PUC denies GTT’s application for rate increase

-says case not convincing; cites poor profit margin, service quality

The Public Utilities Commission (PUC) has denied GTT’s application for increases in wireline access and landline metered charges, saying that the telecommunications giant did not present a convincing case.

The Guyana Telegraph and Telephone Company (GTT) had applied on October 1st, 2018, to the PUC for a Tariff Regime for Access and Landline Metered Charges, which caters for increases in landline access charges and landline metered charges. The first hearing was held on October 24th and the last on November 19th.

GTT had proposed that for residential customers with one to two lines, the charge would increase from $750 to $800, with three increments of $50 to be added six months after implementation. Further, residential customers with more than two lines would be subjected to an increase from $1,500 to $1,600, with an increase of $50 to be added after six months of implementation. 

For landline metered charges limited to intra traffic only, GTT had proposed for the rates to be increased from $0.80 to $1.25 for peak hours and from $0.40 to $0.75 for off-peak hours.

It also requested the approval of five residential bundled services exclusive to the landline service, which included an increase of $50 to the current access charge with an offering of 10 minute intra calls and five free minutes of inter calls. However, all minutes after on both the inter and intra exchanges would attract charges at twice the call rate.

GTT also wanted an all-inclusive (intra and inter) bundle, including access for $6,500 per month, with call forwarding, voicemail and call waiting, as well as a bundle with intra calls, plus 100 minutes of inter calls for $2,740 monthly, together with voicemail service, however, excess inter call minutes would be billed at the standard rate.

The fourth bundle featured intra calls only for $650 per month with voicemail but not including access, which would have to be paid as a separate line item by the customer, and the fifth bundle, a “friend and family calling bundle,” featured calling bundles for five persons unlimited for $1,850, with voicemail but not including access, which would also have to be paid as a separate item by the consumer.

However, based on the order that was published by the PUC, the commission found that the company has not presented a convincing case for the proposed price increases for its landline service and therefore the application was denied “in its entirety.”

The PUC explained that several factors were considered, including the fact that the commission has not approved of GTT’s Cost Allocation Methodology (CAM) and as a result, was not convinced that the expenses used in the model accurately reflected a cost-efficient utility, taking into consideration the size and the scope of the operations of the company and whether the values of the non-current assets as stated in the company’s financial statement were acquired at market value at the time of acquisition.

The PUC also noted that it was not convinced whether the company has adhered to the tenets of the licence, which makes provisions for universal service, especially as it relates to the rural areas and that the company has purported to have invested heavily in non-current assets for more than a decade but such is not reflected in expected profit progression or in the quality of the company’s services to their customers.

The order added that the commission also considered that the concept of rate re-balancing is triggered when there has been a dismantling of a monopoly on telecommunication services and as it stands, GTT still retains the monopoly on landline services.

In its presentation, GTT had argued that its CAM, which was developed from its 2017 audited financial statement, showed that the net after tax profit in 2017 was below the company’s entitled rate of return of 15% on capital dedicated to public use and that the Public Switch Telephone Network (PSTN) services are provided to consumers at a significant loss to the company.

It had also pointed out that with liberalisation on the horizon, it is necessary to rebalance rates to bring them closer to the operating cost, a position which they had pointed out is supported by the Telecommunications Act.

As a result, it proposed to rebalance landline rates closer to its operating cost but had wanted to do it in stages over a protracted period in order to avoid creating a rate shock to their customers.

GTT was also seeking to increase access charges by $200, $50 from the date the Order would’ve become effective and the remaining increase of $150 for residential consumers would be implemented by incremental increases of $50 every six months. There would be a $250 increase for business consumers.

It argued that based on the CAM, the cost of maintaining an access line is $2,700 and in order for the company to “break-even” the mentioned increase was needed.

GTT also emphasised that liberalisation is synonymous with tariff rebalancing, which seeks to make prices competitive and economical, which it had said is a prerequisite for the opening of the local market to foreign investors.

With respect to the five bundled services, it had explained that the customer would have the option to choose any bundle and under that regime, has the prerogative of opting out of the bundled package if so desired.

The Guyana Consumers Association (GCA) also made presentations to the commission through its President Patrick Dial and advisor Yog Mahadeo.

It had explained that the application for increased rates appears to be premised on the CAM and that GTT is using rate re-balancing as a guise for its application to increase consumer prices.

The GCA had also expressed its reservations about the model, noting that in the absence of precise data that can be easily corroborated, it would be difficult to be guided by the CAM, and as a result, they were of the view that the guaranteed rate of return is an entitlement and not a guaranteed rate.

It had said that in order for GTT’s application to be properly dissected, pertinent information should have been provided on the impact on the subscribers and the accrual of the anticipated incremental revenue to the company.

The GCA had also expressed reservations over some aspects of GTT’s financial status and suggested that a forensic audit should first be undertaken before considerations could be given for any increase for services. They also alluded to the quality of the landline service and the fact that there remains a large number of Guyanese who are desirous of accessing said service, which GTT has been unable to deliver.

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