This came from Jim Graham of Fidelity Group, which handled the offering.
Systems Resource Group (SRG) won a license in February of last year to provide “fixed radiocommunications services” and had been seeking to raise $12 million from private investors to build a “next-generation wireless” network on New Providence, Grand Bahama and Abaco to deliver Internet and voice services to business and residential customers beginning in January.
According to the Public Utilities Commission (PUC) SRG’s license includes “portable data services but not cellular voice telephony, paging, public mobile radio services or the construction of submarine fibre optic cable.”
The license was issued because the privatisation process was expected to be well underway by now, with the Bahamas Telecommunications Company (BTC) monopoly on fixed and cellular service expiring by the end of this year. But the sale of 49 per cent of the state-owned telephone utility has been delayed several times.
Although a preferred bidder was selected this month, it will be many more weeks before Tom Bain’s BahamaTel consortium hammers out a deal with the government to turn over the keys to BTC and usher in a new era in Bahamian telecommunications. And there is no guarantee that such a deal will be made.
Meanwhile, the PUC said recently that it would not require BTC to lease circuits to any rival operator for fixed-line telephony “for the duration of its fixed-line exclusivity period”.
The only rival at present is SRG’s subsidiary, DigiTel. And there have been concerns about the impact that DigiTel would have on BTC’s sale price and future profitability, leading some to charge that the government was “changing the rules” on SRG’s license in order to protect BTC.
But the commission says BTC’s existing license “does not require it to provide leased circuits to other operators for voice telephony during its fixed-line exclusivity period. The PUC says it declined to change this in order to make an exception for SRG.
“If BTC is required to lease capacity for voice services then (SRG) would be able to by-pass BTC’s gateway and avoid the payment of an acceptable level of contribution to BTC based on traffic handled,” the PUC said in a recent statement. “This would erode BTC’s international revenue to an unacceptable extent.”
Mr Graham told the Guardian Friday that “the PUC decision meant BTC could charge anything to SRG to carry their traffic, making it totally uneconomical…and Cable Bahamas is not allowed to carry SRG traffic, so this made it impossible to do as planned. The model would have been totally out of whack.”
As a result SRG was “rethinking the situation. They had significant commitments and were confident they could make it work,” he said. “But all monies were returned to investors last Monday.’
The government’s telecommunications sector policy (which was drafted in 2001 and revised last October) aims to introduce private ownership and management in telecommunications in The Bahamas; allow new operators and encourage competition.
SRG’s license to provide fixed voice telephony from January, 2004 was one of several measures to deregulate the sector. In April, 2001 Caribbean Crossings (a Cable Bahamas subsidiary) was authorised to build and operate a new fibre-optic cable link between The Bahamas and Florida.
And in October, 2000 Cable Bahamas was authorised to lease circuits and provide public Internet services in New Providence in direct competition with BTC. This licence was later extended to the whole of The Bahamas.
However, the sector policy states that “Since BTC’s Exclusive Rights will include voice telephony, irrespective of the network used, it will not be permissible for any company other than BTC to provide voice services over the Internet or voice over Internet Protocol Networks for the duration of the Exclusivity Period.”
At a press conference in June, SRG chief Paul Hutton said DigiTel would offer “the first and only competitive voice services in the country. We will offer a full range of fixed telephony and mobile data services, giving consumers a choice in both telephone and broadband provider companies for the first time ever.”
He said subscribers would be able to connect to DigiTel’s network for telephony and broadband services via a portable radio device at home. This would allow direct connection of computers or standard telephones.
“There is a gray market out there of people who will use new services that DigiTel is able to offer, like mobility. We are actually adding to the size of the market. What we might do is take back some of that gray market that is using call back or voice-over internet type services,” Mr Hutton said.
SRG has invested some $2 million in pursuing DigiTel’s business model.
SRG’s directors include Bahamian Dr David Allen, a clinical psychiatrist at Georgetown Medical School in the US, Canadian investor Frank Crothers who has lived in the Bahamas since 1957, accountant Greg Cleare and financial expert Barry Malcolm. The company was formed in 1990 to provide Internet and computer services.
It owns Bahamas On-line and also acquired the Tribune’s dial-up Internet service in 2000. SRG has subsidiaries on Grand Bahama and in the Turks & Caicos Islands.
By Larry Smith, The Nassau Guardian
