which imposes unfair selling, purchasing or trading conditions; limits markets or technical developments to the prejudice of consumers; applies dissimilar to other trading parties, thereby placing them at a competitive disadvantage; imposes a duty to accept some other unconnected contractual agreement unconnected with the service sought; or which limits or impedes access to a network or service where access is essential for another operator to provide electronic communication services.

Mr. Speaker, it is clear that anti-competitive activities by a dominant provider of communications services who has SMP whether as a result of a specific contractual agreement or by virtue of the conduct, the act or omission, of the dominant service provider is caught by these two (2) Sections of the Bill.

CONSUMER PROTECTION

Mr. Speaker,

The anti-competitive abuse provisions of this Bill are ground-breaking legislation for The Bahamas. These are provisions of Law that will, in time, lead to the development of a sound body of jurisprudence, and legal precedents, as to what anti-competitive or, as the Americans call it, Anti-trust agreements and behaviour are.

Such jurisprudence and legal precedents will have their impact in other areas of Law, in due course. The anti-competitive practices of some financial institutions and their harmful impact upon innocent consumers are a case in point.

As the jurisprudence and law develops, and the general, public become accustomed to receiving the benefits of protection against abusive and collusive agreements and conduct between service providers in the communications sector, the demand will grow that the same protections should be offered to innocent consumers in other areas of commercial life where, just as in the communications sector the ordinary man on the street is forced to do business with large financial institutions which demand and impose strict compliance by the consumer with contractual terms and conditions, many of which were not made clear to the consumer when the contract was entered into.

CONCLUSION

Further, Mr. Speaker, we should note that the regulator which is envisaged by this Bill is called the Utilities and Competition Regulatory Authority (URCA); not the Communications and Competition regulatory authority. Thus it is implicit in the name of URCA that it is envisaged that other Utilities will also come to be regulated by URCA.

Even if BEC were not to be privatized, it is not difficult to see the development of a system of electrical distribution, using BEC?s light poles and electrical grid, where private sector generators of electricity, say by a combination of wind and solar power, will have the right to supply their own customers, using BEC?s electrical grid, and that such relations will come to be regulated by URCA.

The development of URCA together with the strengthened regulatory capacity, together with the development of a comprehensive jurisprudence or body of legal decisions on anti-competitive behaviour or contracts, will certainly lead to the expansion, generally, of stronger laws against anti-competitive contracts, agreements, or behaviour not only in the communications sector, but also in other sectors of our national economy. The Bahamas will become a more fair, just and equitable place to live, to consume goods and services, and to go into business.