NASSAU, BAHAMAS — The country’s utilities regulator has come under scrutiny from its licensees over what they describe as “significant” increases forecasted in its 2023 budget, with one major communications provider stating that the days of telcos being a “cash cow” are over.
Both Cable Bahamas Limited Group and BTC in their responses to the Utilities Regulation and Competition Authority’s (URCA) 2023 Draft Annual Plan expressed concern over the regulator’s increased budget as well as continued high staff turnover and its impact on the regulator’s overall efficiency.
The CBL Group in its response noted, “The employee turnover at URCA has been a cause of concern for sometime and we trust that URCA carries out exit interviews to better understand the reasons. Perhaps it is time for URCA to take an in-depth examination of the organization as a whole in order to identify the systemic reasons for such high turnover, particularly in certain areas which, by URCA’s admission has impacted its ability to start and complete projects particularly in the past two years, causing a carry over of more than 50 percent of the 2022 projects which will surely impact the competition of the 2023 projects.”
The CBL Group noted that as a licensee it also faces similar challenges particularly with unexpected employee turnover but nevertheless is required to meet its licensee obligations.
“URCA should deliberately seek to avoid circumstances in which a significant amount of the Plan projects are abandoned or not completed as and when intended as this has implications, sometimes serious, for delayed progress of the sector. The 2022 carry over of six projects is not a good reflection,” the CBL Group noted.
Further, the group said it was “astounded” with the presentation of this year’s draft budgets’ figures/amounts.
“URCA’S significant increase in the budget amounts for 2023 in the absence of detailed explanations or justification is a cause for great concern to licensees. The days of telcos being a “cash cow” are decidedly over and the mantra of the industry today is fiscal restraint and the reduction of administrative and operating costs.
“There is increasing financial pressure to maintain existing networks, invest in expensive upgrades and provide new and more costly networks and services. Given the archipelagic nature of our country and the relatively small population, telecommunications is an expensive venture and with robust competition profits necessary for reinvestment are on the decline.
The group added: “Given that this is a draft budget and the fact that there can be no reasonable justification for a 23 percent overall increase in the combined Operating Budget, URCA is urged and encouraged to redraft the 2023 Combined Budget with the object of reducing the $7,958,657 total operation expenditure to be recovered from Licensees which is $1.26 million over the prior year 2022 of $6,698,000 and bring it more in line with 2022’s budget with, at the very most, a minimal five percent to 10 percent increase year over year.
“Indeed, the excessive Budget increases being imposed on Licensees, combined with increasing attempts by URCA to impose fines which are disproportion to the alleged matter for which the fine is being applied, amounts to an assault on the finances of Licensed Operators in the sector.”
The group warned that URCA cannot continue year after year with budget increases without consideration for the financial pressures imposed on licensees by other forms of taxation.
Similarly, BTC also noted the significant increases forecasted in 2023 in all categories over 2022 and most of 2021. “While URCA provided some explanations for the year-over-year variances in the expenses outlined in the budget, the explanations were not comprehensive,” BTC noted.
“Additionally, from an overall perspective, URCA provides no indication on how cost is apportioned amongst the sectors as well as amongst shared resources. BTC is interested in understanding the allocation methodology that URCA employs and it should be included in the draft annual plan. On the budget presented firstly, URCA notes the staff count increased by one in 2022 and suggested unexpected team member turnover resulted in the shortfall of scheduled projects for 2022.
“Nonetheless, URCA’s non-executive compensation in 2022 equated to $184,000 and is estimated to climb to $408,000 in 2023. URCA reasons this exponential increase is led by the potential onboarding of six additional staff members. BTC finds this growth in staff compensation to be extreme and unexplainable.”
The company also noted that the regulator is projecting a significant increase in conferences, training and travel when compared to the pre-pandemic years of 2018 and 2019. “Most organizations across the world have adopted the “new normal” and are relying on a healthy mix of in-person and virtual training,” BTC noted.
URCA noted that it will ensure sufficient finances to meet its regulatory mandate and deliver the best possible service to its stakeholders. The regulator noted that in 2022, URCA’s staff count increased by one person to thirty-six at the end of the year, notwithstanding budgeting for a headcount of 42; onboarding of new hires budgeted for in 2022 either concluded later in the year than anticipated or did not occur as planned.
“Additionally, the increased staff compensation budgeted for 2022 resulting from the Compensation Study has been deferred to 2023. In 2023, URCA again seeks to expand its staff complement, growing from 36 to 42 staff. As a result, URCA’s Staff Costs are projected to increase modestly by three percent, reflecting continued efforts to staff the organisation, ensuring that the sectors are appropriately regulated,” the regulator said.
It further stated that budgeted spending on Professional Services in 2023 will increase by 51 percent year over year due to new regulatory projects (specifically in the Electricity Sector) and continuation to completion of 2022 projects. Regulatory projects, including various surveys, reviews, market assessments, and litigation expected before the Utilities Appeal Tribunal (UAT) and Court for adjudication, are expected to either commence or continue in 2023.
“Spending on Conferences, Training and Travel will increase significantly by 566 percent due to the reallocation of the majority of the 2022 budget to fund the regulatory campaigns; in 2023, there is the anticipated resumption of in-person travel for regulatory meetings, staff, renewed regulatory monitoring, staff training and up-skilling, and the hosting of two (2) regulatory fora. It also noted that Consumer Education and Public Relations will increase by 11 percent due to ongoing or resumption of paused activities due to regulatory campaigns and increased consumer education initiatives,” URCA said.
