CABLE & WIRELESS (Jamaica) Limited (C&W) is set to raise the rental rates for its landlines.
This comes in the wake of the rejection by the Office of Utilities Regulation (OUR) of a C&W proposal to adjust the rates it charges other service providers to access its network. The rejection came earlier this month.
"We are looking at the likelihood that Cable & Wireless will have to increase its domestic rates," said C&W director of corporate communications, Errol Miller. The access rate adjustment request had been intended to help the company bear the cost of subsidising its landline network.
Wednesday Business has received information that the proposal is for a 25 per cent increase in rates for business and residential telephone rentals. The cost of intra-parish calls is set to rise 12 per cent and inter-parish calls should go up by eight per cent. The company will also cut the cost of international outbound calls by five per cent to all countries, except for Cuba.
The economic cost of providing a landline is $1,400-$1,500 per month, Mr. Miller said. This is the cost of putting in a line and maintaining it.
But residential customers pay $400 per month for a line and business customers pay $1,000. The company thus has a $1,000 deficit for each residential customer and $400 for each business customer each month
The company has 500,000 landline customers, of which 80 per cent are residential and the rest business. The result is a deficit of $440 million per month.
In the past this was not an issue as C&W had a monopoly on the market and it subsidised its domestic network from the revenue from its international calls. It no longer enjoys this monopoly and, critically, its international revenue base has collapsed. The United States demanded and got an adjustment of international settlement rates.
The company used to get US$6.50 a minute for calls coming into the island, but on January 1, 2001, that was adjusted to US$0.19.
The company has less than half of the rapidly growing cellular telephone market, Mr. Miller said.
INTERNATIONAL CALLS
The market for international telephone calls has been flooded by competition. Since March of last year, 62 international carrier licenses have been issued, and 12 to 14 companies are now operational.
"Everybody is fighting for traffic," Mr. Miller said. The result is that rates have plummeted.
The total market for incoming international calls is 60-70 million minutes per month, and C&W has less than 50 per cent of that market now.
These new international carriers use the C&W network to terminate their calls and so avoid its heavy domestic infrastructure investment.
Meanwhile the domestic fixed line market has stagnated. There are 500,000 fixed line customers but more disconnections than installations are taking place.
The Government issued 26 license for fixed line service providers and Gotel entered the market but has since slowed its expansion.
Unlike the mobile market, C&W still controls 99 per cent of the fixed line market, Mr. Miller said.
Relegated to this position in the market, C&W's net profit attributable to shareholders fell from $3.9 billion in 2001 to $3.2 billion in 2002 and $2.1 billion in 2003.
REBUFFED
The company sought to re-adjust the access fees to its network through the OUR but were rebuffed.
"Regulations supported the granting of an access deficit contribution as long there was is a constraint on domestic rates," Mr. Miller said. The rejection of the access deficit contribution has removed the constraint on changing domestic rates.
"It is a fully competitive market and rates need to be at cost," he said. "We have some decisions to make, but obviously rates will go up."
