Price Cap Plan 2012

• Jurisdiction: Barbados
• Court: Fair Trading Commission (Barbados)
• Judgment Date: 22 May 2012
• Docket Number: Document No.: FTC/UR/DEC/2012-02

Price Cap Plan 2012

Document No.: FTC/UR/DEC/2012-02

Fair Trading Commission

COMPLIANCE RULES AND PROCEDURES

Part 1 – Interpretation

1 Interpretation

“Actual Price Index (API)” has the meaning as set out in Rule 8.3;

“Bundle Offerings” may either include a combination of regulated services or a combination of regulated and unregulated services;

“Commission” means the Fair Trading Commission;

“Company” means Cable & Wireless (Barbados) Limited;

“Exogenous factor (Z-Factor)” is a correction factor included in the price cap formula to adjust the PCI in response to an unforeseen event outside the control of the Company that negatively affects its income;

“Inflation Factor” means the Retail Price Index (RPI) as given by the Barbados Statistical Service.

“Period” means a period during the Price Cap Plan 2012 as set out in Rule 4.1;

“Price Cap Index” (PCI) has the meaning set out in Rule 8.4;

“Price cap period” means the period during which the Price Cap Plan 2012 shall apply as set out in Rule 4.1;

“Rates” has the meaning assigned to it by Section 2 of the Utilities Regulation ACT CAP. 282;

2 These Price Cap Plan 2012 Compliance Rules and Procedures herein after referred to as “Rules” apply to the implementation and operation of the Price Cap Plan 2012 and are in turn applicable to the Company.

3 Where these Rules are silent on any matter of procedure in relation to Price Cap proceedings before the Commission, the procedure to be applied shall be determined by the Commission. The Commission may consult with the Company on such procedures to ensure that there are no conflicts with these Rules and the Utilities Regulation (Procedural) Rules 2003 and the Utilities Regulation (Procedural Amendment) Rules 2009.

Part II — The Price Cap Plan

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4.1 The Price Cap Plan 2012 (PCP2012) which shall be applied by the Commission for a term of three (3) years in the regulation of retail telecommunications services provided by the Company and which are deemed to be regulated services subject to the Telecommunications (Regulated Services) Order 2006. The periods of the PCP2012 are:

Period 1: April 1, 2012 through March 31, 2013

Period 2: April 1, 2013 through March 31, 2014

Period 3: April 1, 2014 through March 31, 2015

4.2 Changes in the rates of a regulated telecommunications retail service subject to the PCP2012 will be deemed to be approved where the proposed change complies with the PCP2012.

4.3 It is not intended that the PCP2012 be amended. However, in exceptional circumstances where there is a need to amend the PCP2012 this shall be done pursuant to Rule 14 of the Rules which sets out procedures for consultation between the Commission, the Company and other interested parties including the general public.

4.4 Going in rates for the PCP2012 shall be the rates existing at March 31, 2012 which was the end of the end of the Price Cap Plan 2008 (PCP2008). The procedures for effecting and notifying price changes are set out in these Rules.

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5.1 The services to be regulated under the PCP2012 include only those retail services specified as being subject to regulation in the Statutory Instrument S.I. No. 5 — Telecommunications (Regulated Services) Order 2006 namely:

• (a) International telecommunications services;

• (b) Domestic voice telecommunications services; and

• (c) Leased circuits.

5.2 Subject to revision of the above referenced Telecommunications (Regulated Services) Order the following categories of services will be regulated under the PCP2012:

• (a) Residential fixed line access rental service;

• (b) Non-residential fixed line access rental service;

• (c) Non-residential and residential fixed line installation;

• (d) Domestic payphone service;

• (e) Value Added Services;

• (f) Residential and Business International Telephone Service;

• (g) International cards;

• (h) International toll-free;

• (i) International Private Leased Circuits;

• (j) Domestic private leased circuits;

• (k) Call centre international calls;

• (l) Operator assistance;

• (m) Voicemail;

• (n) Business voice network service e.g. Centre; and

• (o) Emergency.

5.3 The Minister responsible for telecommunications may conduct market reviews and determine that a particular service should no longer be regulated.

5.4 The list of categories of services set out at Rule 5.2 shall be revised by the Commission on publication of a revised Telecommunications (Regulated Services) Order by the Minister. Where the Minister makes a determination that a telecommunications service included in the PCP2012 is an unregulated service, the Commission shall remove that telecommunications service from the PCP2012 and shall no longer require the service to be included in the Annual Compliance Filing for the next price cap period and the calculation of the API will exclude the service.

5.5 The following services shall not be subject to price cap regulation:

• (a) wholesale telecommunications services (including):

  • (i) charges in respect of interconnection charges;

  • (ii) international simple resale.

• (b) bundled services as noted in Rule 7.4(iv)

• (c) other retail services that are not identified as regulated in the Telecommunications (Regulated Services) Order, 2006 or any revised Telecommunications Regulated Services Order that may be issued by the Minister responsible for telecommunications.

Part III – Basket Structure and Pricing Constraints

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6.1 The PCP2012 shall be based on two service baskets which represent “competitive” and “non-competitive” services. In addition there will be a sub-cap on residential access services being a subset of the ‘non-competitive’ services. A detailed list of services and basket assignments is provided in Schedule 1. An example of the assignment of some service categories is set out below:

Basket 1: This basket includes all regulated services for which the level of competition is sufficient to ensure that prices are reflective of a competitive market outcome. These services include international call services, international private leased circuits (IPLCs) and business voice network services.

Basket 2: This basket will include all remaining regulated services, i.e., all regulated domestic voice access, ancillary services and domestic private leased circuits (DPLCs).

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7.1 In Period 1 a moratorium has been placed on all regulated prices whereby no regulated prices will be increased between April 1, 2012 and March 31, 2013.

7.2 In Period 2 and Period 3 of the PCP2012 different price controls are applied to each basket, reflecting the degree of competitive constraint on the Company's pricing behaviour:

Basket 1: Services in Basket 1 will not be subject to a price cap control.

Basket 2: An RPI-X pricing control will be applied to Basket 2 services, with the X-factor set at 5.25%.

7.3 Residential access services, which are a subset of services included in Basket 2, will be subject to an additional pricing constraint to the general ‘RPI-X’ price cap for that Basket. In Period 2 and in Period 3 the prices for each of these services cannot be increased by more than the Inflation factor up to a maximum of 5% per annum.

7.4 Residential access services include all fixed-line access and installation services provided by the Company to residential customers.

7.5 When the Company chooses not to raise its prices to the maximum allowable level the PCI will exceed the API and headroom is created. In the subsequent year the Commission has the option of permitting the Company to retain this headroom and therefore the Company would have the opportunity to implement price increases that exceed the relevant difference between inflation and the X-factor (i.e. I-X) for that year. This option is known as carry-over of headroom.

7.6 The option of headroom from one period to another allows the Company greater flexibility in terms of the timing of its rate changes. This option allows the Company to delay legitimate rate increases if it so desires.

7.7 For Basket 2 the Company will be allowed to carryover any unused headroom from Period 2 to Period 3. However in accordance with the PCP2012 Decision on the sub-cap on residential services, the Company will not be allowed to apply any carryover of headroom to residential services 3.

7.8 The treatment of particular services under the PCP2012 is set out below:

• i. Services currently not charged — In order to establish a price for a regulated service which is currently provided without any charge, the Company shall give justification for the proposed application of a tariff to this service. The notice of establishment of a charge must be submitted to the Commission 20 business days before the proposed effective date. The Commission shall review the information submitted and may require the Company to modify its proposal in the event that the Commission considers that the rate or associated terms are not fair or reasonable. If deemed to be a regulated service it will be placed in Basket 1 until the next price cap period.

• ii. New services — Where a new retail service not previously supplied to the public by the Company is introduced during the price cap term, that service shall not be included in the PCP2012 unless deemed by the Minister responsible for telecommunications to be a regulated service in accordance with the Telecommunications (Regulated Services) Order.

  Where the new service is deemed to be regulated, it shall be included in Basket 1.

• iii. Promotions — Promotional rates including promotional discounts for services subject to the PCP2012 may not be included in the calculation of the API for compliance purposes, except where such discounts are offered to all customers who qualify for that service.

• iv. Bundled Services — When the Company introduces any new bundled offering after the start of the PCP2012, such offering shall not count towards compliance of the API. However, the individual...