Has Digicel been outmanoeuvred by the OUR?

Amidst concerns that the current framework of interconnection charges did not offer a level playing field, less than a month ago, the Jamaican Regulator set an interim mobile termination rate. Digicel, the largest player in the market, is seeking to overturn that ruling.

On Friday, 15 June, LIME Jamaica introduced its TALK EZ plan, which offers significantly lower mobile calling rates to both prepaid and post-paid customers. As discussed in Are LIME Jamaica’s mobile rates reductions too little too late?, the reductions were by as much as 63% for prepaid local calls, as shown in Table 1.

Table 1: Comparison of local calling rates for LIME Jamaica’s Anytime and TALK EZ plans (Source: LIME Jamaica)

In that article, we were of the view that Digicel would not take those reductions lightly and would most likely try to contest them. Hence we were not surprised when the company subsequently announced that it had made an application to the courts to overturn the determination issued by the Office of Utilities Regulation (OUR) in Jamaica, which would have been the impetus for LIME’s rate reductions.

In this post, we highlight both Digicel’s and the OUR’s positions, along with some observations we have made that could influence the outcome.

The OUR’s determination

On 4 June, the OUR published Mobile Termination Rate: Determination Notice, which established an interim mobile termination rate of JMD 5.00 (USD 0.06) for the Jamaican mobile/cellular sector. The first chapter of the document sought to establish the legal framework for addressing interconnection charges. It therefore included provisions from the new amendment to the Telecommunications Act which permits the OUR to set interim rates and charges for wholesale and retail services”.

The rest of the document is quite technical, as the OUR identified key inputs and reasoning behind its determination. Of note, however, is the fact that it used information submitted by the mobile/cellular operators themselves (LIME, Digicel, and Claro, which is no longer in operation) for an earlier interconnection cost justification exercise, to make its decision. However, the OUR was quick to highlight that Digicel was not particularly co-operative during that earlier exercise, which could suggest to the reader that the company was resistant to and sought to thwart the process.

Digicel’s case against the OUR

On Wednesday 13 June, the day before LIME’s press launch of its TALK EZ plan, Digicel filed an application at the Supreme Court of Jamaica seeking leave to proceed with a claim for Judicial Review of the OUR’s determination. Based on a press release published earlier this week, key claims being made by Digcel as the basis of the appeal include:

… the determination … is unconstitutional and contrary to the common law right of natural justice since, among other things, the OUR has denied Digicel of its rights and legitimate expectation that the OUR adhere to due process and procedural fairness when making determinations.

More importantly, along with its request to appeal the determination, Digicel is asking the court to order a “stay” of the determination, thereby halting implementation of the new mobile termination rate, pending the outcome of its appeal via Judicial Review.

Key considerations

The setting of telecoms rates and charges, especially those for interconnection, tend to be highly contentious episodes in a regulatory environment, which regularly result in litigation.  Further, as has been the OUR’s experience to date, rate setting exercises can also be a highly protracted – primarily due to uncooperative parties – and has led to an amendment to the Act to allow interim rates to be established.

Many parties, including LIME, had expressed the sentiment that the longstanding interconnection charges, which were set in the early 2000s, offered Digicel an unfair advantage in the market. Reports over the last several months have highlighted the severe losses experienced by LIME Jamaica in the mobile market, along with concerns about the company’s possible withdrawal from the country. Hence, there would have been considerable pressure on the OUR to act swiftly and decisively, in light of its new powers to set interim charges.

Having said this, we (here at ICT Pulse) were quite surprised at the speed with which the determination was issued. The amendment empowering the OUR to establish interim charges was passed in the Upper House on 4 May 2012, but only received Royal Assent (via the Governor General) on 24 May 2012, to make it law. The Determination Notice was published on 4 June 2012.

Furthermore, and perhaps more critically, the OUR’s Determination Notice did not indicate whether consultations were held with affected parties, specifically Digciel and LIME as mobile/cellular operators, prior to the interim rate being finalised. Neither does it include any of the views that the parties might have shared – be they in support of, objecting to, or even new proposals. Such a step would have provided the parties with an opportunity to be heard, and for the OUR to consider all views and submissions before making a final decision. More importantly, earlier Determination Notices on the OUR’s website does suggest that consultation processes are regularly implemented to reach the final outcome.

Covering all bases

Based on the information that so far has been placed in the public domain, it seems likely that the Court will grant Digicel leave to seek Judicial Review. The stay, on the other hand, seems a bit tricky, since LIME is relying on the new mobile termination rates to offer the TALK EZ plan, which has been quite popular. If the stay were granted, it would mean that although TALK EZ could remain, all mobile termination rates would revert to earlier levels, to LIME continued detriment (see Figure 1).

Figure 1: Termination rates payable by telecoms operators in Jamaica prior to the OUR’s June 2012 mobile termination rate determination (Source: OUR)

In a separate note, in addition to seeking to overturn the OUR’s determination, and as we had predicted, Digicel has introduced a new plan. Jamaica’s Sweetest Plan offers:

  • Digicel to Digicel calls for JMD 2.89 (USD 0.03) per minute
  • Calls to all other networks, JMD 6.99 (USD 0.08) per minute
  • talk for 5 minutes, get the next 10 minutes for free
  • talk for 5 minutes on an international call, get the next 25 minutes for free
  • send 5 texts, get the next 10 for free
  • top up to JMD 200.00 (USD 2.27) and get one hour free at nights
  • get JMD 100.00 (USD 1.14) bonus credit every month as brand loyalty.

Clearly, the competition is far from over…