Landmark Communications Bill About to Change Industry Forever

by Larry Smith

If you work for Cable Bahamas or the phone companies, you may have a vague idea that BTC's pending privatisation (a process that began in 1997) will bring some changes to the Bahamian communications landscape.

Well, you would be wrong.

As a matter of fact, BTCs sale will be a watershed for our media and telecoms industries because everything will change. And we do mean everything - including ZNS and Cable Bahamas. In fact, reshaping the national communications landscape will probably go down as Hubert Ingraham's greatest legacy.

Until recently, like most others I was a die-hard skeptic in this regard. But after mingling with industry representatives during a four-hour consultation meeting at the British Colonial Hilton last Friday, I sense a climate of change similar to the early 1990s, when the stultifying state monopoly on broadcasting was finally broken.

The immediate goal of the present process is to sell a majority stake in BTC to a private partner, earning tens - if not hundreds - of millions of dollars for the Treasury while relieving the government of the need to modernise our telecoms infrastructure.

But along with that,  our entire communications sector - both telecoms and broadcasting - will soon be opened up to competition under a genuinely independent regulator, and ZNS will be transformed from a hacked-out state agency into a true public service broadcaster.

The overall impact of this reform will be like a tidal wave washing over the island and sweeping away the detritus and garbage of the past. And to mix metaphors, we are not talking pie in the sky here. Legislation will be brought to parliament later this month to create a new business framework for the communications industry for passage prior to the Budget process.

This framework will include a powerful Utilities Regulation & Competition Authority (URCA); a Utilities Appeal Tribunal (UAT) to review the regulator's decisions and mediate among licensees; and a landmark Communications Act governing telephony, internet, television and radio services, as well as maritime and aviation radio.

As further sectors are liberalised (such as electricity and water supply), the plan is for the government to enact new sector-specific laws designating URCA as the single unified regulator. The existing Public Utilities Commission, which is headed by former FNM parliamentarian Anthony Rolle, will be dissolved as soon as the new law comes into effect.

The Tribunal - which will sit only when there is a case to be heard - will be headed by a judge appointed by the Judicial Service Commission. Other members - appointed by the Tribunal president - will include economists, lawyers and land appraisers. Their decisions can be appealed to the courts.

The all-powerful Authority will be funded by license fees based on a percentage of operator turnover, and governed by a chief executive officer under a five-member board. Going forward, three non-executive directors will be selected by a committee headed by the governor of the Central Bank. These three will choose a chairman from amongst themselves.

However, in the first instance a chairman will be appointed by the prime minister for a renewable two-year term. That chairman will then appoint the remaining two non-executive directors for renewable three- and four-year terms respectively.

Public officers and politicians will not be eligible for this board. The two executive directors will be the CEO and a policy expert, who is now being recruited. Both the Authority and the Tribunal will come into force as soon as the new legislation is enacted, and the intention is for the Authority to have the same level of autonomy as the Central Bank.

The Communications Act will come into force when it is gazetted or when BTC is privatised, whichever comes first. In the meantime, the Authority will operate under existing law while a new communications sector policy is drafted.

All of the documents outlining this revolution are available on the Internet (www.btcprivatisation.com), but none of it is set in stone. The folks guiding the process - who include experts from the international accounting firm, KPMG, and the British regulatory law firm, Charles Russell - are seeking input from industry leaders, as well as you, dear reader.

Their consultation was launched in December, primarily with BTC and CBL. More recently it has included others, such as radio stations. The meeting that Tough Call attended last week was aimed at putting the proposals into a live context so that operators will be able to assess how they will be affected going forward. And the consultation will soon expand to involve the public in a big way.

In anticipation of just how far-reaching these reforms are, KPMG advisors say they are trying to avoid a "big bang that will destabilize the market." According to Gita Sorenson, a director in KPMGs economic regulation group who specialises in the communications sector, "We want transparency so we can get it right, but we do have a compressed timetable to deal with in order to take advantage of the window of opportunity before the Budget."

This was an oblique reference to the political pressure that the current BTC privatisation team is under to complete the seemingly never-ending story of BTC's sale. Most of the regulatory reforms now underway flow from this planned sell-off, and according to Simon Townend, a partner at KPMG Bahamas, there is still market interest in BTC despite the economic downturn.

The reforms call for an immediate switchover to the new regime. When legislation is passed this month, all broadcasters and telecoms operators will have to apply for new licenses within 120 days, unless they opt to continue their existing licenses until expiry. But the new licenses are expected to be more attractive and wider ranging in order to encourage a changeover.

"The new regime will regularise everything that exists now under a temporary framework," Sorenson told the Hilton meeting. "But we only want to regulate what needs to be regulated going forward, and I have spent the last 10 years helping to set up regulatory regimes in small island states, so I am aware of what the major pitfalls are. We are putting a lot of effort into coming up with robust solutions to all the issues."

In addition to operating licenses, URCA will control spectrum (the allocation of radio frequencies), as well as telephone numbering and Internet domain naming systems. And for the first time, Bahamian businesses will have to face competition regulations, including provisions dealing with anti-competitive agreements, abuse of dominant market position and mergers.

"In the UK a 25-30 per cent market share is considered a significant market position and subject to regulation," Sorenson said. "A consultation document will be produced to look at competition policy in general and to determine what a significant market position would be in the Bahamas. And more work needs to be done on what the appropriate remedies would be for this. Market reviews are complex and costly undertakings, so we want to slim down this process as much as possible."

The most obvious near-term changes arising from this revolution will be the end of BTCs monopoly on mobile phones (within two years) and CBLs exclusivity on cable television (which expires later this year). Both companies have their own fibre-optic networks and are expected to aggressively compete in each other's primary markets as soon as they are able to. In other words, BTC will introduce cable tv and CBL will become a phone company.

That's because the chief goal of the reforms is to promote competition so that consumers can have more and better choices with the least amount of government intervention. For example, broadcasting licenses will no longer be a political handout by the prime minister. That job will be one of URCA's technical responsibilities.

And URCA will also be responsible for developing and applying a broadcasting code of practice, setting standards and guidelines for the electronic media for the first time, along with a public complaints process. Among other things, these standards will seek to protect children from harmful material, promote accuracy and fairness in news, require distinctions between advertising and news, and regulate political broadcasting.

The other big change - which many thought might never happen - is the designation of ZNS as a public service broadcaster. This will mean a wholesale revamping of the way the station works and how it relates to the government of the day. When the Communications Act comes into force, URCA will undertake a full review of public sector broadcasting and the future role and funding of ZNS.

According to the consultation documents, "the public service broadcaster will initially be ZNS, although it is possible for other content providers to apply to be a public service broadcaster and thereby receive funding. The Minister will decide the specific obligations of the public service broadcaster after receiving recommendations from URCA."

In order to obtain public funding, the new ZNS will have to publish a yearly plan for meeting the public service broadcasting objectives set by URCA. And that plan must include key performance indicators against which ZNS will be measured, as well as a realistic budget. These are constraints that ZNS has never had to contend with in the past.

"A paper is being drafted on how public service broadcasting works in other countries and public opinion will be taken into account in the final analysis," Sorenson said. "The new regime will regularise everything under a transparent framework and make it more accountable, which is important."

So instead of receiving annual subsidies from the Treasury, the public service broadcaster will be funded by a levy set by parliament, as well as by donations. In Britain, for example, the BBC is funded by a receiving set license fee. And years ago, this column suggested a levy on cable television subscriptions to provide independent funding for ZNS so that it could end its reliance on commercial advertising and political subsidies.

In other words, public service broadcasting has to tread a fine line between the "hammer of the state and the anvil of the market". And principally, the goal is to detach broadcasting from vested interests - including the government - and address audiences as citizens rather than consumers.

The remaking of ZNS will occur in an environment where the technological distinctions between text, audio and video are eroding. Newspapers, radio and TV stations can all distribute information over the web or a mobile phone. Cable operators can provide phone service, and phone companies can provide cable service.

Ladies and gentlemen, brace yourself. We are about to enter a crazy, mixed up world.

Comments

[C.Lowe]

I agree with your last statement for sure, and will also add that on paper it looks good but:

"same level of autonomy as the Central Bank"
Is it autonomous? Like the Judiciary?
I don't think we are capable of that sort of self control or denial of the urge to defacate upon anything with the potential to succeed.
Perhaps harsh but I smell more self important clueless wnannabees on the public payroll.
A simple point:
Where are they searching for the " policy expert"?
In my opinion our Administrations of late leave much to be desired as legislators and even more to be desired as leadership.
None the less, we shall watch with interest, and thank you for opening the lid on this scenario.

[Keith Major]

Great great article. It really piqued my interest.

[Felicity Johnson]

Excellent article on the changes. I hope that this provokes further discussion in the community. Exciting isn’t it?

[larry smith]

Couple points Chris.

I was told that the goal is to achieve the greatest level of autonomy within reason, and any suggestions on how to do that would be welcome. You can contribute to the debate.

My impression is that the policy expert is being recruited overseas because we don't have that kind of creature in the Bahamas.

As I noted, the authority will be funded by the industry - not by the government.

[Hubert Edwards]

I read your article of today with great interest and a sense of excitement too.

It is clear that this sector will be shaken up in some real ways. The table is being set for very serious and agreessive competition (at least in principle) with the consumer benefiting.

The enticing aspect of this, though, is the attendant effect it will have on other segments of the economy. The framework being developed, including your mention of anti-competition hold very important implications for the wider market.

Cursory analysis will show that there are likely to be many entities in various aspects of the Bahamaian market that actually meet the benchmark for anticompetition standards be it 30% or 40%. There are serious segment concentrations which will have to be looked at.

Back to the telecom sector, though. It should be realized that CBL is well positioned with its triple play. They are already in the households providing data and video. The only other leg of the stool is voice.

In the first instance they stand a chance to make very serios inroads into the market. Given the "grace period" for the purchaser of BTC and the positioning of CBL it makes for exciting analysis how they will strategize. Clearly this period must involve making moves in anticipation of CBL's potential moves.

I agree with you get ready for a mixed up world. If it materializes as you projected in your article, this could be a watershed moment for business in the Bahamas is general. Definitely positive for the telecom sector and with spin offs for other sectors, but also with maybe not yet well understood challenging implications.

[Erasmus Folly]

Bring it on! Can't wait. Look at the great things that happened with radio and tv, the last time Ingraham shook it up. We went from the stone age to the third world with that one. Now, we can really move forward - sky's the limit. Who knows, we may even surpass the Americans by integrating the more modern Asian communications systems into the grid and leave the US behind. Bahamians should be proud. Next, BEC, Water and Sewerage and BahamasAir - then tax reform. Let's go CHANGE!

[Erik Russell]

Another great article, Larry. The one word that kept going through my head is: "opportunities!" These changes bring opportunities at so many levels, from new revenue streams for BTC and Cable Bahamas to new entrepreneurial openings for the creative and innovative ones among us.

The only hesitation I have in my excitement is that the 'pie' really isn't changing all that much. There will still be about the same number of households and businesses and individuals to subscribe to TV, phone and data services. Once you segment that pie so many times, can anyone really make much money after putting in the capital you need to build an infrastructure that can sustain a reasonable load?

Whatever happens, the unknown in this case is what makes it so exciting.

~ejr~

[Bahamas Community]

How will anything change when the same crooked shills will still be large and in charge, albeit in new positions?