Digicel (Barbados) Ltd

• Jurisdiction: Barbados
• Court: Fair Trading Commission (Barbados)
• Judge: Sir Neville Nicholls,Professor Andrew Downes,Ms. Herma Griffith-Ifill,Mr. Errol Humphrey,Ms. Monique Taitt
• Judgment Date: 03 June 2015
• Docket Number: FTC/URD/STYLRIC 2015-01

In the Matter of the Utilities Regulation Act CAP. 282, the Fair Trading Commission Act CAP. 326B and the Telecommunications Act CAP. 282B of the Laws of Barbados;

And in the Matter of the Utilities Regulation (Procedural Rules 2003 and the Utilities Regulation (Procedural) (Amendment) Rules, 2009;

And in the Matter of the Application by Digicel (Barbados) Limited for a Stay of the Decision of the Fair Trading Commission dated the 27 ^th day of March 2015.

Digicel (Barbados) Limited

Applicant

Before:

Sir Neville Nicholls—Chairman

Professor Andrew Downes — Deputy Chairman

Ms. Herma Griffith-Ifill—Commissioner

Mr. Errol Humphrey—Commissioner

Ms. Monique Taitt—Commissioner

FTC/URD/STYLRIC 2015-01

FAIR TRADING COMMISSION

DECISION

THE APPLICATION FOR REVIEW AND STAY

1 Digicel (Barbados) Limited (hereinafter called the “Applicant”) by way of a Notice of Motion filed on April 23, 2015 applied for a review and variation of the Decision of the Fair Trading Commission (hereinafter referred to as the Commission) on the Long Run Incremental Cost Interconnection Rates (LRIC) Decision (“the LRIC Decision”) dated March 27, 2015.

2 In the LRIC Decision, the Commission determined, among other things, that transitioning to the new LRIC interconnection rates will be effected using a glide path which would entail a larger reduction being done in the initial stage. An initial reduction of 60% of the difference between the existing RIO 2010 rate and the LRIC-based rates with effect from May 1, 2015. The remaining 40% reduction to move the rate to the final LRIC-based rates would be applied on April 1, 2016.

3 The Applicant being dissatisfied with the LRIC Decision, proposed in its Notice of Motion to vary the Commission's LRIC Decision by extending the period of the glide path for the implementation of the new LRIC interconnection rates.

4 The Notice of Motion applied for the following Orders:

• a. An Order that the Commission vary its decision and extend the glide path as referenced in the Decision.

• b. An Order staying the Decision of the Commission and the LRIC process generally until final determination of all of the matters raised in this Notice of Motion or upon further determination of the matters raised as may be required.

5 The Applicant sought a review on a number of grounds. These grounds are specified below:

• a. That the Commission failed to conduct the LRIC process in a transparent manner. That the costing exercise engaged in to date by the Commission in tandem with Cable & Wireless (Barbados) Limited (C&W) was prejudicial to the Applicant.

• b. That the Commission failed to act in accordance with the rules of natural justice since it did not provide the Applicant with a reasonable time-frame to adjust to the new rates which subjected the Applicant to hardship and prejudice.

6 The Applicant contends that the implementation of the LRIC Decision before the review is heard will be detrimental to it. Consequently, the Applicant sought an order staying the LRIC Decision of the Commission dated March 27, 2015 until final determination of the motion.

7 The issue concerning whether the Stay should be granted is a preliminary matter. As such the Commission analysed the submissions of C&W, Columbus International Inc. (FLOW) and CARITEL, being the parties to the consultation process, setting out the reasons for or against the granting of a Stay of the LRIC Decision.

SYNOPSIS OF THE SUBMISSIONS ON THE STAY

DIGICEL

8 The Applicant, in its Notice of Motion and the supporting Affidavit dated April 23, 2015 which was filed on behalf of the Applicant and its further submissions dated May 5, 2015, submits that its Application raises serious issues to be tried which cannot be considered to be frivolous or vexatious. In fact, the main issue raised by the Applicant concerns the time-frame over which the changes to termination rates are to be implemented. The Applicant claims that this is of considerable significance to its business and to the telecommunications industry as a whole in Barbados, as it can adversely impact the company's financial well-being in a very material way. The Applicant further claims that there are also serious questions regarding the process used by the Commission to make its decision which is neither frivolous nor vexatious.

9 The Applicant further submits that a refusal to grant a Stay would prejudice the Applicant and cause irreparable harm to its business. The Applicant states that a sudden and massive reduction in rates, whereby the entire rate reduction if implemented over the twelve month period, will have a massive impact on its budgeting and finances.

10 The Applicant claims that if a Stay is not granted that “ it will not be possible to reverse the effects of the implementation of the Decision should the outcome of the Commission's review require this. It is unlikely to be possible to reverse any adjustments in wholesale or retail rates once these are introduced to the market. The net effect of failing to grant a stay pending the determination of Digicel's Motion…and to implement the Decision will be to permanently alter the structure of the market in Barbados.” It further stated in its submissions of May 20, 2015 that “the reductions in MTR [Mobile Termination Rates] will require a rebalancing of Tariffs across multiple retail and wholesale markets to ensure that there is adequate overall network cost recovery across the totality of operators' revenue streams…. This cannot be achieved overnight…Too precipitous a reduction in MTR does not afford the wider market time to respond in achieving this rebalancing.”

11 The Applicant added that, as it relates to the effect on the wholesale pricing, if the Application for the Review is successful, then this would result in a temporary increase in the level of MTR to move from a steeper to a shallower glide-path which would not be able to translate to the published pricing of terminating operators. This would mean therefore that due to the “fixed terms in the agreements of transit operators would result in them having higher out payments to the terminating operators than they can recoup from the originating side.” The Applicant further states that “this effect is felt not just by the operators in proximity to terminating network [but] potentially at any point along the cascade accounting chain.”

12 As it relates to the issue of the balance of convenience, the Applicant advanced that no party will be prejudiced in any way by a Stay being implemented. The Applicant further states that the process leading to the Commission's Decision has been on-going for many years and that both telecommunications operators and consumers in Barbados currently enjoy the benefits of a highly competitive market. As a consequence, the Applicant is of the view that the granting of a Stay will “ not have the effect of prejudicing either the public interest or the interest of any other party”.

13 The Applicant further sets out in its submissions of May 20, 2015 that should the “Stay not be granted then retail market participants are faced with the decision of whether to reflect the lower rates in retail propositions in the short term. In order to avoid negative customer experience a prudent operator would not pass through the reductions but would maintain prices at a level that would protect them…”.

14 Nevertheless the Applicant also adduced that should the Commission not agree that the Applicant had met the legal criteria above, that the balance of convenience requires that the status quo remains pending the outcome of this Notice of Motion for Review.

C&W and FLOW

15 C&W and FLOW (jointly referred to as C&W), in its letter dated May 15, 2015 in response to the submissions of the Applicant on the Stay, states that the criteria for the grant of a Stay were not met by the Applicant. C&W articulates that the LRIC Decision is consistent with the provisions of section 25(2)(e) of the Telecommunications Act CAP. 282B of the Laws of Barbados which stipulates that interconnection services shall be offered at charges that are cost-oriented.

16 The contention of C&W is that the Applicant did not satisfy the criteria of whether there is a serious issue to be tried. C&W purports that it is “noteworthy that Digicel makes no attempt to argue that the rates preceding the Decision were cost-oriented, that the rates produced by the model are not, or that the Commission ought not to move to cost-oriented rates.”

17 It further contends that the LRIC model and the rates derived from that model have been under consideration for three (3) years and that any reductions in interconnection rates ought not to be a surprise to the Applicant. C&W states that “ any impact on Digicel's financing and budgeting should reasonably have been taken into account for some time….that a twelve month glide path is not the sudden and massive reduction in rates of which Digicel complains”. Nevertheless, C&W adduces that the move to the LRIC Rates was specifically consulted upon by the Commission in the later stages of the consultation process and all parties including the Applicant were given an opportunity to respond. This in itself underscores the fact that the Commission gave due regard to the views of all parties prior to arriving at a decision.

18 In addition to the above, C&W's submission on whether the Applicant would suffer irreparable damage in the event that the Stay is not granted was based on the ground that the damage or prejudice complained of by the Applicant relates to the requirement to move from charges far in excess of costs to charges in keeping with costs. In support of this position, C&W further argues that “ damages would be an adequate remedy in the circumstances as revenues garnered or lost over time with a varied glide path are perfectly quantifiable.”

19 Lastly, C&W submits that the balance of...