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No third mobile operator during Davis Gov'ts term

By Neil Hartnell

Tribune Business Editor

The Bahamas will not have a third mobile phone provider before the Davis administration's term in office ends although it has placed regulators on alert to crackdown on any anti-competitive practices.

The Government's draft electronic communications sector policy for 2023-2026, released for public and industry consultation late last week, said it had accepted the Utilities Regulation and Competition Authority's (URCA) analysis that permitting a third operator to enter the Bahamian mobile market will "not be commercially viable" or help foster "sustainable competition".

The rationale behind URCA's assessment was not revealed, although it will likely come down to the fact that The Bahamas' 400,000-strong population is simply not large enough to support three profitable operators. As a result, the draft sector policy states that the Government "proposes to refrain" from licensing a third operator before the current policy ends in 2026, which is the year when the Davis administration's five-year term in office will likely end.

"Under the 2020 to 2023 electronic communications sector policy, the Government requested URCA to provide advice and recommendations to the Government, including a feasibility and market analysis, to support any recommendations [for] further liberalisation of the cellular mobile market in The Bahamas," the draft sector policy states.

"URCA has provided the requested advice and recommendations, which this government has taken under advisement. URCA’s considered assessment has indicated that a third mobile entrant would not be commercially viable or further the policy objective of promoting sustainable competition in the cellular mobile market at this time. Therefore, the Government, during the life of this policy, proposes to refrain from introducing further competition in the cellular mobile market."

However, given the present mobile duopoly due to just two market participants, Aliv and the Bahamas Telecommunications Company (BTC), the draft sector policy urged URCA to be on its guard for anti-competitive behaviour that could hurt consumer interests such as price-fixing and other forms of collusion.

"Within this context, a key policy objective of the Government is to ensure that the market continues to deliver positive benefits to consumers in the future," the draft sector policy said. "This is especially in light of URCA’s concern that the competitive dynamics between the two existing mobile network operators (BTC and BeAliv) may change in the future.

"In particular, as the market becomes more concentrated and potentially susceptible to tacit coordination, it is possible that competition could lessen which could slow further improvements to consumer outcomes.

"To this end, URCA is encouraged to closely monitor the progress and developments in the market with a view to ensuring that the cellular mobile market continues to exhibit effective and sustainable competition, including the merits of encouraging further entry at a later stage should the current market structure fail to deliver competitive outcomes."

Identifying the potential practices that URCA will need to prevent, the draft sector policy added: "Tacit co-ordination or tacit collusion refers to an oligopolistic market phenomenon where leading firms take advantage of certain features of a market and co-ordinate their behaviours on prices, outputs, etc by taking into account their competitor’s strategies and likely reactions, without getting into any formal or overt agreements.

"Co-ordinated behaviours are prevalent in cellular mobile markets internationally, especially where the major players have converging or similar market characteristics, as is currently the case in The Bahamas." The Government's decision, which does not completely close the door to a third mobile operator, only doing do so for the near-term, has been keenly awaited by market participants and consumers alike.

Tribune Business records show that the decision should have been taken by October 2019, almost four years ago, as this would have marked three years after Aliv ended BTC’s 16-year mobile monopoly by becoming its first competitor through a November 2016 launch.

While barriers to competition are always problematic, as they deny consumers the benefits of greater choice, product innovation and lower prices, a key concern has always been whether The Bahamas, with its 400,000-strong population and estimated 360,000-380,000 mobile subscribers, has the critical mass to support a third mobile operator.

Allowing a third entrant could result in the market being split too thinly, with none of the operators able to achieve sufficient subscriber bases to reach profitability and positive operating cash flow. The capital intensive nature of any network build-out will also delay profitability by many years, and existing operators have previously warned that licensing a third operator could affect their plans for - and investment in - 5G or fifth generation technology.

John Gomez, Aliv's top executive, told this newspaper in 2021 that the Bahamian market was too small, and has too few subscribers, to warrant the introduction of a third operator as this would further split market share with "two very competitive forces".

A further factor is that the Government presently holds large equity ownership interests in both mobile operators: 49 percent in BTC, and 51.75 percent in Aliv, although its majority in the latter does not give it Board or management control. Previous plans to sell down its interest in both operators, via either initial public offerings (IPOs) or private placements to Bahamian institutional or retail investors, have so far failed to materialise.

As for 5G, the draft sector policy calls on URCA to persist with its public consultations on the issue to identify present demand for the technology plus current and future uses. "The Government is committed to maximising the social and economic benefits of 5G technology, which is expected to usher in a new era that will create significant opportunities for The Bahamas and people in The Bahamas," it said.

"The Government is aware that advanced 5G technology and networks are able to provide data capacity, speed and responsiveness that is necessary to transform various sectors of the economy by integrating technological advances such as Artificial Intelligence (AI), the Internet of Things (IoT), Augmented Reality (AR) and Blockchain.

"5G technology also has the capacity to reliably connect a large number of digital devices, process high volumes of data with minimal delay and, over time, make technology such as smart cities and automated vehicles mainstream. Most importantly, 5G technology has the potential to significantly support the digital ecosystem and economy of The Bahamas......

"As the digital economy of The Bahamas continues to evolve, the Government recognises that there is also a real risk that those without reliable, affordable and advanced broadband connectivity will be excluded from effectively participating in the economy," the draft sector policy continued.

"The Government believes that 5G technology can be a tool to effectively address this concern, but in order for The Bahamas to realise the full benefits of 5G technology, a clear policy road map must be articulated covering key issues such as spectrum usage, infrastructure requirements, use-case trials and workable solutions to overcome key challenges."