FTC claims MTR increased Talk Time, Digicel and FLOW claim Marketing as Herfindahl Hirschman Index says decreased competitiveness

With MNP (Mobile Number Portability) and LNP (Landline Number Portability) looming on the horizon, has the Jamaican consumer benefitted much from the MTR (Mobile Termination Rate) adjustment of JA$5.00 per minute or Cross-Network Calling introduced by the OUR (Office of Utilities Regulation) on Sunday July 15^th  2012 as stated in my blog article entitled “OUR's JA$5.00 Cross Network Flat Rate ratified by Judge Ingrid Mangatal  - GOJ's Telecoms Tax applied and Digicel's victory in FTC Case assured”?

And did those benefits increase when the OUR again applied another MTR and dropped the Cross-Network Calling Rate to JA$1.10 per minute on Monday July 1^st 2013 as stated in my blog article entitled “OUR sets Cross-Network Rates at JA$1.10 as of Monday July 1 2013 - Everything is Possible  as we’re Zombies for Data World War Z”?

It appears to be a mixed bag of benefits despite the statistics put forward by the FTC (Fair Trading Commission) whose study implies that since MTR, Jamaicans are talking more as stated in the article “Mobile termination rates versus value products”, published Friday November 28, 2014 by McPherse Thompson, Assistant Editor, The Jamaica Gleaner.

So what do the stats actually say? They’re quite straightforward really. But the Telecom Providers disagree on their source as well as what cause the apparent increase in talk time!

FTC implies MTR has increase Talk time – 13% increase or 1.281 billion minutes is significant

According to the FTC figures, from the July 2012 up until March 2014, Subscribers talk time has increased as follows:

1.      10.02 billion minutes if the MTR was not reduced

2.      11.3 billion minutes since the MTR was reduced

3.      1.281 billion minutes differences between the figures

This translates to savings that vary based on the adjusted Calling Rates being used by either JA$1.77 per minute for Telecom Provider LIME at the low end or JA$15.75 per minute for Telecom Provider Digicel on the high end. Based on my calculations these savings on International Calls work out as follows:

1.      US$22.7 million at JA$1.77 per minute for Telecom Provider LIME customers

2.      US$201.7 million JA$15.75 per minute for Telecom Provider Digicel customers

So basically from these figures, it can be seen clearly that since the two MTR , the first introduced on Sunday July 15^th 2012 and second introduced on Monday July 1^st 2013 that the amount of minutes of calling on Mobile Telecom Networks in Jamaica has increased by some 12.78%, rounded off to 13% as the FTC has done. However the Telecom Providers are disputing these figures, both in terms of source as well as in terms of the real reason for the apparent increase.

FTC claims 13% increase in Calling post-MTR - Digicel and LIME claim Marketing not MTR

That right statistics fans!

Telecom Provider Digicel claims its more marketing and not MTR even as they dispute the source of their stats to quote their response to the Jamaica Gleaner: “If there has been an increase in talk minutes, quite likely it is as a result of, in the case of Digicel, the injection of more offers into the market such as our Gimme Five and BFFF (Best Friends For Free) offers. This would not translate into increased revenue for Digicel. The MTR reduction has taken value out of the market as it has reduced revenues for operators and therefore taxable income for the Government, traditionally obtained from the Jamaican telecommunications sector”.

Good to note at this point: Digicel and the FTC were involved in a legal case with the FTC since May 2012 with regards to the legality of Digicel Group swapping Digicel Honduras and Digicel El Salvador in exchange for America Movil’s CLARO Jamaica Telecom operations as argued in my blog article entitled “FTC wins right to pursue legal action against the Digicel-America Movil swap - Game of Thrones as Mobile Data Candyshop beckons”.

Telecom Provider Digicel has since then won the case as stated in the article “FTC Has No Jurisdiction Over Digicel, Claro Merger - Appeal Court,” Published Wednesday December 31, 2014 by Barbara Gayle, Justice Coordinator, The Jamaica Gleaner and “Court of Appeal to rule on Digicel/FTC case in October” published Wednesday, May 22, 2013 by Paul Henry, The Jamaica Observer with FTC possibly considering to file an appeal relating to the decision.

Telecom Provider Digicel is claiming that it the increase in minutes is due to their Gimme 5 Promotions as stated in my blog article entitled “Digicel's Sweetest Deal and Digicel Mobile 4G Launched - Challenge to LIME Talk EZ heralds Postpaid, MRSI via MNP and Cashless Society Renaissance”.

They claim it represents a loss of revenue in order to hold on to customer in face of competition from Telecom Provider LIME as described in my Geezam blog article entitled “Digicel launches 4G Mobile and JA$2.89 Sweeter in a bid - Jamaican Voice + Data Summer Wars”.

LIME’s Talk EZ Explanation – Mobile Customer increase but Total Revenue Decline

Telecom Provider LIME has a similar explanation for the rate increase, claiming it was due to their Talk EZ Promotions after the MTR on Sunday July 15^th 2012 as stated in my blog article entitled “LIME's new TALK EZ Plan drops Cross Network Calling to JA$2.99 - Digicel's Game of Thrones vs LIME Return of the King”.

The following MTR that came into effect on Monday July 1st 2013 saw their Talk EZ Promotions adjusting prices as stated in my blog article entitled “LIME drops JA$2.99 Talk EZ to All Networks as Digicel promises something Bigger - Telecom Providers can bring The Heat via lower Priced Smartphones to spur 3G Data and Postpaid Plans”.

Hence Telecom Provider LIME explanation, quote: “The overwhelmingly positive consumer response to our best­value Talk EZ $2.99 rate, also evidenced by the addition of another 150,000 subscribers in 100 days in 2013, have contributed to steady quarterly gains in mobile services revenue. We expect this trend to continue with the more recent introduction of even better mobile voice and Internet value featured in the increasingly popular MVP plan”.

Telecom Provider LIME also benefitted in other ways as well, based on their Financial Report for the Year ending Monday March 31^st 2014:

1.      JA$5.3 billion for out payments and direct costs i.e. Cross-Network Tariff charges

2.      JA$7.15 billion for out payments and direct costs i.e. Cross-Network Tariff charges for the same period in 2013

3.      JA$6.67 billion in Mobile Revenue

4.      JA$5.2 billion in Mobile Revenue for the same period in 2013

This based on their Financial Report for the Year ending Monday March 31^st 2014 back in June 2014 as chronicled in my blog article entitled “CWC Report ending March 2014 indicates LIME Jamaica's improving Bottom Line - Project Marlin heralds Solar Powered Telecom Provider to Reduce Operating Costs”.

If anything, Telecom Provider LIME seems to have benefitted overall. They experienced a 31% growth in Mobile Subscriber Base to 705,000, representing an increase of 165,000 subscribers but saw their revenues decline to JA$18.4 billion in total revenue, down from JA$19 billion in 2013.

Herfindahl Hirschman Index – Closer to 10,000 after CWC Acquisitions. MTR or no MTR

What now remains to be seen is how competitive the MTR has made the Jamaican Telecoms Industry. The standard measure thus is the Herfindahl Hirschman Index, which according to the OUR back in July 2012 had increased after Digicel acquired CLARO Jamaica follows:

1.      7,223 points after Digicel had acquired CLARO Jamaica

2.      5,104 points before Digicel had acquired CLARO Jamaica

10,000 is the upper bound of the Herfindahl Hirschman Index, indicating a market that's least competitive.

Clearly, since CWC (Cable and Wireless Communications) has acquired FLOW for some US$3 billion dollars on Friday November 7^th 2014, basically killing the only remaining competition in Jamaica as stated in the article “Cable & Wireless to acquire Flow parent for US$3b. Digicel knocks deal as bad for competition”, published Friday November 7, 2014, The Jamaica Gleaner and “Cable & Wireless buys Columbus Intl”, published Thursday, November 06, 2014 6:29 AM, the Jamaica Observer.

Now that CWC has also acquired Dekal Wireless Jamaica as announced Tuesday, December 9^th, 2014 as reported in “LIME to take over operations of DEKAL Wireless”, published Tuesday, December 09, 2014, the Jamaica Observer and “CWC company acquires small wifi rival DEKAL”, Published Wednesday December 10, 2014, The Jamaica Gleaner, that index is a lot close to 10,000, MTR or no MTR.

This spells doom for the customer as their choices are basically limited by a duopoly set of players who can control the market any way they wish in the Year of the Sheep!