Calls in exchanges to cost 200% more
Phone company gets 17% of extra revenue sought
US, UK calls now cheaper
Internet users will not have to pay more By Gitanjali Singh
Stabroek News
February 20, 2002

The Public Utilities Commission (PUC) yesterday granted the phone company an interim increase of 200% on calls within exchanges and ten per cent to 13 per cent on calls from Georgetown to other exchanges. Calls to the USA have been reduced by 40 per cent and to the UK by 27 per cent.

A host of other revenue raising measures were ignored by the PUC including one to charge internet users for the number of minutes registered online at the intra exchange rate. In total, the PUC's decision will result in $491M in extra revenue for the phone company compared to its original request of $5.5.B and the revised figure of $2.9B

Guyana Telephone and Telegraph Company Ltd's (GT&T) Deputy General Manager, Terry Holder, said yesterday said that Chief Executive Officer Sonita Jagan; rate specialist Gene Evelyn and consultant Godfrey Statia were still studying the increases and it would be premature to pronounce on them.

Chairman of the PUC, Prem Persaud said yesterday that the final increases would be decided upon by June and an independent audit of the GT&T accounts would have to guide that ruling.

The commission's decision, arrived at on Monday evening was communicated to the phone company yesterday and simultaneously released to the public.

The interim order is a response to GT&T's request for rate hikes by as much as 1,900 per cent for calls within exchanges and by 75 per cent for calls between exchanges to meet a $4.4 billion anticipated revenue shortfall to guarantee the company its rate of return of 15 per cent. Reduced settlement rates for calls from the US, which came into effect from the beginning of this year, are expected to contribute significantly to this revenue shortfall. However, increased demand for inbound calls is expected to realise $1.1 billion in revenues, reducing the original deficit of $5.5 billion.

GT&T had offered to exclude certain items from a temporary rate calculation -- including advisory fees, working capital allowance and revaluation of assets over the past few years. This slashed the revenue requirement of GT&T from $4.4 billion to $2.9 billion, the PUC order said. However, the PUC determined that the company only needed 17 per cent of this amount.

"A preliminary study of the data submitted to date has led the commission to conclude that a total of approximately $491 million in net revenues is additionally required from domestic service to ensure not less than 15 per cent on capital dedicated to public use," the PUC order said.

Further, the order said, the recommended increases included all labour and capital costs in the test year budget and should there be any reductions in budgeted labour and capital costs, this would require corresponding downward adjustments in the temporary rates granted.

The interim order, in effect, takes domestic rates within exchanges to 60 cents per minute from the current 20 cents per minute and carries the off-peak rate from ten 10 cents per minute to 30 cents per minute. The new rates are effective from February 1, 2002.

Rates between Georgetown and other exchanges, which were $2.64 per minute are now $3 per minute during the day (6.00 am to 6.00 pm) and move from $1.66 per night to $2 per night. Calls to exchanges which cost $3.96 in the day would now cost four cents more and at night 36 cents more. That is, the night calls would cost $3 per minute. Calls from the city to exchanges, which cost $6.60 per minute will now cost $7 per minute and the night calls will move from $4.40 per minute to $5 per minute. These are the rates for calls without an operator's assistance.

The peak rate to the USA which was $167.07 per minute and which GT&T asked to be reduced to $136 during peak hours and $123 per minute during a single off-peak hour has been reduced further to $100 per minute and $90 per minute at off-peak. The phone company's similar demand for rates to the UK which currently stand at $187.58 and the $131.31 at the first off-peak was granted. That is, the peak rate to the UK is now $136 per minute and a single off-peak rate is $123 per minute.

The PUC has granted the company's request that there be two periods for calls -- peak and off-peak. It has set the peak period from 6.00 am to 6.00 pm Mondays to Fridays and off-peak from 6.00 pm to 6.00 am and all weekend long.

It has agreed to GT&T's request that the current peak rates remain for all countries except the USA and the UK and that the single off-peak rate will be the first off-peak rate currently charged.

In the case of residential line rentals, the PUC doubled this from $250 per month, falling short of the company's demand by $1000. The rental of $500 is for the first and second residential lines. For the third and subsequent line, the cost moves to $750 per month.

In the case of business lines, for the first four lines the PUC approved rental of $1,500 per month up from $1,000 -- 50% of what the company asked for. All other services for which GT&T sought increases were denied.

GT&T would be required to publish the new tariffs. Additionally, the PUC said that if the US Federal Communications Commission should favourably review GT&T's application to waive the imposition of 23 US cents as the international settlement rate over the next five years, then it would need to revisit its order.

The commission, comprising Persaud, John Willems, Hugh George and Badrie Persaud, took GT&T's cellular operation into account in determining the company's rate base and revenue requirement and excluded advisory fees among the other issues GT&T agreed to.

The commission only recently saw a copy of GT&T's 2002 budget and found many of the revenue and expense items "not tied to the version of the budget that was filed with the commission." It said this would be investigated further, but pointed out that if this information had been filed, then GT&T's deficiency would be less than originally claimed. The PUC said further testing of the budget projections would be required before permanent rates were fixed.

The PUC said it viewed the tariff application as a rebalancing one and saw the process involving lower prices on international calls and possibly, increases in line rentals and prices for local calls.

Citing comments by Statia that rates had dropped as low as US$0.05 cents per minute in some countries as a result of the tremendous volume of international calls, the PUC said the migration pattern of Guyanese was an important factor in its considerations. The PUC felt that with North America being a major destination for emigrating Guyanese and relatives and friends in the USA being wealthier than their Guyanese counterparts, the telecommunication flows might result in a net settlement surplus for GT&T.

The commission said that the test year would end on December 31, 2002.

For the rate base, an average of $11.9 billion was used in the determination of the required earnings for GT&T adjusted for the elimination of:

*the franchise asset from the test year;

*an allowance of $242 million for working capital;

*interest bearing accounts, designated as sinking funds from the rate base;

*the increases in the plant and accumulated depreciation accounts that result from the revaluation of GT&T's assets of 1994 and 1998.

The commission said these adjustments were consistent with the US FCC procedure, which the purchase agreement of GT&T called for the use of. It further said that income requirements to meet legitimate obligations in the interim rates were established using an after-tax return of 15 per cent on the adjusted average rate base.

The PUC accepted GT&T's calculation of the impact of the reduced settlement rates, but its staff will review the work papers and actual results to confirm that the accounting rates and agreement with the various carriers have been modified before the final rates are pronounced on.

In addition to the accounting rate adjustment, other modifications include the removal of all advisory fees from the cost of service as was proposed by GT&T in the adjustment; removal of amortisation expenses related to the franchise assets and a decrease in the test year depreciation expense.

The PUC further ordered that GT&T should continue to charge depreciation on the straight-line basis and not adjust the method of depreciation without a formal filing to the PUC and subsequent approval. The commission said it kept in mind GT&T's guaranteed 15 per cent return on capital invested or dedicated to public use in coming to its decision on temporary rates.