Unique C&W rate structure to recover deficit

Cable & Wireless  vice-president of sales and marketing for the Northern Caribbean, Paul Taylor, came up with a hybrid pricing structure unique to Barbados. He told the Fair Trading Commission (FTC) hearing yesterday that alternatives were considered before coming up with the one proposed to the FTC. The final proposal allows consumers to choose between a package of 2,000 minutes,  4,000 minutes and  an unlimited plan. Taylor said that among the options considered, but not chosen, were having  a day and evening rate, along with a per-call charge, but he said the alternatives did not fit into the guiding principles so the hybrid one  was chosen.

One of these guidelines was minimising impact on residential subscribers. Taylor said that was aimed at making sure rates were affordable to the majority of the consumers and to avoid rate shock. Rate shock occurs where prices are changed to such an extent that they are too expensive  for consumers, who  are then forced  to change their usage or discontinue service. Taylor said the proposed structure would not put consumers in such a position, adding that after the last rate change in 1994, which was  not so dissimilar, the market did not experience such behaviour.

The suggested rate adjustment, Taylor said, also was a mechanism under which consumers would be charged for the level of usage. The witness further told the commission that the new rates would allow for the recovery of the  $24.7 million deficit on the domestic side. “To offset the increases necessary in the domestic service to recover that deficit, C&W is proposing to reduce international prices by an equivalent amount,” Taylor said. “But it is actually more than the $24.7 million [to] take into account the  elasticities of the domestic services,” he said. “We will basically break even,” he added.