Dear Editor,
GT&T is seriously concerned about the column appearing in last week’s Sunday Stabroek in which the President of the Consumers Advisory Bureau, Ms Eileen Cox analyses the company’s reduced fare structure for overseas destinations and concludes that consumers are being short-changed.
Such charges made by the Consumers Association and the Consumers Advisory Bureau need to be taken seriously and cannot be dismissed, because these organizations are led by persons who have selflessly given of their time and energy in seeking always to protect the interests of Guyanese consumers. But we must express our surprise and our disappointment.
We are surprised that the conclusions could be reached by anyone after a serious review and analysis of the new rate structure. And we are disappointed that there can be so many misconceptions which could have been cleared up if only Ms Cox and her counterpart had taken advantage of the open invitation issued by GT&T’s CEO for discussion if ever or whenever there is a matter of public concern. In any discussion, they could have been helped to understand the basic reason for this promotion of low-cost international calls.
It seems necessary that everyone should appreciate that the promotion has been introduced with a view to GT&T beginning to understand the responsiveness of outbound international calls to price decrease. At the end of the three-month period, the company will analyse the traffic and the revenue data and then decide on the way forward.
But the two consumer protection bodies take the view that: i) GT&T’s new reduced international rates offer shortchanges the customer, and ii) GT&T ought not to offer consumers any price reductions unless these reductions bring GT&T’s rates below those of the internet cafés. We do not believe that these views are shared by the general public. After all, a penny saved is a penny earned.
Let us, for a moment, examine the arguments made by the two consumer bodies and the company’s response to them.
GT&T already offers an off-peak overseas rate for $40 per minute which is not very different from what they are now propagating as a new gift. It is true that we have other international call offers out there, but they are not the same as the current offer. Some of those offers are confined to specific times during the off-peak period, and the peak rate under the current offer is below G$40/minute at any time of day. We could have pulled these offers. But why do so when the rational consumer will choose which offer suits him/her best?
For GT&T’s offering to be realistic the rates should have been at least lower than the rates of the internet cafés. The internet cafés operate in contravention of the telecoms laws and GT&T’s licence. They have no network, mostly they pay no taxes, as a rule they do not apply the VAT that the law stipulates must be applied to all telephone calls, and many of them operate wireless facilities but pay no spectrum fees. In other words, it would be virtually impossible for a large, traded company like GT&T to compete with these illegal enterprises that circumvent government imposts and have little or no overheads.
We recognize that in today’s world the price of international calls is falling. However, until such time as full competition is introduced and proper mechanisms instituted to cover the cost of universal access, our international business must continue to compensate for our low monthly access charges and low domestic call rates.
In any event, let us be clear, even where full competition has arrived in the Caribbean, international call rates are not down to the G$10/minute. For example, in Trinidad and Tobago a peak hour call to the USA, UK or Canada on the incumbent’s network costs TT$1.25/min (ie US$0.20/min or G$40/min). For a peak hour call to these same destinations, Digicel Jamaica charges JA$17.75/min (ie US$0.20/min or G$40/min); Digicel Barbados charges B$1.20/min (ie US$0.60/min or G$120); Digicel St. Lucia charges EC$1.30/min (ie US$0.50/min or G$100/minute).
In other words, to test the responsiveness of outbound international calls to price reductions, we have set the promotion rates at and below the lowest prices in the fully competitive Caribbean markets.
GT&T makes a profit from the internet cafés which in turn make a profit for themselves. The PUC should have pressed GT&T to drop the rates to a realistic level. As we have shown above, the promotion rates are at realistic levels. The predicament for the consumer bodies is that “a realistic level” cannot mean the level of the café rates. A point that merits making here is that, although most of us never pause to think about it, the business model of the cafés is one that demands foreign exchange (to purchase minutes from abroad) but earns none. If GT&T and other local businesses were to operate with that business model, the G$/US$ exchange rate would quickly increase well in excess of G$200/US$1.00.
GT&T’s offering compels the landline user to pay more than the cellular user for the same allegedly reduced rates. The promotion recognizes two discrete categories of wire line customers: those with international direct distant dialling (IDDD) and those without. Customers without IDDD are treated the same as mobile customers, in that they are ineligible to subscribe to any of the plans, and the promotional rates apply only after the first minute of talk time. Customers with IDDD enjoy the promotional rates from the first minute of talk time, once they have opted to subscribe to one or more of the plans.
In these allegedly reduced rates, the consumer must pay a high rate for the first minute, several hundred per cent more than the other minutes. Billing sets of minutes at different rates is a common practice in the telecoms business. It is referred to as tiered or step billing and it is employed to encourage greater usage at lower prices.
The promotion covers only 86% of outgoing calls. The other 14% must pay the high rates. This criticism is not entirely without merit. The fact is that we could not complete all of the analytical work in time to include all destinations in the January 1, 2010 launch of the promotion. We reasoned that everyone calls the popular destinations covered by the promotion, so everyone benefits. And in any event, promotions are done all the time on a subset of the goods or services offered for sale by an operator. However, we have committed to the Commission to include the other destinations if the promotion were to be extended beyond the three-month period.
GT&T have already indicated that they would be raising landline rates if or when their monopoly on overseas calls is removed. We suspect that GT&T are using this ‘promotion’ as one of their first gambits in increasing landline rates. This appears to be a reference to rate rebalancing (an exercise in which some rates go down (mostly international telephony rates) and some rates go up (mostly rental and local service rates)). Lowering international outbound rates, while keeping rental and local call rates low, cannot be a “gambit” to increase domestic rates. We have no incentive to price our local services business out of existence. Rebalancing is not arbitrary. It is achieved by computing the cost of service provision and having prices, in a competitive environment, cover that cost. Both the cost models used and the costing exercise itself are subjected to regulatory scrutiny.
‘Nothing will ever be attempted if all possible objections must first be overcome.’ As we have said before, we have made the low-cost international calls offer in good faith with a view to our beginning to understand the responsiveness of outbound international calls to price decreases. At the end of the three-month period, we will analyse the traffic and revenue data and then decide on the way forward. In the meantime, we will not withdraw the promotion as proposed by the two customer advocacy bodies, but expect instead that customers will take full advantage of the significantly lower rates.
Yours faithfully,
Gene Evelyn
Director Rate Making
GT&T
