Bypass costing C&W millions

McPherse Thompson, Staff Reporter

A persistent multi-million dollar loss of revenue from bypass of Cable & Wireless Jamaica's international telephone facilities, could have a huge bearing on its application for a rate increase soon.

Director General of the Office of Utilities Regulation (OUR), Winston Hay, has confirmed that over a six-month period in 1999, Cable & Wireless lost about $400 million in revenue because of bypass, and that was the most significant factor used to determine the level of increase granted then.

While he could not quantify the losses the telecommunications giant had incurred over the year to May 2000, Mr. Hay said the company has continued to lose revenue because of bypass.

A usually reliable source said, however, that Cable & Wireless, which has been monitoring a number of telephone numbers at business places believed to be involved in the bypass activities, has lost about $150 million from May 1999 to May 2000.

In mid-1999, the company was granted a net tariff increase of $520 million, the Government having rejected an application for a $1.8 billion increase to cover the year to May 2000.

Mr. Hay said that while Cable & Wireless had not, up to last week, made another application for an increase, he expected the company to do so some time towards the end of this week. Cable & Wireless is expected to ask for an adjustment in its tariff structure to shift the burden away from overseas calls towards domestic rates. The OUR has 30 days from the date of application to decide whether or not to approve an increase.

In a telephone interview with the Financial Gleaner, Mr. Hay suggested that if the company was not losing revenue from bypass of its facilities, it might not have been necessary to have granted an increase in telephone rates last year.

The net effect of the increase was that consumers were made to and could again be forced to subsidise the illegal operations.

Chief executive officer of Cable & Wireless Jamaica, Errald Miller, in the company's audited financial results for the year ended March 31, 2000, said a modest eight per cent growth in the gross operating revenue during the year "reflected the impact on incoming international call revenues by bypass of the company's international facilities by unauthorised operators."

Asked what impact the bypass operations would have on an application for a rate increase at this time, Mr. Hay said that would depend on evidence presented by the company of the effect of the bypass operations on their revenue.

According to Mr. Hay, some companies involved in bypass operations were shut down during last year, but since then some have re-started the illegal activity. And even with new legislation, the OUR appeared powerless to order the disconnection of lines being used by some V-SAT (Very Small Aperture Terminal) owners and others who might be engaged in the practice.

Under new legislation passed by Parliament earlier this year, the OUR has been given the authority to allow Cable & Wireless to disconnect telephone lines believed to be used to carry out bypass, and "we did that in the case of InfoChannel about two months ago," said Mr. Hay.

Mr. Hay said that under the old Telecommunications Act, the OUR had no authority to give instructions to Cable & Wireless to disconnect telephone lines.

However, he said that even with the new legislation, the OUR was powerless to act if licensed V-SAT owners were using the spectrum illegally because "we do not regulate the spectrum, we regulate traffic over land lines."

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