The value of the Bahamas Telecommunications Company [BTC] is diminishing because private and business users are bypassing the company’s private network to embrace new technology like Voice over Internet Protocol [VoIP] which offer drastically lower long distance calling rates, according to a new revelation contained in an Inter-American Development Bank [IDB] document.
The May 2006 report on Promoting Investment in Information and Communication Technologies in the Caribbean, was released this month.
Some observers estimate that up to 70 percent of outgoing international traffic bypasses BTC’s network with 30 to 40 percent of business subscribers using VoIP alternatives like Vonnage and Skype, the report stated.
It added that the incentives to bypass BTC’s public network are so overwhelming that individuals and small enterprises are not intimidated by the threat of huge fines for defying the law.
“It may be wise for the government to take stock of the current situation, understand the realities of this technology and its impact on prices, recognize the futility of trying to stop its progress or to police its use and instead encourage BTC to take into account and embrace VoIP technology to reduce the overall cost of the delivery of telecommunications services in The Bahamas,” the report said.
Additionally, analyst Peter A Stern urged government officials to reflect on the reasons why the previous attempt to privatize BTC failed and develop a policy and plan which will promote the long term development of the information and communication technology in The Bahamas.
Under the Telecommunications Act, any person who uses VoIP or provides the service without approval from the Public Utilities Commission risks a $300,000 fine.
But even BTC officials have conceded that the use of the service is eroding its revenue base. Just recently, the PUC announced that it had granted the company approval to drastically reduce its long distance calling rates, a move which paved the way for BTC’s first tariff rebalancing exercise.
The IDB report concluded that the government finds itself caught between opposing objectives reforming the telecommunications sector and its desire to extract the maximum possible from the sale of BTC.
“The rapidly evolving technology is however offering users easy alternatives to bypass BTC’s traditional network and to pay prices which are fractions of those charged by BTC even after price reductions of up to 70 percent are taken into account,” the report said.
“The value of BTC is diminishing as these new technologies are becoming more widespread and accessible.”
But officials were quick to point out that while the evolving technology may be having a negative impact on the value of the company it also has the potential for long term benefits in strengthening the economy and helping to diversify The Bahamas’ dependence on tourism and financial services.
Best practices suggest that in the long run this will most likely outweigh the loss in income resulting from the company’s sale.
Dedicating a portion of its analysis to the failed privatization of BTC, the IDB report attributed that unsuccessful attempt to a number of reasons inclusive of the failure to have clearly established ground rules for the process, the awarding of a competing voice telephone service to the Systems Resource Group, the government’s failure to have a defined time table for the company’s tariff rebalancing and the absence of a comprehensive regulatory framework.
Additionally, a number of uncertainties related to the scope of the new licence, the company’s large spending programme inclusive of the $60 million project to construct a domestic fibre optic network, the government’s concern about the potential loss of jobs and a misunderstanding of the impact of new technologies were also blamed.
The government has been taking steps to prepare the company for privatization but there are some skeptics who continue to believe that the company will never actually have a strategic partner. BTC officials had also contracted consultants to receive advice on how to function in a competitive environment.
The company recently communicated to telecommunications regulators that it still expects under the proposed new long distance calling rates that the combined cost of providing the local and international services and other obligations would cause a residual revenue access deficit which it urged the PUC to address expeditiously.
By: Tameka Lundy, The Bahama Journal
