But C&W has for years been able to use the income generated from its international call services to subsidise the deficit on its local land-line revenue stream - a dynamic which has been changing radically over the last two years with the reduction in its earnings from overseas telecoms firms that send calls to Jamaica.

As a result, since November 2002, C&W has been allowed by the OUR to increase its land-line fees by, 100 per cent, but remains adamant that the local land -line charges still remain more than 50 per cent below cost.

Two weeks ago, the OUR took a decision to change the fee structure - in effect allowing C&W to charge its customers the economic cost of its land-line service - thus obviating the need for the company to cross-subsidise this service from its overseas call revenues.

"We took the decision two weeks ago to remove the constraint on the local prices," explained Morgan at Tuesday's press conference at the OUR's headquarters in Kingston.

Morgan said that in any event, the revenue earned from overseas telecoms firms by Jamaica's telephone companies for terminating overseas calls here, had slipped precipitously, that it had all but eroded C&W's capacity to continue its practice of cross-subsidy.

It was against the background of changes in the fee structure by the OUR that C&W applied for the rate increase.
However, on Tuesday the OUR had cautioned that the rate increase would be granted only to the extent that it would allow C&W to restore the income lost - rather than to generate net additional revenue.

The OUR also announced that beginning January 24, it had established a flooring on the rates that local telephone firms could charge international carriers to deliver calls into
Jamaica of 8.1 US cents per minute (approximately J$4.90).

At the same time, Cable and Wireless would be allowed to charge other Jamaican carriers no more than five US cents per minute, when these firms intermediated in calls from US carriers and then terminated them into C&W's land-lines.

It means that these firms will be able to charge US carriers 8.1 cents to accept their calls into Jamaica, and then pay C&W no more than five US cents to deliver the calls to its land-based customers allowing them to make a spread on the transaction.

"We approved the C&WJ rate for termination of international calls on their fixed network at five US cents, in order for the market to work and to be sustained in its infancy," explained Morgan. "It is the only way to ensure that the market stability is protected until it is mature enough to allow the competitive force to work."

http://www.jamaicaobserver.com/magazines/Business/html/20040129T210000-0500_55058_OBS_MAJOR_HIKES_IN_C_W_LAND_LINE_LOCAL_RATES.asp