There are more than 15,000 utility poles on Grand Cayman, all of which serve as potential nodes for fiber-optic cables.
Telecom companies are eager to use those poles to expand their fiber networks, which would improve and expand their broadband internet services. However, doing so requires negotiating with DataLink Ltd., a Caribbean Utilities Company subsidiary created to manage the installation and maintenance of cables attached to CUC-owned poles.
Those negotiations have become contentious in recent years, and a failure to reach timely agreements has delayed necessary updates to Cayman’s internet infrastructure, according to the Utility Regulation and Competition Office (OfReg), which regulates the territory’s utilities.
One of the major bones of contention between the companies stems from DataLink charging the telecom companies that want to expand their fiber networks to reserve unused space on its poles since 2012.
With the companies unable to resolve their differences over that issue, OfReg stepped in to resolve the dispute. Last month, the regulator issued orders prohibiting DataLink from continuing to charge reservation fees, and to refund fees that have been charged in the past.
DataLink is challenging those orders, filing an application with the Grand Court on Wednesday to apply for judicial review. DataLink is seeking a court order to quash OfReg’s orders, and a suspension of those orders while the case is being litigated, according to the firm’s claim form, which is posted on the financial services website OffshoreAlert.
The CUC subsidiary’s claim form does not explain the grounds for its dispute, but OfReg’s orders are on a 77-page document that details a raft of legal and technical disputes between DataLink, the telecom companies, and the regulator.
According to that document, DataLink justifies its reservation fees on the grounds that they encourage companies to use the poles efficiently – rather than holding the space to prevent it from being used by a competitor, for example – and because the fees allow DataLink to recoup opportunity costs incurred by reserving space that could otherwise be leased out for different uses.
C3 disputed those reasons in the document, arguing that they are discriminatory because some companies pay more than others, and that “there is no objective justification for these fees, and they should be removed from the C3 and Logic agreements.”
C3 also disputed DataLink’s contention that reservation fees encourage the efficient use of the utility poles. According to the telecom company, the reservation fees actually delay the attachment of fiber cables because DataLink could collect reservation fees while the empty spaces remained unused.
“Removing the reservation fee would, in [C3’s] view, ‘remove the possibility of DataLink benefiting from their own delay and incompetence of administration,’” OfReg stated.
Flow, for its part, stated that reservation fees can be appropriate in theory.
“The company declined, however, to comment on the appropriateness of the magnitude of the reservation fee,” OfReg’s documents states, adding that Digicel and Logic did not comment on the issue.
OfReg sided with C3, ruling that DataLink’s reservation fees did not enhance the efficiency of the pole usage, and that they were discriminatory in practice.
“C3 and Logic experience higher costs relative to DataLink and Flow in relation to the attachment of their communication cables to CUC’s electricity poles, thereby placing them at a competitive disadvantage vis-à-vis DataLink and Flow,” OfReg states in its July 11 decision, quoting an earlier conclusion by the Communication Technology Authority, which was consolidated with other regulators into OfReg last year. “This further translates into slimmer profit margins for C3 and Logic as a main consequence of certain cost factors being applied to C3 and Logic and not to DataLink and Flow.”
It’s not clear how DataLink’s finances could be impacted if OfReg’s orders stand. CUC stated in its latest quarterly report, which it filed on July 31, that the company is in the process of “quantifying the maximum refund allowed if the determination is upheld.”
DataLink declined to comment on the matter.