RA Report Details Mobile, Internet, TV & More

Mr. Speaker, as the Minister responsible for telecommunications under the Regulatory Act 2011, I was pleased to table in this Honourable House the Annual Report of the Regulatory Authority of Bermuda for the period January 2013 to March 2014.

Mr. Speaker, the Regulatory Authority, [or RA,] is required under Section 47[1] of the Regulatory Authority Act to prepare and deliver to the Minister responsible for a regulated industry sector, in this case, Telecommunications—

• A report on the operations of the Authority during the preceding financial year, including a discussion of—

a] The major activities undertaken;

b] Any significant deviations from the work plan adopted by the Authority; and

c] The results achieved; and

• A copy of the annual financial statements of the Authority certified by the auditor, in this case, the Auditor General.

Mr. Speaker, the Annual Report of the Regulatory Authority for the year ended March 31st, 2014 has been prepared in accordance with the Act. This Report is the first Annual Report of the Authority’s activities and covers the first 15 months of its operation. The Report documents the decisions made, the measures taken and the outcomes achieved by the Regulatory Authority during this period.

Mr. Speaker, during its first 15 months, the Authority focused on the following strategic objectives:

• [i] Institutional capacity building;
• [ii] Completion of the transition from the regulatory regime under the Telecommunications Act 1986;
• [iii] Promotion of sustainable competition;
• [iv] Consumer protection;
• [v] Efficient use of scarce resources; and
• [vi] Promoting Bermudian employment and Bermudian ownership.

Mr. Speaker, in addition to the three [3] Commissioners and the Chief Executive, the Authority had a complement of six [6] technical and administrative staff as at March 31st, 2014. The four members of the Civil Service, who were seconded to the RA during its infancy, were hired on a full-time basis in September 2013. These included the Chief Technical Officer, the Customer/Carrier Relations Officer, the Licensing Clerk and the Business Manager. In addition to these four, the RA also filled the positions of Market Analyst and Legal Advisor in September and October 2013 respectively.

Mr Speaker, with respect to the general state of Bermuda’s telecommunications sector, the market data collected by the RA indicated that there were significant changes within the framework of the sector. Within the first year of operation of the RA, Bermuda saw increased competition within the Internet Service Provider [ISP] market, and a significant decline in prices. New entrants in the ISP market also led to a shift in the way the market was shared.

The industry also experienced a shift from Fixed Telephone services to Mobile services, and saw an increased demand for both mobile and fixed broadband. “Over-the-top” alternatives to subscription television or the delivery of audio, video, and other media over the Internet, increased the demand for home Internet at increasingly higher speeds and played a role in the declining subscription rates in Pay TV. The mobile sector also saw an overall increase in subscriptions in 2013; and experienced a slight increase in outgoing calls; but realized a significant decrease in text messages during 2013.

Mr Speaker, I would now like to provide Honourable Members with an overview of the telecommunications market in Bermuda as detailed in the Report:

• Mobile – The distribution of market share for mobile subscriptions remained somewhat evenly divided between CellOne and Digicel. CellOne gained a small portion of overall market share throughout 2013 and into 2014, increasing its subscriber base from 49% at the end of Q1 2013 to 52% in Q4. CellOne’s increase accounts for the loss of market share experienced by Digicel, which decreased by 3% resulting in a 48% market share in Q4 2013.

• Internet – The number of Internet subscribers totaled 20,356, an increase of 572 during 2013, or a 3% growth from Q1 to Q4.

• Broadband – The market share for Broadband Access also remained relatively evenly divided, with BTC holding a slight lead for 2013, with 54% of total broadband access subscribers. Logic remained the lead broadband service provider throughout 2013, although its estimated market share had declined in every quarter.

• Subscription Pay TV – Total Pay TV subscribers have declined in each quarter of 2013. In terms of Market Share by Carrier, both WOW and Cablevision’s Market Share remained unchanged during 2013.

• Average Revenues per User – Aside from mobile service, the Average Revenue per User or ARPU remained relatively equal throughout 2013. Mobile ARPU increased by $64.67 per quarter over 2013, resulting in its highest increase in Q3, with a total increase in ARPU of $107.35. Broadband Access experienced a slight increase from Q1 to Q4, a total of $8.29 per quarter. Although the sector experienced substantial price decreases, which should have led to a decline in ARPU, the trend of customers to move to higher broadband speed subscriptions accounted for the increase in ARPU. Fixed Telephone ARPU remained relatively unchanged, increasing only $0.92 from Q1 to Q4. The ARPU for Pay TV declined by $1.23.

• Spectrum – On April 29, 2013, the RA issued the new Integrated Communications Operating Licences or ICOLs, together with the associated Spectrum Licences that were issued on an interim basis and scheduled to expire on October 29, 2014. These interim licenses were designed to be replaced with full-term licenses once the Authority had completed its spectrum allocation exercise. As part of its remit to manage spectrum in an efficient manner and keep Bermuda in line with the International Telecommunication Union [ITU] recommendation that the 700 MHz band be utilized for mobile services by 2015, the RA initiated a consultation on January 31, 2014 called “World on Wireless 700 MHz Spectrum Proposal”. This consultation was designed to solicit feedback on reclaiming the 700MHz spectrum that had been assigned to World on Wireless and reallocate it to the mobile service providers.

• Consumer protection – The RA embarked on a Consumer Protection, Education and Awareness strategy as part of its 2014 work plan.

Mr Speaker, the approved operating and capital budgets for the period, January 28, 2013 to March 31, 2014, were $3.9 million and $353,100 respectively. During this period, the actual operating and capital expenditures for the period were less than the budgeted allocations by $811,423 [21%] and $264,219 [75%] respectively. In addition, the actual revenues of $3.7 million exceeded projected revenues by $155,558 [4%].

As the Authority was in a start-up phase at the time the budget was being prepared, it was difficult to accurately predict the expected expenditure and revenue in the Authority’s first period of operations.

Finally Mr Speaker, in any year in which the Authority realizes a net surplus, the Authority, after recouping any net losses and contributing to the reserve fund pursuant to the Act, shall transfer the remaining surplus to the Consolidated Fund. Accordingly, the distribution to the Consolidated Fund for the January 2013 – March 2014 period was $303,988.

Thank you, Mr. Speaker.

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