OfReg lacks legal resources to effectively regulate telecoms

Utility regulator OfReg lacks the legal expertise to address the controversies and challenges around infrastructure sharing in the telecommunications industry, the Public Accounts Committee heard last week.

Randy Merren, C3

Randy Merren, managing director of C3, testified his company has filed seven disputes in the telecom space. Merren said C3 is blocked from building out its own fibre network, because Flow and CUC-owned Data Link make various claims, effectively preventing C3 from accessing existing duct or pole infrastructure for a fee.

OfReg is “regulating multi-billion companies who are not going to easily give up their market share”, he said. “So, they’re going to try to block us any way they can.”

In one case, Flow argued C3 use an inner duct to run its cables through Flow’s duct system but claimed the one C3 was using was the wrong size. Data Link said its electricity poles would have to be reinforced, or new poles added at a higher cost, if more cables were added.

Merren said OfReg should have access to a fleet of regulatory attorneys who can investigate and resolve the disputes his company has filed within months, not years.

While C3 lost one of the disputes in court, Merren said it was lost on a technicality. In another case about access to the landing station of the Maya-1 undersea network cable, the regulator had written a letter to Flow but that letter had been ignored, the C3 managing director said. “They have no respect for the regulator,” he added, suggesting OfReg should issue fines.

Alee Fa’amoe, OfReg

Alee Fa’amoe, executive director ICT at OfReg, testified before the committee.  “We constantly have licensees who are in different stages of non-compliance and all of those are being addressed.” Fines or penalties are not always immediately warranted, he said, and the regulator is following an enforcement pyramid that begins by sending a letter of warning, before it proceeds to penalties or the suspension of a licence.

How long the process takes once a letter of warning has been issued depends on the nature and the complexity of the issue. However, “that particular issue (access to infrastructure) has been investigated and we are struggling with our legal team to figure out how to take it forward”, Fa’amoe conceded.

Although the regulatory fees paid by licensees cover the administrative costs, including legal fees, of the regulator, OfReg’s board had discontinued a legal retainer of specialised regulatory lawyers.

“We had specialised legal contractors and we were told to get rid of them,” Fa’amoe said.

While his team of seven in the ICT division of OfReg is made up of technical specialists, it does not include lawyers. Once an investigation is concluded, a regulatory legal team is needed to help frame the determinations onto the relevant statutes under relevant regulations.

Because OfReg as a regulator is a quasi-judicial entity, its decisions are effectively court orders or the equivalent of court judgments, he explained.

The lack of legal expertise has also halted the review of the ICT licence framework and meant that OfReg has so far not carried out a market power review, examining if any market participants are abusing their dominant market position to the detriment of the consumer.

Fa’amoe said a new proposal to get the necessary legal support was set to be put before the board on 30 July.

Asked if there would be progress on the matter within the next two months, the OfReg executive director said, “I would hope so. We have a number of investigations that have been done and determinations need to be written and it’s not happening.”

The issue of infrastructure sharing is a known impediment to competition worldwide with market incumbents blocking competitor access, leveraging their dominance or acting anti-competitively. In Cayman, the Information and Communications Technology Authority therefore introduced infrastructure-sharing regulations as early as 2003.

Fa’amoe explained the basic tenet of infrastructure sharing, whether it is a pole, manhole, duct, building or tower, is that you have to share it.

“It may sound unfair that you have to share your building, that you’ve invested in, but it has been proven that infrastructure sharing is one of the key elements of lowering the barrier to competition and enabling the consumer at the end of the day to benefit from that competitive market,” he said.

In response to the committee questioning what OfReg needs to do to counter the slow development of telecom and internet infrastructure in the eastern districts and on Cayman Brac, the regulator admitted that “we need to do a better job of clearing the roadblocks out of the way because [smaller telecom companies] want to build their networks out but they’re being hampered”.

Fa’amoe added, “I need very specific skill sets to deliver the quality regulation that I think the people of the country need and deserve and frankly that the industry deserves.”

EDITOR’S NOTE: James Bergstrom, the owner of the Cayman Compass, is a shareholder in C3.

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