The Guyana Telephone and Telegraph Company Limited (GT&T) says higher costs that have placed it in financial distress as well as substantial changes in the telecoms environment justify its proposed increase in rates for domestic services, even as it faces accusations that it is misrepresenting its costs and has been taking advantage of subscribers.
GT&T representatives made their second appearance before the Public Utilities Commission (PUC) last Friday, following its application for approval of a tariff regime establishing a change of rates in some instances and new rates in others.
The hearing was further adjourned to October 1st after a series of arguments were presented by consumer activist Leonard Craig and to also allow the commission itself to submit further queries.
According to the application, proposed increases for services such as installations, transfers, additional jacks, wake-up call, 3-way, voicemail, call forwarding and reconnection fees range from 40 to 50%. Rates for intra exchange calls during peak hours are proposed to go up by 40%, while non-peak hours are set to go up by 60%. The current intra-exchange call rate is $.60 (peak) and $.30 (non-peak). For inter-exchange calls (calls from one zone to another), the rate is set to go up by 20% for both peak and non-peak hours. The current rates for peak hours, per minute are Zone A-$3, B-$4, C-5$ and D-$7. During non-peak hours the rates are $2, $3.6, $4.8 and $5, respectively.
GT&T said in its proposal that the application was made on the basis of the need to rebalance telecom service rates prior to the imminent passage of the new telecoms law and regulations and the substantial changes in the telecoms environment since the commission last approved new rates in 2002. It further stated that costs have increased so significantly that they have outstripped efficiency gains the company derived from its major investments and it specifically cited electricity as a debilitating factor.
The new telecoms bill, still before the National Assembly, will set the stage for competition in the international calling market and is expected to force the rates of international calls downwards. As a result, GT&T proposes to reduce international rates to preempt the bill while seeking a cushion by increasing rates for the domestic market.
Gene Evelyn, Ratemaking and Regulatory Affairs Consultant at GT&T, told the Commission that the company is in financial distress. He added that the company is unable to cover the cost of wireline (landline) service, saying that the burden is like an albatross around GT&T’s neck. This was in response to the commission raising an eyebrow over the financial statements of 2011, which contradicted Evelyn’s claim of financial distress.
Vice President of Finance at Atlantic Tele Network (ATN), John Audet told the Commission that the rate increase is necessary for GT&T to survive and he noted that landline rates will remain significantly cheaper than mobile rates.
Craig, however, challenged GT&T’s claims of financial distress, while stating that the company is having a “feeding frenzy” in Guyana.
Extracted
In a bid to demonstrate GT&T’s history of “not delivering to the Guyanese people,” Craig said that every single year since its inception, it has met and extracted its 15% minimum rate of returns sought in the original agreement. As such, the Guyanese consumers have been meeting its obligation to GT&T every single year of the life of the company. He reminded the commission that GT&T had agreed to a plan to expand its facilities and operations significantly, with the original date for completion of the plan being December, 1993. This, he said, was subsequently amended to February, 1995, but by the end of 1999, GT&T had not yet delivered.
Chairman of the Commission, Prem Persaud interjected, saying that if it can be proven that GT&T is extracting its 15%, then its application for rates increases will be completely rejected as that is the basis upon which the application is made.
Craig, in his presentation, lambasted GT&T for what he deemed as inefficiencies in its system. He cited as an example the E1 digitalised subscriber line service. He said that the utility company has always had the capacity to provide this service but has waited until imminent obsolescence before introducing the service to Guyana.
Citing GT&T’s numbers as misleading, Craig said that the company has aggregated all its domestic costs and disproportionately attributed it to the landline service as a disaggregated cost centre, thereby overestimating its share attributable to any possible cost underruns. He concluded this point by saying that the imbalance may not be as large as GT&T claims it to be or may not even exist at all.
Supplementing his earlier charge of GT&T having a feeding frenzy in Guyana, he indicated that the interconnection settlement service charge is $14 but the company charges $12 per minute. He added that even with a deficit settlement charge, GT&T can and will have surplus zones on every call since the settlement rate is a per second charge, while the customer is billed by the minute. As a result the differential will be a surplus, except in cases when a customer ends a call exactly on the minute.
Craig told the Commission that further inefficiencies occur with the long time it takes for GT&T to issue telephone lines to businesses and residences all over Guyana. He added that GT&T has not made any “significant” investment in changing equipment in any “significant way.” Craig said that instead of making investments, GT&T chooses to “jump on the backs” of Guyanese consumers when it has a choice to be innovative.
He posited that the company has capacity that has not yet been tapped into. In citing an example, Craig pointed out that GT&T has not activated landline voicemail service “while lots of people go around buying answering machines… this could have been avoided.”
Craig argued that without raising a single cent in rates GT&T has the capacity to sustain itself.
Persaud told GT&T that in two weeks, the Commission will submit further queries to GT&T. Evelyn declared that the company will respond a week after that and will also reply to Craig’s concerns
Meanwhile, President of the Consumers Association of Guyana, Patrick Dial, who spoke at the hearing, said that it is premature for the hearing to proceed given that GT&T declared its position to the special select committee dealing with the telecoms bill in the National Assembly. He added that the imminent legislation should address the company’s concerns and urged the commission to await the passage and implementation of the bill.
