The Guernsey Competition and Regulatory Authority is reducing Sure’s wholesale on island leased line prices to almost three quarters of their current levels and has concluded that current wholesale prices charged by Sure are almost a third too high.
Leased lines are key building blocks for businesses relying on telecommunications connectivity. Retailers who provide these products to businesses are dependent on Sure to serve these customers while at the same time competing with Sure for the same customers.
The States of Guernsey 2021 Policy Letter – ‘Delivering Next Generation Digital Infrastructure’ states: “Critical outcomes for the delivery of next generation digital infrastructure are …:
- Telecoms infrastructure delivered at the best possible cost for consumers and business users through the promotion of retail competition and transparent and effective regulation.”
Assisted by a specialist organisation in developing cost models for the telecommunication industry, the Guernsey Competition and Regulatory Authority (GCRA) has investigated Sure’s costs and profits and is requiring Sure to reduce its wholesale leased line charges by 23%.
The decision ensures that Sure’s charges are based on the reasonable costs of providing leased lines to retailers including the ability to earn a reasonable return on its investments.
The average annual price of Sure’s wholesale on-island leased lines would reduce to around £6,300/year compared to £7,800 currently. The price range for these services is large but if these price reductions were passed onto retail customers, their average bill per leased line would go down around £1,500 in the first calendar year of the control.
Michael Byrne, GCRA CEO said: “There are many businesses in Guernsey who have a great deal of influence on the cost of living and cost of doing business here. They enjoy monopoly privileges and so it is right that they should be challenged to justify what they charge. As the independent regulator of the telecoms sector the GCRA has the powers to challenge the charges in that sector. It is concerning that in two areas, business connectivity and broadband, when the GCRA carries out a detailed assessment it finds charges set well above the reasonable costs and profits that would be expected for providing them.”
A spokesperson for Airtel-Vodafone responded to the GCRA’s findings: “Airtel-Vodafone agrees with GCRA that the leased lines are key building blocks for businesses relying on telecommunications connectivity, as Airtel-Vodafone buys various leased lines from Sure to serve its customers to compete with Sure for the same customers, however, GCRA’s final decision on pricing of Wholesale On-Island Leased Line will result in negligible benefit for Airtel-Vodafone and its customers.
“GCRA’s price review of Wholesale On-Island Leased Line did not create a ‘level playing field’ for all the possible backhaul options in Guernsey as it exists in other jurisdictions, e.g., UK, as GCRA was required to reduce pricing of on-island leased lines closer to the level of Microwave backhaul costs.
“The outcome of this GCRA’s price review exercise does very little to ease the cost of business connectivity in Guernsey. The GCRA’s final decision is a huge disabler to effectiveness and efficiency of competition in the island and is a massive setback to invest in newer technology such as 5G which is contingent on reasonably priced on-island leased line connectivity solutions.”
The GCRA has also issued a decision today (18th December 2023) instructing Sure to lower its charges to retailers by 31% from 1st April 2024.
The GCRA was supported in the review by a leading specialist firm in this area. If the price reductions are passed on to retail customers they will benefit from an annual saving of £116 on average by the first year of the price control.
The GCRA has pursued a States of Guernsey priority in the telecom sector that wholesale products and prices should be similar to those in comparable sized jurisdictions in which Sure operates, to ensure Guernsey remains competitive.
Michael Byrne, continued: “Sure’s charges to retailers of broadband for using its network are a large proportion of the final price we end up paying for our broadband at home. While a business should get a fair return for its investment, there is always a risk that monopolies with a free hand to set their prices put needless pressure on the cost of living for households by charging excessive prices. In the Guernsey telecoms sector an independent regulator is in place to safeguard against that. Even allowing for a generous profit margin our review clearly demonstrated the levels of profits Sure was seeking to make from charging its competitors for retailing broadband was far too high”.
The GCRA’s extensive review accounted for Sure’s costs and revenues in the coming years as it rolls out the fibre network. This was done to ensure that the reduction in charges still enables Sure to recover its efficient costs and does not undermine Sure’s ability to finance its fibre network roll-out.
A spokesperson for Airtel-Vodafone responded to the GCRA’s findings: “Whilst Airtel-Vodafone expresses its support for any reduction in wholesale broadband pricing, however, it still awaits an explanation from GCRA on how the proposed broadband’s weighted average price will have an impact on specific broadband prices for different bandwidths respectively. Further, Airtel-Vodafone noted that the implementation of the new proposed pricing is slated for 1st April 2024, rather than the earlier suggested date of 1st January 2024.
“Despite the technological advancement in fibre broadband which eliminates the need for traditional copper telephone infrastructure (landline / WLR services), Airtel-Vodafone is disappointed to note that customers are still required to opt for WLR / landline services at a similar price before this price review, despite very low demand for WLR / landline services in Guernsey.”
