As it awaits crucial hearings on an application for rate increases, the phone company yesterday upped the ante by declaring it was at crossroads as its viability was threatened by big changes in international settlement rates and "regulatory inertia".
At a luncheon yesterday at Le Meridien Pegasus Hotel to brief media operatives on the consequences for the utility if it doesn't win higher rates, General Manager and Chief Executive Officer of GT&T, Sonita Jagan painted a gloomy picture.
According to Jagan, GT&T's campaign for rate rebalancing which began several years ago has heightened since the January 1, enforcement of a US Federal Communications Commission (FCC) ruling on reduced settlement rates. The so-called "Benchmark Order" has seen GT&T receiving US$0.23 cents per minute for calls from the US as opposed to the previous figure of US$0.85 cents per minute.
As a consequence the CEO stated there is a need for domestic rates to be increased to offset the reduction in international collection rates to ensure the phone company's continued viability and to facilitate its continued expansion programme. In its recent rate filing GT&T is seeking an average 1900% increase in the rates for calls within exchanges and an average 75% hike in rates for calls between exchanges. Changes in rates for other services are also being sought.
The Public Utilities Commission (PUC) is contending that GT&T over the last few years had not applied for rate rebalancing but increased tariffs. The issue of rate rebalancing will however grab centre stage at PUC hearings set for Monday at the Tower Hotel.
Glide path
Sister Caribbean states, Jagan continued, were able to adjust their rates for local and international calls over the period that GT&T was attempting to get the PUC to adopt a gradual approach to hikes in local rates after the FCC first issued its Benchmark Order in August 1997.
At that time it was proposed that a glide path approach be adopted that would have allowed rates to be rebalanced gradually prior to the initiation of the January 1, 2002, US$0.23 per minute settlement rate with US carriers.
Pointing to a 12-page case prepared by the phone company on rate rebalancing and providing background to its plight, Jagan adverted to telephone rental charges in other Caribbean counterparts. Jagan argued that Guyana presently enjoys one of the lowest rates at US$1.32 for residential service and US$5.26 for business service per month.
In that graph Grenada was quoted as having the highest monthly telephone rental charges for both residential - at US$14.07 - and business - at US$40.74 - services respectively. Neighbouring Trinidad and Tobago's business rentals were the second highest at US$27.78 with Antigua's at US$22.00. Even Cuba, which is said to have substantial state subsidies, has higher monthly telephone rental charges.
According to the CEO, GT&T is only requesting a hike to US$15.79 for business rentals and US$7.89 for residential rentals to ensure its continued viability and profitability.
Collection rate
Seeking to justify the proposed increases, Jagan stated that GT&T like all other carriers in the business is obliged to spend the same amount of hard currency to obtain equipment to ensure the continued efficiency of its service.
Jagan also dispelled the notion that lower settlement rates payable by American carriers would mean cheaper calls stating that these prices are dictated by the collection rate charged to customers in the US. Presently these were quoted as of yesterday at US$0.93 per minute although the American carriers would only have to pay GT&T US$0.23 cents per minute.
The CEO also highlighted the losses being incurred by the telephone company and government - a 20% shareholder in GT&T - via Internet cafes which offer overseas calls via the Internet. These services are an infringement of the company licence, she charged. The document circulated by GT&T was particularly scathing in its comments on wireless internet service provider I-Net. It noted that despite a warning to I-Net by Prime Minister Sam Hinds that its service was unauthorized nothing had been done about it. "Not only has government not moved against I-Net but, there are government ministries listed among I-Net's subscribers!", GT&T noted.
The phone company further charged that government and the regulatory agencies are permitting illegal voice over internet operations that violate the GT&T licence. "By our last count there are at least 50 `Internet Cafes' that offer international voice telephony for sale to the public. All have escaped the scrutiny of the regulatory authorities", the phone company lamented. Three types of losses were being registered as a result, GT&T said. These were no compensation for network use, network congestion that limits the completion of revenue bearing calls and lost international revenue from calls that bypass the national network via satellite.
While stressing that the company's future lay in the hands of the PUC, Jagan said that the company is only requesting a fair hearing.
Plugging its achievements, GT*T pointed out that there were 13,000 working lines in 1991 compared to 80,000 today and 1,126 international circuits compared to 99. And from no working public call boxes in 1991, GT&T has 550. A clutch of other achievements was highlighted including deployment of fibre optic systems and the installation of a submarine fibre optic cable across the Demerara River.
Four-fold
Responding to a question about the company's ability to stimulate an increase in calls to the country from the US, Director of Ratemaking, Gene Evelyn stated that that was dependent on the rate that US carriers charge customers in the US.
However, he stated that the increase in inbound traffic needed to be four-fold to make up for the reduction in settlement rates. The company would also have to spend more to handle the increased volume.
GT&T's Consultant, Godfrey Statia also pointed out that provision has been made by the company for an increase of about 40% in incoming traffic in its December 31, 2001 proposal to the PUC for rate rebalancing.
Slide
The company also adduced more data in its document entitled Telecommunications in Guyana: Portrait of an Industry in Trouble to illustrate its plight due to the slide in the value of the dollar.
In 1989 when the currency was G$10 to US$1 GT&T received calls at peak hours at G$0.35 per call equivalent to US$0.035 per call. Due to the steady depreciation of the local currency in 1998 some ten-years later it is receiving G$0.20 per minute which is equivalent to US$0.001 per minute.
Similarly, collection charges illustrated showed depreciation due to the sliding dollar.
The company, the CEO pointed out, as part of its contract with government at the time of the privatization of the state controlled entity agreed on a guaranteed 15% rate of return on its investment capital along with a freeze on rate increases for the first three years save for the devaluation of the dollar.
It was also agreed at that time that controversial advisory fees - 6% of gross revenues - would be paid to its parent company Atlantic Tele-Network (ATN). GT&T argued that all of GT&T's lobbying and marketing on the international front are undertaken by ATN and that GT&T considered the fee a legitimate expenditure. The PUC recently disallowed it as a legitimate expense in the computation of GT&T's rate of return. The document circulated by the phone company yesterday also argued that ATN/GT&T are flexible on the question of the licence and the advisory fee.
GT&T also argued that much time was wasted before the PUC in skirmishing with consumer groups and over other issues. It took four years before a decision was arrived at by the PUC on GT&T's rate hike request in 1997. The PUC for its part had denied being responsible for this delay and had adverted to legal actions filed by GT&T and consumer groups for the delay in the ruling.