Price Cap Plan 2016

• Jurisdiction: Barbados
• Court: Fair Trading Commission (Barbados)
• Judgment Date: 16 June 2016
• Docket Number: Document No.: FTC/UR/PCP/2016-02

Price Cap Plan 2016

Document No.: FTC/UR/PCP/2016-02

FAIR TRADING COMMISSION

COMPLIANCE RULES AND PROCEDURES

Part 1 – Interpretation

1 Interpretation

“Actual Price Index” (API) – The index capturing the average changes in prices for a service basket, which should not exceed the Price Cap Index. Also see Rule 8.3.

“Bundle Offerings” — Either a combination of regulated services or a combination of regulated and unregulated services.

“Cable & Wireless (Barbados) Limited” — The regulated service provider of domestic and international telecommunications services, pursuant to Utilities Regulation Order S.I. 2014 No. 65 and the Barbados subsidiary of Cable & Wireless Communications Plc.

“Columbus Telecommunications” – Columbus Telecommunications (Barbados) Ltd. and the Barbados subsidiary of Columbus International Inc.

“Commission” — The Fair Trading Commission;

“(the) Company” — The company in existence as a result of the merger between Cable & Wireless Communications Plc and Columbus International Inc.

“Exogenous factor (Z-Factor)” — 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” (I-Factor) – The percentage change in the average retail price index (RPI) between two periods, as given by the Barbados Statistical Service.

“Period” — A period during the Price Cap Plan 2016, as set out in Rule 4.1.

“Price Cap Index” (PCI) – The constraint that specifies the maximum level of aggregate price change for a service basket. Also see Rule 8.4.

“Prices” – This may also be referred to as “Rates”, based on the meaning assigned in Section 2 of the Utilities Regulation Act CAP 282.

2 These Compliance Rules and Procedures (“Rules”) apply to the implementation and operation of the Price Cap Plan 2016 (PCP 2016), which are in turn applicable to the Company. For the avoidance of doubt, the PCP 2016 will apply to all customers of the Company, including those secured as part of the acquisition of Columbus Telecommunications.

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 or the Utilities Regulation (Procedural) Rules 2003 and the Regulation (Procedural Amendment) Rules 2009.

Part ii — The Price Cap Plan

4 General

4.1 There shall be established a Price Cap Plan 2016 (PCP 2016), 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 2008. The periods of the PCP 2016 are:

Period 1: April 1, 2016 through March 31, 2017

Period 2: April 1, 2017 through March 31, 2018

Period 3: April 1, 2018 through March 31, 2019

4.2 The PCP 2016 can be extended, at the discretion of the Commission, for up to one (1) additional year. 1 Upon a decision to extend the PCP 2016, the Commission will give advanced notice to both the Company and the public.

4.3 Changes in the prices for a regulated telecommunications retail service subject to the PCP 2016 will be deemed to be approved where the proposed change complies with the PCP 2016.

4.4 It is not intended that the PCP 2016 be amended. However, in exceptional circumstances where there is a need to amend the PCP 2016, this shall be done pursuant to Rule 16 which sets out procedures for consultation between the Commission, the Company and other interested parties, including the general public.

4.5 Going-In rates for the PCP 2016 shall be the prices existing at the end of the Review of Price Cap Plan 2012 (PCP 2012). The procedures for effecting and notifying price changes are set out in these Rules.

5

5.1 The services to be regulated under the PCP 2016 will 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 PCP 2016:

• (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. Centrex, 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 PCP 2016 is an unregulated service, the Commission shall remove that telecommunications service from the PCP 2016 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) particular bundled services as noted in Rule 11.1 (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

6

6.1 The PCP 2016 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 prevent excessive pricing by the Company. These services include international private leased circuits (“IPLCs”), international call services, and domestic and international operator assistance services.

Basket 2: This basket will include all remaining regulated services, including residential access, business access, voicemail, call waiting, other value-added services, and domestic private leased circuits (“DPLCs”). This includes access and call services previously offered by Columbus Telecommunications.

7

7.1 In each Period of the PCP 2016, 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: Average prices across services in this basket are allowed to increase annually in line with the Inflation Factor, or 3% where the Inflation Factor exceeds 3%. In the case of the Inflation Factor being negative in any given year, the allowable price increase will be set at zero for that year.

7.2 The Company will be permitted to increase prices on Basket 2 services no more than once in any one Period of the PCP 2016.

7.3 Residential access services, which are a subset of services included in Basket 2, will be subject to an additional pricing constraint. In all Periods of PCP 2016, the prices for these services are constrained in the same way as for the whole of Basket 2. That is, the prices on these services cannot be increased, on average, by more than the Inflation Factor, up to a maximum of 3% per annum; in the case of the Inflation Factor being negative in any given year, the allowable price increase will be set to zero for that year.

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

Part iv — The Price Cap Formula 8

8 THE PRICE CAP FORMULA

8.1 The price cap formula is applicable to the regulation of regulated retail services provided by the Company which are contained in Basket 2 of the PCP 2016.

8.2 The price cap formula specifies that the Actual Price Index (API), which represents average changes in prices charged by the Company for the services contained in Basket 2 over a particular period (t), must be less than or equal to the Price Cap Index (PCI).

8.3 The API for Basket 2 is calculated as follows:

and alpha α is defined as follows:

Where:

In line with Rule 11.1, the API calculations will take into account quantities from all services contained in Basket 2, including those from stand-alone and bundled services.

8.4 The PCI for Basket 2 is calculated as follows:

Where:

I denotes the Inflation Factor as described in paragraph 9.2 below; and

Z denotes the Exogenous Factor described in paragraph 9.3.

8.5 The X factor is not explicitly stated in the formula above as the X factor for Basket 2 services is set at zero (0) for the PCP 2016. The formula is therefore consistent...